DRS/A

As confidentially submitted to the Securities and Exchange Commission on May 1, 2017

Registration Statement No. 333-            

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM S-1

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

ATHENEX, INC.

(Exact Name of Registrant as Specified in Its Charter)

Delaware	2834	43-1985966
(State or other jurisdiction of incorporation or organization)	(Primary Standard Industrial Classification Code Number)	(I.R.S. Employer Identification No.)

1001 Main Street, Suite 600

Buffalo, NY 14203

(716) 427-2950

(Address, including zip code and telephone number, including area code, of registrant’s principal executive offices)

Johnson Y.N. Lau

Chief Executive Officer

Athenex, Inc.

1001 Main Street, Suite 600

Buffalo, NY 14203

(716) 427-2950

(Name, address, including zip code, and telephone number, including area code, of agent for service)

Copies to:

Karen A. Dewis, Esq. Michael J. Rosenthall, Esq. Sidley Austin LLP 1501 K Street NW Washington, DC 20005 (202) 736-8000 Chris K.H. Lin, Esq. Daniel Fertig, Esq. Simpson Thacher & Bartlett LLP 35^th Floor ICBC Tower 3 Garden Road Central, Hong Kong +852 2514-7600

Approximate date of commencement of proposed sale to the public:

As soon as practicable after this Registration Statement becomes effective.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act, check the following box.  ☐

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ☐

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ☐

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ☐

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	☐
		Emerging growth company	☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act.  ☐

CALCULATION OF REGISTRATION FEE

Title of each class of securities to be registered	Proposed maximum aggregate offering price(1)(2)	Amount of Registration Fee(3)
Common Stock, $0.001 par value per share

(1) Estimated solely for the purpose of computing the registration fee pursuant to Rule 457(o) under the Securities Act of 1933, as amended.

(2) Includes offering price of the additional shares that the underwriters have the option to purchase.

(3) Calculated pursuant to Rule 457(o) based on an estimate of the proposed maximum aggregate offering price.

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

The information in this prospectus is not complete and may be changed. We cannot sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and we are not soliciting an offer to buy these securities in any state or other jurisdiction where the offer or sale is not permitted.

Subject to completion, dated                         , 2017

Prospectus

            Shares

COMMON STOCK

We are offering             shares of our common stock. This is our initial public offering and no public market currently exists for our common stock. We currently expect the initial public offering price to be between $         and $         per share.

We have applied to have our stock listed on The NASDAQ Global Market under the symbol “ATNX.” We are an “emerging growth company” as defined by the Jumpstart Our Business Startups Act of 2012 and, as such, we have elected to comply with certain reduced public company reporting requirements for this prospectus and future filings.

Investing in our common stock involves a high degree of risk. Please read “Risk Factors” beginning on page 14 of this prospectus before making a decision to invest in our common stock.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

	Per Share	Total
Initial public offering price	$	$
Underwriting discounts and commissions(1)	$	$
Proceeds to Athenex, before expenses	$	$

⁽¹⁾ See “Underwriting” for a description of the compensation payable to the underwriters.

Certain of our existing stockholders and their affiliated entities, including stockholders affiliated with certain of our directors, have indicated an interest in purchasing up to an aggregate of approximately $         million worth of shares of our common stock in this offering at the initial public offering price. However, because indications of interest are not binding agreements or commitments to purchase, the underwriters could determine to sell more, less or no shares to any of these stockholders and any of these stockholders could determine to purchase more, less or no shares in this offering. The underwriters will receive the same underwriting discounts and commissions on any shares purchased by these stockholders as they will on any other shares sold to the public in this offering.

Delivery of the shares of our common stock is expected to be made on or about                     , 2017. We have granted the underwriters an option for a period of 30 days to purchase an additional             shares of our common stock.

(in alphabetical order)

Credit Suisse		J.P. Morgan
	Deutsche Bank Securities

The date of this prospectus is                     , 2017

TABLE OF CONTENTS

ABOUT THIS PROSPECTUS	ii
PROSPECTUS SUMMARY	1
THE OFFERING	10
RISK FACTORS	14
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS	78
USE OF PROCEEDS	80
DIVIDEND POLICY	81
CAPITALIZATION	82
DILUTION	84
SELECTED HISTORICAL FINANCIAL INFORMATION AND OTHER DATA	86
MANAGEMENT’S DISCUSSION AND ANALYSIS OF  FINANCIAL CONDITION AND RESULTS OF OPERATIONS	88
INDUSTRY BACKGROUND	108
BUSINESS	115
MANAGEMENT	182
EXECUTIVE AND DIRECTOR COMPENSATION	191
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS	201
PRINCIPAL STOCKHOLDERS	207
DESCRIPTION OF CAPITAL STOCK	210
SHARES ELIGIBLE FOR FUTURE SALE	215
TAXATION	217
UNDERWRITING	222
LEGAL MATTERS	228
EXPERTS	229
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS  ON ACCOUNTING AND FINANCIAL DISCLOSURE	230
WHERE YOU CAN FIND MORE INFORMATION	231
GLOSSARY OF SCIENTIFIC TERMS	232
INDEX TO FINANCIAL STATEMENTS	F-1

ABOUT THIS PROSPECTUS

We have not, and the underwriters have not, authorized anyone to provide you with information other than that contained in this prospectus or in any free writing prospectus prepared by or on our behalf or to which we have referred you. We take no responsibility for, and can provide no assurance as to the reliability of, any other information that others may give to you. We are offering to sell shares of our common stock, and seeking offers to buy shares of our common stock, only in jurisdictions where offers and sales are permitted. The information contained in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or any sale of our common stock.

Through and including                     , 2017 (the 25th day after the date of this prospectus), all dealers effecting transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the dealers’ obligation to deliver a prospectus when acting as an underwriter and with respect to an unsold allotment or subscription.

Investors Outside the United States

Neither we nor any of the underwriters have taken any action to permit a public offering of the shares of our common stock or the possession or distribution of this prospectus in any jurisdiction where action for that purpose is required, other than the United States. You are required to inform yourselves about and to observe any restrictions relating to this offering and the distribution of this prospectus.

Market and Industry Data and Forecasts

Certain market and industry data and forecasts included in this prospectus were obtained from independent market research, industry publications and surveys, governmental agencies and publicly available information. We believe that these external sources are reliable, but we have not independently verified any of the data from third-party sources, nor have we ascertained the underlying assumptions relied upon therein. Similarly, independent market research and industry forecasts, which we believe to be reliable based upon our management’s knowledge of the industry, have not been independently verified. Notwithstanding the foregoing, the Company acknowledges that it remains liable for the use of the third-party data referenced herein.

Trademarks

We have proprietary rights to trademarks, trade names and service marks appearing in this prospectus that are important to our business. Solely for convenience, the trademarks, trade names and service marks may appear in this prospectus without the ^® and TM symbols, but any such references are not intended to indicate, in any way, that we forgo or will not assert, to the fullest extent under applicable law, our rights or the rights of the applicable licensors to these trademarks, trade names and service marks. All trademarks, trade names and service marks appearing in this prospectus are the property of their respective owners.

Glossary

A glossary of scientific and technical terms used throughout this prospectus is included beginning on page 227.

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PROSPECTUS SUMMARY

This summary highlights information contained elsewhere in this prospectus. This summary is not complete and may not contain all the information you should consider before investing in our common stock. You should read this entire prospectus carefully, especially the risks of investing in our common stock discussed under the heading “Risk Factors,” and our consolidated financial statements and related notes included elsewhere in this prospectus before making an investment decision.

Except as otherwise indicated herein or as the context otherwise requires, references in this prospectus to “Athenex” “the company,” “we,” “us” and “our” refer to Athenex, Inc. and its consolidated subsidiaries.

Overview

We are a global biopharmaceutical company dedicated to the discovery, development and commercialization of novel therapies for the treatment of cancer. Our mission is to improve the lives of cancer patients by creating more effective, safer and tolerable treatments. We have generated our clinical product candidates through our Orascovery and Src Kinase Inhibition research platforms, which are based on our understanding of human absorption biology and novel approaches to inhibiting kinase activity, respectively. We believe that our ability to overcome the challenges of oral delivery of chemotherapy and limitations associated with IV delivery, via our P-gp inhibitor, offers significant potential benefits to patient outcomes by allowing patients to stay on therapy longer and extending the potential opportunities to combine with other agents, including targeted and immunotherapies that would otherwise be too toxic in combination with IV chemotherapy. We have assembled a leadership team and have established global operations in the U.S. and China across the pharmaceutical value chain to execute our mission to become a global leader in bringing innovative cancer treatments to the market and improve health outcomes.

Orascovery platform

Our Orascovery platform is based on the novel oral P-glycoprotein, or P-gp, pump inhibitor molecule HM30181A. The P-gp pump is a plasma membrane protein on the cells of the gut which forms a localized drug transport system and limits effective oral absorption of known and widely used P-gp substrate cancer chemotherapeutic drugs such as paclitaxel, irinotecan and docetaxel, thus restricting current usage to intravenous, or IV, administration. IV chemotherapies’ adverse events are due in part to sharp increases in the blood concentration levels of the chemotherapeutic drugs, and infusion-related reactions caused in part by dilution agents used to facilitate IV administration. Although clinical trial results with IV chemotherapy have shown that the dose-limiting side effects are associated with treatment efficacy, these adverse events have limited the duration of treatment with this route of administration. Through sequential co-administration of HM30181A and oral paclitaxel (together, Oraxol), we are able to facilitate oral absorption of paclitaxel at therapeutic blood levels by blocking the P-gp pump. We believe oral administration of paclitaxel reduces blood concentration level fluctuations and eliminates infusion-related reactions related to IV administration improving patient tolerability and allowing for longer dosing durations to improve efficacy. In addition to Oraxol, we are advancing three other clinical candidates in this platform, Oratecan (HM30181A and oral irinotecan), Oradoxel (HM30181A and oral docetaxel) and Oratopo (HM30181A and oral topotecan) to target solid tumors.

Src Kinase Inhibition platform

Src Kinase, a tyrosine kinase protein involved in regulating cell growth, is strongly implicated with blocking metastasis. Defects in Src Kinase are implicated in a number of cancers, and inhibiting this protein may limit the growth or proliferation of cancerous cell types. The Src Kinase Inhibition platform refers to novel small molecule compounds that have multiple mechanisms of action, including the inhibition of the activity of Src Kinase and

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the inhibition of tubulin polymerization during cell division. We believe the combination of these mechanisms of action provide a broader range of anti-cancer activity as compared to either mechanism of action alone. Our key clinical product candidates in this platform are KX-01 ointment for pre-cancerous lesions and KX-02 for glioblastoma multiforme, or GBM.

In addition to our existing portfolio of clinical candidates, our research and development teams are evaluating additional applications of our novel technology platforms. For example, our novel Cytochrome P450, or CYP, and P-gp dual inhibitor technology could lead to the discovery of new drug candidates.

In advance of the launch of our proprietary product candidates in the U.S., our commercial team intends to market oncology and oncology symptom-related products, to fund our infrastructure build-out. We believe it is important to minimize supply chain disruptions for high potency oncology active pharmaceutical ingredients. We have thus internalized key components of the supply chain that we believe are integral to minimizing the associated risks. We have organized our business model into three segments: Oncology Innovation Platform, Commercial Platform and Global Supply Chain Platform—with operations in both the U.S. and China. Our global operations across the three segments are shown below:

Our Global Supply Chain Platform manufactures active pharmaceutical ingredients, or API, for use internally in our research and development, clinical studies, and for sale to pharmaceutical customers globally. Our Commercial Platform currently markets the API produced by our Global Supply Chain Platform, including 14 products in the specialty and generic market segment in the U.S. and products under Section 503B of the Food, Drug and Cosmetics Act, or FDCA, through our compound pharmacy facility.

Our leadership team was carefully assembled to capture the global commercial market opportunities in novel drug development. Our executive officers are seasoned leaders with complementary skill sets across global pharmaceutical research and development, operations, supply chain and manufacturing, capital markets and mergers and acquisitions. We believe this characteristic is unique for a U.S.-based company and we believe we will be able to utilize this strength to create long term value for cancer patients, our employees and our

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shareholders. Our team is excited about the prospects of creating new paradigms in the treatment of cancer in developed markets and also driving our product candidates to emerging markets where patient access to treatments has historically been limited.

Based in Buffalo, New York, we were formed in 2003 and have been funded from inception by over $250 million in private financings and public-private partnerships with an estimated aggregate value of $375 million.

(1) Also excluding Taiwan, Singapore, Vietnam, Australia, New Zealand and Africa

(2) Collaboration with Eli Lilly and Company, manufacturer of ramucirumab

(3) Excluding Taiwan

(4) Also excluding Taiwan, Macau, Hong Kong, Singapore and Malaysia

(5) Also excluding Taiwan, Hong Kong, Singapore, Malaysia, Thailand, the Philippines, Indonesia and Vietnam

(6) Also excluding Taiwan, Hong Kong and Singapore

Our Orascovery Product Candidates

Oraxol (HM30181A and oral paclitaxel)

Oraxol is an oral dosage form of the widely used IV administered tubulin-stabilizing chemotherapeutic agent paclitaxel administered orally with the HM30181A molecule. We have been able to achieve similar paclitaxel exposures compared to the widely used 80 mg/m² IV weekly dosing. We believe that Oraxol offers patients with paclitaxel-responsive tumors the possibility of oral therapy without the requirement for premedication to prevent infusion-related hypersensitivity-type reactions. Current clinical data suggests the potential for a better clinical response and tolerability profile, which is likely attributed to the pharmacokinetic profile achieved with oral dosing. Oraxol is presently in a Phase 3 trial in metastatic breast cancer and poised to enter into a combination study for treatment of advanced gastric cancer with ramucirumab through a clinical trial collaboration with Eli Lilly and Company, or Lilly.

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Oratecan (HM30181A and oral irinotecan)

Irinotecan given by IV is an anticancer agent that is used widely in the treatment of colorectal, lung, ovarian, cervical, pancreatic, upper gastrointestinal and brain cancer. In the product label for Camptosar (irinotecan), a variety of dosing regimens are approved for therapeutic use in metastatic colorectal cancer, including 350 mg/m² given once every 3 weeks, weekly regimens of 125 mg/m², and 180 or 240 mg/m² every 2 weeks. The main objective supporting these dosing schedules has been to establish the highest dose possible that would lead to disruption of tumor growth, while allowing the bone marrow to recover from the chemotherapy-induced toxicity. Oratecan has been studied in combination with capecitabine in solid tumors in Korea and a Phase 1 study for Oratecan is ongoing in solid tumors in the U.S.

Oradoxel (HM30181A and oral docetaxel)

Docetaxel is an anticancer agent that is used widely in the treatment of breast, prostate, gastric, head and neck, and lung cancer. In the product label for Taxotere (docetaxel), a variety of doses ranging from 60-100 mg/m² are approved for therapeutic use for these various indications, administered as a 1-hour infusion once every 3 weeks. The U.S. Food and Drug Administration, or FDA, allowed our Investigational New Drug Application, or IND, in the first quarter of 2016 and, most recently, we gained regulatory allowance for a Phase 1 clinical study in New Zealand.

Oratopo (HM30181A and oral topotecan)

Topotecan is an anticancer agent that can be used alone or in combination with other anticancer drugs to treat cervical cancer, ovarian cancer and lung cancer. In March 2017, the FDA allowed our IND for for Oratopo.

Our Src Kinase Inhibitor Product Candidates

KX-01

KX-01 is a compound developed under our Src Kinase Inhibition platform that, as a free base, has advantageous physical properties for topical ointment formulations. A topical ointment with KX-01 has shown promising results in a proof of concept clinical trial for actinic keratosis, or AK, a pre-cancerous skin lesion. We completed enrollment of an approximately 160-patient Phase 2a study of KX-01 for treatment of AK in 2016 and we have received allowance from FDA to conduct a Phase 3 study, which we expect to commence in the second half of 2017. An additional indication for psoriasis is being evaluated in a Phase 1 clinical trial led by our out-licensing partner. Since AK can lead to skin cancers, we are now investigating the initiation of a study in that indication, along with a study in T-cell lymphomas. These applications provide additional potential therapeutic utilities for KX-01 ointment and could represent significant potential market expansions beyond AK. KX-01 oral has shown activity against both solid and liquid tumors in patients, and we are planning further studies to focus our upcoming evaluation efforts in targeted indications.

KX-02

KX-02 is the second compound we developed using our Src Kinase Inhibition platform. Although KX-02 is an analog of KX-01, it has significantly different physical properties. These properties allow KX-02 to freely cross the blood-brain-barrier such that the concentration in the brain is equal to, or somewhat greater than, that in the plasma. This trait is uncommon for oncology drugs and highlights the potential for KX-02 as a novel therapy for unmet medical needs such as brain cancers, including GBM and brain metastases. The FDA has granted Orphan Drug Status to KX-02 for the treatment of gliomas. KX-02 is a non-ATP competitive Src Kinase inhibitor and tubulin polymerization inhibitor. Studies of KX-02 in preclinical syngeneic mouse GBM models resulted in the complete eradication, without recurrence, of the tumors in an average of approximately 30% of

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treated mice. KX-02’s multiple mechanisms of action, or MOAs, along with its ability to cross the blood-brain-barrier, make it a novel molecule for the treatment of brain tumors. KX-02 is currently in the early stages of a U.S. Phase 1 clinical trial in solid tumor patients. A Chinese IND has been filed by our development partner in China to start a study in primary brain tumors with KX-02 which we believe will commence in 2017.

Our Strengths

Transformative, oncology-focused and highly synergistic pipeline with late stage product candidates.

We believe we have a robust clinical pipeline. We have seven major clinical stage drug candidates, four of which are based on a proprietary Orascovery oral absorption technology, using our novel, highly-selective P-gp inhibitor in combination with widely-used cytotoxic agents enables oral administration of currently injectable only drugs. The remaining three are novel proprietary Src Kinase inhibitors that have multiple mechanisms of action.

We believe our extensive pipeline can create three impactful synergies:

• Drug synergy: We believe the potentially better clinical response and tolerability of Oraxol versus injectable paclitaxel opens the possibility for greater use of chemo and immuno-oncology therapies. There are also potential synergies between our pipeline products and existing anti-cancer products for potential best-in-combination or first-in-combination with immuno-oncology therapies;

• Platform development and regulatory synergy: Approval of the first drug in each of our research and development platforms may serve as validation and facilitate approvals of other pipeline drug candidates using similar technology; and

• Commercial synergy: We believe clinical and commercial success of our initial products will shift the oncology market from injectable to oral formulations. Adopting future products using our oral technologies should require less market education across physicians and providers.

Proprietary research and development platforms capable of producing future drug candidates.

Since 2013 alone, our research and development platform has enabled us to file six U.S. investigational new drug applications, or INDs. We believe that our Orascovery platform can be applied to other existing drug therapies to achieve better pharmacokinetics, or PK, clinical response and tolerability profiles. Additionally, we have applied our research knowledge and experience of human oral absorption functions and have identified late stage novel molecule candidates which could represent additional future platform technologies.

Unique business model structured to capture value through commercialization and minimize supply chain risk.

We have a business model positioned to capture value by creating opportunities through multiple levers for growth. We have built a commercial sales and marketing infrastructure in the U.S. and intend to continue to further build out this segment. We expect this segment to start selling existing in-licensed therapeutically related oncology products in 2017 as a means of funding commercial infrastructure. Through acquisitions, we own elements of a high potency oncology supply chain. By utilizing capital efficient public-private partnerships in the U.S. and China, we expect to have built current good manufacturing practice, or cGMP, manufacturing facilities in both geographies.

A biopharmaceutical company with a focus on the U.S. and China oncology markets.

We have crafted our business model in order to capture the market opportunities in two of the largest pharmaceutical markets in the world. We have research and product development teams in both countries

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allowing us to leverage our innovation platform resources, including development and regulatory expertise, to maximize opportunities in both countries. We intend to serve as a technology bridge between these unique markets. We also expect to identify new technology opportunities through acquisitions, licensing or partnering in either market and position ourselves as a gateway to the other market.

Management team with industry-leading expertise and proven track record in leading global drug discovery, development and commercialization.

Our experienced senior management team members have held senior executives roles at multinational pharmaceutical companies and many led the development and regulatory approvals of pharmaceutical products in markets around the globe. Our research and development team members played a key role in the clinical development of numerous significant drugs including: Herceptin, Rituxan, Xeloda, Pegasys, PEG-Intron, Rebetol, IV Temodol, Requip, Suboxone, Subutex and Northera. The leadership of our commercial team has launched more than 50 novel and generic drugs and drug products into multiple markets around the world.

Our Mission and Strategy

Our mission is to improve the lives of cancer patients by creating more effective, safer and tolerable treatments. To achieve our mission, we intend to pursue the following strategies:

Rapidly and concurrently advance our clinical product candidates.

We intend to pursue the fastest feasible pathways to approval of our existing novel oral absorption technology. We are currently enrolling patients in a Phase 3 clinical trial of Oraxol. We plan to submit an NDA to the regulatory authorities in both New Zealand and Taiwan in 2017. We believe once we demonstrate the safety and effectiveness of this technology with Oraxol, the other drug candidates paired with this technology will face a more efficient development process. In addition, we expect complete primary endpoint data from the Phase 2a study of KX-01 ointment in the first half of 2017. If the data from this study confirms our previously completed proof of concept study data, we intend to launch a Phase 3 of KX-01 ointment registration study in 2017. We anticipate the development timeframe for our KX-02 drug candidate for GBM to be accelerated once we commence our partnered clinical program in China. Our licensing partner in China submitted a Clinical Trial Application, or CTA, for KX-02 to the China Food and Drug Administration, or CFDA, in 2016. We anticipate fast enrollment in China based on its large patient population which would accelerate the overall global development timeframe.

Leverage our global research and development operations to continue development of an oncology-focused product pipeline.

We have research and development operations in both the U.S. and China that are focused on both advancing our existing product pipeline and on developing additional novel clinical product candidates. We have developed a core competency in oral absorption technology and apply that skill to develop new methods of drug discovery. We believe that we can create substantial long term value by pursuing a robust, ongoing research and development program.

Build a proprietary commercial platform and selectively leverage collaborative relationships to achieve global drug sales, marketing and distribution.

We have begun building our U.S. commercial operation in preparation for future FDA approvals of our proprietary product candidates. We believe that our experienced product commercialization team can build an infrastructure that leverages both our global facilities and collaborative relationships to achieve global distribution of any FDA approved products in a timely and cost-effective manner.

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Continue to build-out our supply chain and cGMP manufacturing capabilities.

We believe internalization of our supply chain is uniquely suited to execute in both the U.S. and China, two of the world’s largest pharmaceutical markets. We intend to utilize cGMP manufacturing facilities from our public/private partnerships in both the China and U.S. markets as a mechanism to access both important markets and minimize supply disruptions. We intend to manufacture certain of our proprietary drugs and our partnered drugs commercialized around the world. Additionally, we expect that the expansion of our existing cGMP high potency API facilities will provide us with more flexibility, and control over high potency API as our drugs start to become commercialized. Our goal is to continue expanding this infrastructure and to leverage it to maintain future financial flexibility by optimizing our financial commitments and capital expenditures, which we believe will create value for shareholders.

Selectively pursue strategic M&A or licensing opportunities to complement our existing operations.

We have historically pursued acquisitions and in-licensing opportunities, and will continue to opportunistically target opportunities that will complement our existing portfolio and operations to create value for shareholders and support our business strategy and mission.

Risks Related to our Business

Despite our strengths and strategy described above, our ability to successfully operate our business is subject to numerous risks, including those that are generally associated with operating in the biopharmaceutical industry. Any of the factors set forth under the heading “Risk Factors” may limit our ability to successfully execute our business strategy. You should carefully consider all of the information set forth in this prospectus and, in particular, you should evaluate the specific factors set forth under the heading “Risk Factors” in deciding whether to invest in our common stock. Some of the principal risks relating to our business and our ability to execute our business strategy include:

• Our primary clinical candidates are still in the development stage and have not yet received regulatory approval, which may make it difficult to evaluate our current business and predict our future performance.

• We incurred net losses in 2015 and 2016 and anticipate that we will continue to incur net losses for the foreseeable future. The report of our independent registered public accounting firm on our 2016 consolidated financial statements contains an explanatory paragraph regarding going concern, and we will need additional financing to fund our current operating plans and to continue as a going concern.

• We currently do not generate substantial revenue from product sales and may never become profitable.

• We will need to obtain additional financing to fund our operations, and if we are unable to obtain such financing, we may be unable to complete the development and commercialization of our drug candidates.

• We depend substantially on the success of our proprietary drug candidates, which are in pre-clinical and clinical development.

• We may not be successful in our efforts to identify or discover additional drug candidates. Due to our limited resources and access to capital, we must and have in the past decided to prioritize development of certain product candidates; these decisions may prove to have been wrong and may adversely affect our business.

• Some of our drug candidates represent a novel approach to cancer treatment, which could result in delays in clinical development, heightened regulatory scrutiny, delays in our ability to achieve regulatory approval or commercialization, or market acceptance by physicians and patients of our drug candidates.

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• Our product candidates may cause undesirable side effects that could delay or prevent their regulatory approval, limit the commercial profile of an approved label, or result in significant negative consequences following marketing approval, if any.

• If clinical trials of our drug candidates fail to demonstrate safety and efficacy to the satisfaction of the FDA, CFDA, or other regulatory authorities or do not otherwise produce positive results, we may incur costs or experience delays in completing, or ultimately be unable to complete, the development and commercialization of our drug candidates.

• We rely on licensed intellectual property relating to certain of our lead product candidates. Any termination or loss of rights under those agreements would adversely affect our development or commercialization of our lead product candidates.

• We are substantially dependent on our public-private partnerships and if we or our counterparties fail to meet the obligations of those agreements and we lose the benefits of those partnerships, it would materially impact our development, operations and prospectus.

Implications of Being an Emerging Growth Company

As a company with less than $1.0 billion in revenues during our last fiscal year, we qualify and intend to characterize ourselves as an “emerging growth company” under the JOBS Act. An emerging growth company may take advantage of reduced reporting requirements and is relieved of certain other significant requirements that are otherwise generally applicable to public companies. As an emerging growth company:

• we may present only two years of audited financial statements and only two years of related management discussion and analysis of financial condition and results of operations;

• we are exempt from the requirement to obtain an attestation and report from our auditors on management’s assessment of our internal control over financial reporting under the Sarbanes-Oxley Act of 2002, or Sarbanes-Oxley Act;

• we are permitted to provide less extensive disclosure about our executive compensation arrangements; and

• we are not required to give our stockholders non-binding advisory votes on executive compensation or golden parachute arrangements.

We have elected to take advantage of the scaled disclosure requirements and other relief described above in this prospectus and may take advantage of these exemptions for so long as we remain an emerging growth company. In general, we will be an emerging growth company until the earliest of (i) the end of the fiscal year during which we have total annual gross revenues of $1.0 billion or more, (ii) the end of the fiscal year following the fifth anniversary of the completion of this offering, (iii) the date on which we have, during the previous three-year period, issued more than $1.0 billion in non-convertible debt and (iv) the date on which we are deemed to be a “large accelerated filer,” which will occur at such time that we (a) have an aggregate worldwide market value of common equity securities held by non-affiliates of $700 million or more as of the last business day of our most recently completed second fiscal quarter, (b) have been required to file annual and quarterly reports under the Exchange Act for a period of at least 12 months and (c) have filed at least one annual report pursuant to the Exchange Act.

In addition to scaled disclosure and the other relief described above, the JOBS Act permits us an extended transition period for complying with new or revised accounting standards affecting public companies. We have irrevocably elected not to avail ourselves of this extended transition period and, as a result, we will adopt new or revised accounting standards on the relevant dates on which adoption of such standards is required for other

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public companies. We are in the process of evaluating the benefits of relying on other exemptions and reduced reporting requirements under the JOBS Act. Subject to certain conditions, as an emerging growth company, we may rely on certain of these exemptions, including without limitation, (i) providing an auditor’s attestation report on our internal control over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act and (ii) complying with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements, known as the auditor discussion and analysis.

Corporate Information

We were originally formed under the laws of the state of Delaware in November 2003 under the name Kinex Pharmaceuticals, LLC. In December 2012, we converted from a limited liability company to a Delaware corporation, Kinex Pharmaceuticals, Inc. In August 2015, we amended and restated our certificate of incorporation to change our name to Athenex, Inc. Our principal executive offices are located at 1001 Main Street, Suite 600, Buffalo, NY 14203, and our telephone number is (716) 427-2950. Our website address is www.athenex.com. The information contained on, or that can be accessed through, our website is not a part of this prospectus. We have included our website address in this prospectus solely as an inactive textual reference.

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THE OFFERING

Issuer Athenex, Inc.

Offering price per share $        

Common stock offered by us             shares.

Common stock to be outstanding immediately after this offering              shares (             shares if the underwriters exercise in full their option to purchase additional shares of common stock).

Underwriters’ option to purchase additional shares We have granted the underwriters a 30-day option to purchase up to              additional shares at the public offering price less underwriting discounts and commissions.

Dividend policy We have never paid cash dividends on our common stock and we do not anticipate paying any cash dividends in the foreseeable future. See “Dividend Policy” for additional information.

Use of proceeds We intend to use net proceeds from this offering for development and regulatory activities for our Orascovery product candidates and platform and our Src Kinase Inhibition product candidates and platform, for research and development of our pre-clinical candidates. We anticipate using the remaining amounts for research and development of our pre-clinical candidates, and for working capital and other general corporate purposes. See “Use of Proceeds” for additional information.

Directed share program At our request, the underwriters have reserved for sale, at the initial public offering price, up to     % of the shares to be sold in this offering to our directors, officers, employees, business associates and related persons. The number of shares of common stock available for sale to the general public will be reduced to the extent these individuals purchase such reserved shares. Any reserved shares that are not so purchased will be offered by the underwriters to the general public on the same basis as the other shares offered by this prospectus. See “Underwriting.”

Proposed NASDAQ symbol “ATNX”

Risk factors You should carefully read and consider the information set forth under “Risk Factors” beginning on page 14 and all other information included in this prospectus for a discussion of factors that you should consider before deciding to invest in shares of our common stock.

The company and its officers, directors, and certain holders of the company’s common stock and options have agreed with the underwriters, subject to certain exceptions, not to dispose of or hedge any of their common stock, or securities convertible into or exchangeable for common stock during the period from the date of this prospectus continuing through the date 180 days after the date of this prospectus, except with the prior written

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consent of Credit Suisse Securities (USA) LLC and J.P. Morgan Securities LLC. This agreement does not apply to any existing employee benefit plans. See “Shares Eligible for Future Sale” and “Underwriting”.

The number of shares of our common stock to be outstanding after this offering is based on (i) 41,348,568 shares of our common stock outstanding as of March 31, 2017, which includes 661,982 issued but unvested restricted shares, (ii)             shares of our common stock to be issued upon the completion of this offering pursuant to the conversion of outstanding convertible notes, and (iii) the issuance of shares of our common stock to Hanmi and certain of our executive officers upon the completion of this offering pursuant to contractual obligations discussed elsewhere in this prospectus.

The number of shares of common stock to be outstanding after this offering excludes:

• 9,214,989 shares of common stock issuable upon the exercise of options outstanding as of March 31, 2017 at a weighted average exercise price of $6.25 per share;

• 2,025,543 shares of common stock reserved for future grant or issuance under our stock option plans as of March 31, 2017;

• 344,000 shares of common stock issuable upon the exercise of warrants to purchase our common stock outstanding as of March 31, 2017 at a weighted average exercise price of $0.44 per share;

•              shares of common stock (or approximately     % of the total number of shares of our common stock outstanding immediately following the consummation of this offering, assuming no exercise of the underwriters’ option to purchase additional shares of our common stock) reserved for issuance pursuant to future awards under our 2017 Omnibus Incentive Plan, which will become effective on the day preceding the effectiveness of the registration statement to which this prospectus relates.

Unless otherwise expressly stated or the context otherwise requires, the information in this prospectus assumes or reflects:

• no exercise of the underwriters’ option to purchase              additional shares of our common stock; and

• no exercise of outstanding options or warrants after March 31, 2017.

Certain of our existing stockholders and their affiliated entities, including stockholders affiliated with certain of our directors, have indicated an interest in purchasing up to an aggregate of approximately $         million worth of shares of our common stock in this offering at the initial public offering price. However, because indications of interest are not binding agreements or commitments to purchase, the underwriters could determine to sell more, less or no shares to any of these stockholders and any of these stockholders could determine to purchase more, less or no shares in this offering. The underwriters will receive the same underwriting discounts and commissions on any shares purchased by these stockholders as they will on any other shares sold to the public in this offering.

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SUMMARY CONSOLIDATED FINANCIAL AND OTHER DATA

The following selected statements of operations and comprehensive loss data and the cash flow data for the years ended December 31, 2015 and 2016 and the balance sheet data as of December 31, 2015 and 2016 are derived from our audited consolidated financial statements included elsewhere in this prospectus. You should read this data together with our audited consolidated financial statements and related notes appearing elsewhere in this prospectus and the information under the captions “Capitalization” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Our historical results are not necessarily indicative of our future results. Our consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States, or U.S., GAAP.

	Year Ended December 31,
	2015			2016
	(In thousands, except share and per share data)
Statements of Operations and Comprehensive Loss Data:
Revenue:
Product sales	$	12,816		$	19,394
License fees and consulting revenue		314			392
Grant revenue		814			765
Total revenue		13,944			20,551
Costs and operating expenses:
Cost of product sales		13,153			19,718
Research and development expenses		24,463			60,624
Selling, general, and administrative expenses		27,036			25,956
Total costs and operating expenses		64,652			106,298
Loss from operations		(50,708	)		(85,747	)
Interest expense		1			1,891
Unrealized loss on derivative liability		—			533
Income tax benefit		(54	)		(265	)
Net loss		(50,655	)		(87,906	)
Less: net loss attributable to non-controlling interests		(55	)		(191	)
Net loss attributable to Athenex, Inc.	$	(50,600	)	$	(87,715	)
Net loss per share attributable to Athenex, Inc. common stockholders, basic and diluted(1)	$	(1.50	)	$	(2.19	)
Weighted-average shares used in computing net loss per share attributable to Athenex, Inc. common stockholders, basic and diluted(1)		33,765,751			40,120,908
Pro forma net loss per share attributable to Athenex, Inc. common stockholders, basic and diluted(1)	$			$
Pro forma weighted-average shares used in computing net loss per share attributable to Athenex, Inc. common stockholders, basic and diluted(1)
Comprehensive loss	$	(50,906	)	$	(88,796	)

⁽¹⁾ See Note 17 to our audited consolidated financial statements appearing elsewhere in this prospectus for a description of the method used to calculate basic and diluted net loss per share attributable to Athenex, Inc. common stockholders and pro forma basic and diluted net loss per share attributable to Athenex, Inc. common stockholders.

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	December 31,				Pro Forma December 31,
	2015		2016		2016
	(in thousands)
Selected Balance sheet data:
Cash and cash equivalents	$	43,495	$	33,125
Marketable securities—current		12,271		8,628
Goodwill		37,996		37,552
Working capital*		47,578		23,904
Total assets		120,431		105,890
Long-term debt		3,650		41,807
Total liabilities		22,387		71,221
Non-controlling interests		484		862
Total stockholders’ equity	$	98,044	$	34,669

* Working capital: total current assets—total current liabilities

	Year Ended December 31,
	2015			2016
	(in thousands)
Selected Cash flow data:
Net cash used in operating activities	$	(33,756	)	$	(47,870	)
Net cash (used in) provided by investing activities		(16,909	)		2,659
Net cash provided by financing activities		76,302			35,272
Net effect of foreign exchange rate changes		337			(431	)
Net increase (decrease) in cash and cash equivalents		25,974			(10,370	)
Cash and cash equivalents at beginning of period		17,521			43,495
Cash and cash equivalents at end of period	$	43,495		$	33,125

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RISK FACTORS

Investing in our common stock involves a high degree of risk. You should consider carefully the following risk factors, as well as the other information in this prospectus, including the financial statements and related notes, before you decide to purchase our common stock. If any of the following risks actually occur, our business, financial condition and results of operations could be materially adversely affected, the value of our common stock could decline and you may lose all or part of your investment.

Risks Related to Our Financial Position and Need for Additional Capital

Our primary clinical candidates are still in the development stage and have not yet received regulatory approval, which may make it difficult to evaluate our current business and predict our future performance.

We are a globally-focused biopharmaceutical company formed in November 2003. Our operations to date have focused on organizing and staffing our company, business planning, raising capital, establishing our intellectual property portfolio and conducting preclinical studies and clinical trials of our drug candidates. We have not yet successfully completed large-scale, pivotal clinical trials, or obtained regulatory approvals for our drug candidates and have not yet established sales and marketing activities necessary for successful commercialization. Consequently, any predictions you make about our future success or viability may not be accurate. In addition, as a developing business, we may encounter unforeseen expenses, difficulties, complications, delays and other known and unknown challenges.

We are focused on the discovery and development of innovative drugs for the treatment of cancers. The fact that we have not yet, among other things, demonstrated our ability to initiate or complete large-scale clinical trials or manufacture drugs at commercial scale, particularly in light of the rapidly evolving cancer treatment field, may make it difficult to evaluate our current business and predict our future performance. These constraints make any assessment of our future success or viability subject to significant uncertainty. We will encounter risks and difficulties frequently experienced by early-stage companies in rapidly evolving fields as we seek to transition to a company capable of supporting commercial activities. If we do not address these risks and difficulties successfully, our business will suffer.

We incurred net losses in 2015 and 2016 and anticipate that we will continue to incur net losses for the foreseeable future.

Investment in pharmaceutical product development is highly speculative because it entails substantial upfront costs and expenses and significant risk that a drug candidate will fail to gain regulatory approval or become commercially viable. Since our formation, the company has relied on a combination of private securities offerings, public-private partnerships, the issuance of convertible notes and public grants to fund our operations. We have devoted most of our financial resources to research and development, including our non-clinical development activities and clinical trials. We have not generated substantial revenue from product sales to date, and we continue to incur significant development and other expenses related to our ongoing operations. As a result, we incurred losses in 2015 and 2016. For the years ended December 31, 2015 and December 31, 2016, we reported net losses of $50.7 million and $87.9 million, respectively, and had an accumulated deficit of $195.1 million as of December 31, 2016. Substantially all of our operating losses have resulted from costs incurred in connection with our research and development programs and from selling, general and administrative expenses associated with our operations.

We expect to continue to incur losses for the foreseeable future, and we expect these losses to increase as we continue our development of, and seek regulatory approvals for, our drug candidates, and begin to commercialize approved drugs, if any. Typically, it takes many years to develop a new drug before it is available for treating patients. We may encounter unforeseen expenses, difficulties, complications, delays and other unknown factors that may adversely affect our business. The size of our future net losses will depend, in part, on the rate of future growth of our expenses, our ability to generate revenue and the timing and amount of milestones and other

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required payments to third parties in connection with our potential future arrangements with third parties. If any of our drug candidates fail in clinical trials or do not gain regulatory approval, or if approved, fail to achieve market acceptance, we may never become profitable. Even if we achieve profitability in the future, we may not be able to sustain profitability in subsequent periods. Our prior losses and expected future losses have had, and will continue to have, an adverse effect on our shareholders’ equity and working capital.

We expect our research and development expenses to continue to be significant in connection with our continued investment in our drug candidates and our ongoing and planned clinical trials for our drug candidates. Furthermore, if we obtain regulatory approval for our drug candidates, we expect to incur increased selling, general and administrative expenses. In addition, once we are a public company, we will incur additional costs associated with operating as a public company. As a result, we expect to continue to incur significant and increasing operating losses and negative cash flows from operations for the foreseeable future. These losses have had and will continue to have a material adverse effect on our stockholders’ equity, financial position, cash flows and working capital.

Our ability to continue as a going concern will require us to obtain additional financing to fund our current operations, which may be unavailable on acceptable terms, or at all.

Our recurring losses from operations and our current operating plans raise substantial doubt about our ability to continue as a going concern. As a result, our independent registered public accounting firm included an explanatory paragraph in its report on our consolidated financial statements as of and for the year ended December 31, 2016 with respect to this uncertainty. Our ability to continue as a going concern will require us to obtain additional financing to fund our current operating plans. We believe that the net proceeds from this offering and our existing cash and cash equivalents and short-term investments will be sufficient to fund our current operating plans through at least the next 12 months. We have based these estimates, however, on assumptions that may prove to be wrong, and we could spend our available financial resources much faster than we currently expect and need to raise additional funds sooner than we anticipate. If we are unable to raise capital when needed or on acceptable terms, we would be forced to delay, reduce or eliminate our research and drug development programs or commercialization efforts.

We currently do not generate substantial revenue from product sales and may never become profitable.

Our ability to generate revenue and become profitable depends upon our ability to successfully complete the development of, and obtain the necessary regulatory approvals for, our proprietary drug candidates, as we currently only have commercialized our API products. Our product sales, primarily from sales of API, totaled $12.8 million and $19.4 million in the years ended December 31, 2015 and 2016, respectively. We expect to continue to incur substantial and increasing losses through the projected development and commercialization of our drug candidates. None of our proprietary drug candidates have been approved for marketing in the U.S., China or any other jurisdiction, and they may never receive such approval. Our ability to achieve revenue and profitability is dependent on our ability to complete the development of our proprietary drug candidates, obtain necessary regulatory approvals, and have our proprietary drugs manufactured and successfully marketed.

Even if we receive regulatory approval of our proprietary drug candidates for commercial sale, we do not know when they will generate revenue, if at all. Our ability to generate revenue from product sales of our drug candidates depends on a number of factors, including our ability to:

• complete research regarding, and non-clinical and clinical development of, our proprietary drug candidates;

• formulate appropriate dosing protocols, drug preparations and capsule encapsulation methods;

• obtain regulatory approvals and marketing authorizations for drug candidates for which we complete clinical trials;

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• develop a sustainable and scalable manufacturing processes, including establishing and maintaining commercially viable supply relationships with third parties and establishing our own manufacturing capabilities and infrastructure;

• compliantly launch and commercialize proprietary drug candidates for which we obtain regulatory approvals and marketing authorizations, either directly or with a collaborator or distributor;

• obtain market acceptance of our proprietary drug candidates and their routes of administration as viable treatment options;

• obtain adequate coverage and reimbursement for our proprietary drug candidates from government (including U.S. federal healthcare programs) and private payors;

• identify, assess, acquire and/or develop new proprietary drug candidates;

• address any competing technological and market developments;

• negotiate and maintain favorable terms in any collaboration, licensing or other arrangements into which we may enter;

• maintain, protect and expand our portfolio of intellectual property rights, including patents, trade secrets and know-how;

• ability to successfully commercialize our 503B compound pharmacy products and U.S. specialty pharmaceutical products;

• ability to further develop our API business; and

• attract, hire and retain qualified personnel.

In addition, because of the numerous risks and uncertainties associated with drug development, we are unable to predict the timing or amount of increased expenses, or when, or if, we will be able to achieve or maintain profitability. In addition, our expenses could increase beyond expectations if we are required by the FDA, CFDA, or regulatory authorities in other jurisdictions to perform studies in addition to those that we currently anticipate. Even if our proprietary drug candidates are approved for commercial sale, we anticipate incurring significant costs associated with the commercial launch of these drugs.

Our ability to become and remain profitable depends on our ability to generate revenue. Even if we are able to generate revenue from the sale of our drug candidates and API we manufacture for others, we may not become profitable and may need to obtain additional funding to continue operations. If we fail to become profitable or are unable to sustain profitability on a continuing basis, we may be unable to continue our operations at planned levels and be forced to reduce our operations. Even if we do achieve profitability, we may not be able to sustain or increase profitability. Our failure to become and remain profitable would decrease the value of our company and could impair our ability to raise capital, expand our business or continue our operations. Failure to become and remain profitable may adversely affect the market price of our common stock and our ability to raise capital and continue operations. A decline in the value of our company could also cause you to lose all or part of your investment.

We will need to obtain additional financing to fund our operations, and if we are unable to obtain such financing, we may be unable to complete the development and commercialization of our drug candidates.

We have financed our operations with a combination of private securities offerings, public-private partnerships, issuance of convertible notes and public grants. Through December 31, 2016, we have raised over $250 million in private financings. In addition, we have entered into public-private partnerships with an estimated aggregate value of $375 million. Our drug candidates will require the completion of regulatory review, significant sales and marketing efforts and substantial investment before they can provide us with any product sales revenue.

Our operations have consumed substantial amounts of cash since inception. The net cash used for our operating activities was $33.8 million and $47.9 million for the years ended December 31, 2015 and

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December 31, 2016, respectively. We expect to continue to spend substantial amounts on advancing the clinical development of our proprietary drug candidates, and launching and commercializing any proprietary drug candidates for which we receive regulatory approval, including building our own commercial organizations to address certain markets.

We will need to obtain additional financing to fund our future operations, including completing the development and commercialization of our proprietary drug candidates. We also need to obtain additional financing to conduct additional clinical trials for the approval of our proprietary drug candidates if requested by regulatory bodies, and completing the development of any additional proprietary drug candidates we might discover. Moreover, our research and development expenses and other contractual commitments are substantial and are expected to increase in the future.

Our forecast of the period of time through which our financial resources will be adequate to support our operations is a forward-looking statement and involves risks and uncertainties, and actual results could vary as a result of a number of factors, including the factors discussed elsewhere in this “Risk Factors” section. We have based this estimate on assumptions that may prove to be wrong, and we could utilize our available capital resources sooner than we currently expect. Our future funding requirements will depend on many factors, including, but not limited to:

• the progress, timing, scope and costs of our clinical trials, including the ability to timely enroll patients in our planned and potential future clinical trials;

• the outcome, timing and cost of regulatory approvals by the FDA, CFDA and regulatory authorities in jurisdictions where we seek such approvals, including the possibility that the FDA, CFDA or regulatory authorities may require that we perform more studies than those that we currently expect;

• our ability to secure adequate coverage and reimbursement for our proprietary drug candidates from government (including U.S. federal health care programs) and private payors;

• the number and characteristics of drug candidates that we may in-license and develop;

• our ability to successfully and compliantly launch and commercialize our drug candidates;

• the amount of sales and other revenues from drug candidates that we may commercialize, if any, including the selling prices for such potential products and the availability of adequate reimbursement by third-party payors;

• the amount of rebates or other price concessions we may owe under U.S. federal health care programs that cover and reimburse our proprietary drug candidates;

• the amount and timing of the milestone and royalty payments we receive from our collaborators under our licensing arrangements;

• the cost of filing, prosecuting, defending and enforcing any patent claims and other intellectual property rights;

• selling and marketing costs associated with our potential products, including the cost and timing of expanding our marketing and sales capabilities;

• the terms and timing of any potential future collaborations, licensing or other arrangements that we may establish;

• cash requirements of any future acquisitions and/or the development of other drug candidates;

• the costs of operating as a public company;

• the cost and timing of completion of commercial-scale outsourced manufacturing activities;

• the time and cost necessary to respond to technological and market developments; and

• the costs of filing, prosecuting, defending and enforcing any patent claims and other intellectual property rights.

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Until we can generate a sufficient amount of revenue, we may finance future cash needs through public or private equity offerings, debt financings, collaborations and strategic alliances. Additional funds may not be available when we need them on terms that are acceptable to us, or at all. General market conditions or the market price of our common stock may not support capital raising transactions such as an additional public or private offering of our common stock or other securities. In addition, our ability to raise additional capital may be dependent upon our common stock being quoted on the NASDAQ stock market or upon obtaining shareholder approval to issue a sufficient number of shares of our common stock. There can be no assurance that we will be able to satisfy the criteria for continued listing on the NASDAQ stock market or that we will be able to obtain shareholder approval of such stock issuances if it is necessary. If adequate funds are not available to us on acceptable terms, or at all, we may be required to delay or reduce the scope of, or eliminate, one or more of our research or development programs or our commercialization efforts. We may seek to access the public or private capital markets whenever conditions are favorable, even if we do not have an immediate need for additional capital at that time. In addition, if we raise additional funds through collaborations, strategic alliances or marketing, distribution or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams or drug candidates or to grant licenses on terms that may not be favorable to us.

We believe that the net proceeds from this offering, together with existing cash and cash equivalents, will not be sufficient to enable us to complete all necessary development or commercially launch our proprietary drug candidates. If we are unable to raise capital when needed or on attractive terms, we will be forced to delay, reduce or eliminate our research and development programs or future commercialization efforts. Our inability to obtain additional funding when needed could seriously harm our business.

Raising additional capital may cause dilution to our shareholders, restrict our operations or require us to relinquish rights to our technologies or drug candidates.

We may seek additional funding through a combination of equity offerings, debt financings, collaborations and licensing arrangements. To the extent that we raise additional capital through the sale of equity or convertible debt securities, your ownership interest will be diluted, and the terms may include liquidation or other preferences that adversely affect your rights as a holder of our common stock. The incurrence of additional indebtedness or the issuance of certain equity securities could result in increased fixed payment obligations and could also result in certain additional restrictive covenants, such as limitations on our ability to incur additional debt or issue additional equity, limitations on our ability to acquire or license intellectual property rights and other operating restrictions that could adversely impact our ability to conduct our business. In addition, issuance of additional equity securities, or the possibility of such issuance, may cause the market price of our common stock to decline. In the event that we enter into collaborations or licensing arrangements in order to raise capital, we may be required to accept unfavorable terms, including relinquishing or licensing to a third party on unfavorable terms our rights to technologies or proprietary drug candidates that we otherwise would seek to develop or commercialize ourselves or potentially reserve for future potential arrangements when we might be able to achieve more favorable terms.

Certain of our executive officers and employees have received grants of stock options and shares of restricted stock, which vest over time. Under certain circumstances, such vesting may be accelerated. The accelerated vesting of stock options and shares of restricted stock could result in dilution to our existing stockholders and lower the market price of our common stock.

An impairment of goodwill could have a material adverse effect on our results of operations.

Acquisitions frequently result in the recording of goodwill and other intangible assets. As of December 31, 2016, goodwill represented $37.6 million, or 35.5% of our total assets, primarily as a result of our acquisitions of QuaDPharma, LLC, or QuaDPharma, Comprehensive Drug Enterprises Limited, or CDE, and Polymed Therapeutics, Inc. and Chongqing Taihao Pharmaceutical Co Ltd, collectively Polymed. Goodwill is not

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amortized and is subject to impairment testing at least annually using a fair value based approach. The identification and measurement of goodwill impairment involves the estimation of the fair value of our reporting units. The estimates of fair value of reporting units are based on the best information available as of the date of the assessment and incorporate management assumptions about expected future cash flows and other valuation techniques. Future cash flows can be affected by changes in industry or market conditions, among other factors. The recoverability of goodwill is evaluated at least annually or more frequently when events or changes in circumstances indicate that the fair value of a reporting unit has more likely than not declined below its carrying value.

We cannot accurately predict the amount and timing of any future impairment of assets, and, going forward, we may be required to take goodwill or other asset impairment charges relating to certain of our reporting units. Any such charges would have an adverse effect on our financial results.

Our ability to utilize our net operating loss carryforwards and certain other tax attributes may be limited.

We have incurred operating losses that are treated as taxable losses for U.S. federal income tax purposes. To the extent that we continue to generate taxable losses, unused losses will carry forward to offset future taxable income, if any, until such unused losses expire. Under Section 382 of the Internal Revenue Code of 1986, as amended, or the Code, if a corporation undergoes an ownership change (generally defined as a greater than 50 percentage points change (by value) in its equity ownership over a rolling three-year period), the corporation’s ability to use its pre-change net operating loss carryforwards and other pre-change tax attributes to offset its post-change income may be limited. We believe that we have experienced an ownership change in the past, which may affect our ability to utilize our net operating loss carryforwards. In addition, we may experience ownership changes in the future as a result of this offering or subsequent shifts in our stock ownership, some of which are outside our control. As of December 31, 2016, we had federal net operating loss carryforwards of approximately $106.7 million that could be limited by our past and any future ownership change, which could have an adverse effect on our future results of operations. Similar limitations will apply to our ability to carry forward any unused tax credits to offset future taxable income.

Risks Related to Clinical Development of Our Proprietary Drug Candidates

We depend substantially on the success of our proprietary drug candidates, which are in pre-clinical and clinical development.

As of the date of this prospectus, we had a total of more than 40 planned, ongoing and completed clinical trials for our drug candidates, including a Phase 2 and a Phase 3 clinical trial for KX-01 ointment and Oraxol, respectively. Our business and the ability to generate revenue related to product sales from our proprietary drug candidates will depend on the successful development, regulatory approval and commercialization for the treatment of patients with our drug candidates, which are still in development, and other drugs we may develop. Clinical development is a lengthy and expensive process with an uncertain outcome. The results of pre-clinical studies and early clinical trials of our drug candidates may not be predictive of the results of later-stage clinical trials. In the case of any trials we conduct, results have in the past, and may in the future, fail to meet the desired safety and efficacy endpoints, or differ from earlier trials due to the larger number of clinical trial sites and additional countries and populations involved in such trials. We have invested a significant portion of our efforts and financial resources in the development of our existing drug candidates. The success of our proprietary drug candidates will depend on several factors, including:

• successful enrollment in, and completion of, clinical studies;

• receipt of regulatory approvals from the FDA, CFDA and other regulatory authorities for our drug candidates;

• establishing commercial manufacturing capabilities, either by using our own facilities or making arrangements with third-party manufacturers;

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• conducting our clinical trials safely and efficiently, and in many cases, relying on third parties to do so;

• obtaining, maintaining and protecting our rights in our intellectual property, including patent, trade secrets, know-how and regulatory exclusivity;

• ensuring we do not infringe, misappropriate or otherwise violate the patent, trade secret or other intellectual property rights of third parties;

• competition with other drug candidates and drugs, including existing IV chemotherapy treatments, potential oncology biologics and other oral dosing technologies developed or being developed by competitors; and

• continued acceptable safety profile for our drug candidates following regulatory approval, if and when received.

If we do not achieve one or more of these requirements in accordance with our business plans or at all, we could experience significant delays in our ability to obtain approval for and/or to successfully commercialize our drug candidates, which would materially harm our business and we may not be able to generate sufficient revenues and cash flows to continue our operations.

Clinical testing is expensive and can take many years to complete, and its outcome is inherently uncertain. For example, our current lead product candidate, Oraxol, currently in Phase 3 clinical trials, has been in development by us since 2011. Failure can occur at any time during the clinical trial process. The results of preclinical studies and early clinical trials of our drug candidates may not be predictive of the results of later-stage clinical trials. Drug candidates in later stages of clinical trials may fail to show the desired safety and efficacy traits despite having progressed through preclinical studies and initial clinical trials. In some instances, there can be significant variability in safety and/or efficacy results between different trials of the same product candidate due to numerous factors, including changes in trial procedures set forth in protocols, differences in the size and type of the patient populations, including genetic differences, patient adherence to the dosing regimen and other trial protocols and the rate of dropout among clinical trial participants. In the case of any trials we conduct, results may differ from early trials due to the larger number of patients, clinical trial sites and additional countries and populations involved in such trials. A number of companies in the pharmaceutical and biotechnology industries have suffered significant setbacks in advanced clinical trials due to lack of efficacy or adverse safety profiles, notwithstanding promising results in earlier trials. Our future clinical trial results may not be favorable.

We may not be successful in our efforts to identify or discover additional drug candidates. Due to our limited resources and access to capital, we must and have in the past decided to prioritize development of certain product candidates; these decisions may prove to have been wrong and may adversely affect our business.

To date, we have focused our drug discovery efforts on developing our cancer platform, particularly our Orascovery and Src Kinase Inhibition product candidates. If our cancer platform fails to identify potential drug candidates, our business could be materially harmed. Additionally our management, at the direction of our board of directors, has discretion in prioritizing which product candidates to develop.

Research programs to pursue the development of our drug candidates for additional indications and to identify new drug candidates and disease targets require substantial technical, financial and human resources whether or not we ultimately are successful. Our research programs may initially show promise in identifying potential indications and/or drug candidates, yet fail to yield results for clinical development for a number of reasons, including:

• the research methodology used may not be successful in identifying potential indications and/or drug candidates;

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• potential drug candidates may, after further study, be shown to lack efficacy, have harmful adverse effects or other characteristics that indicate they are unlikely to be effective drugs; or

• it may take greater human and financial resources to identify additional therapeutic opportunities for our drug candidates or to develop suitable potential drug candidates through internal research programs than we possess, thereby limiting our ability to diversify and expand our drug portfolio.

Because we have limited financial and managerial resources, we focus on research programs and drug candidates for specific indications. As a result, we may forego or delay pursuit of opportunities with other drug candidates or for other indications that later prove to have greater commercial potential or a greater likelihood of success. Our resource allocation decisions may cause us to fail to capitalize on viable commercial products or profitable market opportunities.

Accordingly, there can be no assurance that we will be able to identify additional therapeutic opportunities for our drug candidates or to develop suitable potential drug candidates through internal research programs, which could materially adversely affect our future growth and prospects. We may focus our efforts and resources on potential drug candidates or other potential programs that ultimately prove to be unsuccessful.

If we encounter difficulties enrolling patients in our clinical trials, our clinical development activities could be delayed or otherwise adversely affected.

The timely completion of clinical trials in accordance with their protocols depends, among other things, on our ability to enroll a sufficient number of patients who remain in the trial until its conclusion. We and our research partners have from time to time and may in the future experience difficulties in patient enrollment in our clinical trials for a variety of reasons, including:

• the availability of a sizeable population of eligible patients;

• the design of the trial;

• our ability to recruit clinical trial investigators with the appropriate competencies and experience;

• competing clinical trials for similar therapies or other new therapeutics;

• clinicians’ and patients’ perceptions as to the potential advantages and side effects of the drug candidate being studied in relation to other available therapies,

• our ability to obtain and maintain patient consents;

• the failure of patients to complete a clinical trial; and

• the availability of approved therapies that are similar in mechanism to our drug candidates.

In addition, our clinical trials will compete with other clinical trials for drug candidates that are in the same therapeutic areas as our drug candidates, and this competition will reduce the number and types of patients available to us, because some patients who might have opted to enroll in our trials may instead opt to enroll in a trial being conducted by one of our competitors. Because the number of qualified clinical investigators is limited, we have conducted and expect to conduct some of our clinical trials at the same clinical trial sites that some of our competitors use, which will reduce the number of patients who are available for our clinical trials at such clinical trial sites.

Even if we are able to enroll a sufficient number of patients in our clinical trials, delays in patient enrollment may result in increased costs or may affect the timing or outcome of the planned clinical trials, which could prevent completion of these trials and adversely affect our ability to advance the development of our drug candidates.

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Some of our drug candidates represent a novel approach to cancer treatment, which could result in delays in clinical development, heightened regulatory scrutiny, delays in our ability to achieve regulatory approval or commercialization, or market acceptance by physicians and patients of our drug candidates.

Some of our drug candidates, particularly those developed through our Orascovery platform, represent a departure from more commonly used methods for cancer treatment, and therefore represent a novel approach that carries inherent development risks. For instance, our Orascovery platform intends to facilitate the delivery of chemotherapy agents orally, as opposed to IV, while our Src Kinase inhibitor candidates operate by a new mechanism of action. To develop our Orascovery platform, we must successfully develop oral formulations of the active ingredients and ensure they can be delivered safely and consistently in capsule form. The need to further develop or modify in any way the protocols related to our drug candidates to demonstrate safety or efficacy may delay the clinical program, regulatory approval or commercialization, if approved. Our Src Kinase inhibitor platform is based on a novel molecule with an additional mechanism of action that is not found in other Src Kinase inhibitors. Because of this, unexpected safety and tolerability concerns may arise during the development process.

In addition, potential patients and their doctors may be inclined to use conventional standard-of-care treatments rather than enroll patients in any future clinical trial or to use our product candidates commercially once approved. This may have a material impact on our ability to generate revenues from our drug candidates. Further, given the novelty of the administration of our drug candidates, hospitals and physicians may prefer traditional treatment methods, may be reluctant to adopt the use of our products or may require a substantial amount of education and training, any of which could delay or prevent acceptance of our products by physicians and patients and materially hinder successful commercialization of our drug candidates.

Our products and product candidates may cause undesirable, or an increase in the frequency of, side effects that could delay or prevent their regulatory approval, limit the commercial profile of an approved label, or result in significant negative consequences following marketing approval, if any.

Undesirable side effects caused by our product candidates could cause us or regulatory authorities to interrupt, delay or halt clinical trials and could result in a more restrictive label or the delay or denial of regulatory approval by the FDA, CFDA or other regulatory authorities. Further, if a product candidate receives marketing approval and we or others identify undesirable side effects caused by the product after the approval, or if drug abuse is determined to be a significant problem with an approved product, a number of potentially significant negative consequences could result, including:

• regulatory authorities may withdraw or limit their approval of the product;

• regulatory authorities may require the addition of labeling statements, such as a “Black Box warning” or a contraindication;

• we may be required to change the way the product is distributed or administered, conduct additional clinical trials or change the labeling of the product;

• we may decide to remove the product from the marketplace;

• we could be sued and held liable for injury caused to individuals exposed to or taking the product; and

• our reputation may suffer.

Any of these events could prevent us from achieving or maintaining market acceptance of the affected product candidate and could substantially increase the costs of commercializing an affected product or product candidate and significantly impact our ability to successfully commercialize or maintain sales of our product or product candidates and generate revenues.

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If clinical trials of our drug candidates fail to demonstrate safety and efficacy to the satisfaction of the FDA, CFDA or other regulatory authorities or do not otherwise produce positive results, we may incur costs or experience delays in completing, or ultimately be unable to complete, the development and commercialization of our drug candidates.

We may experience various unexpected events during, or as a result of, clinical trials that could delay or prevent our ability to receive regulatory approval or commercialize our drug candidates, including:

• regulators, institutional review boards, or IRBs, or ethics committees may not authorize us or our investigators to commence a clinical trial or conduct a clinical trial at a prospective trial site;

• clinical trials of our drug candidates may produce negative or inconclusive results, and we may decide, or regulators may require us, to conduct additional clinical trials or abandon drug development programs;

• the number of patients required for clinical trials of our drug candidates may be larger than we anticipate, enrollment may be insufficient or slower than we anticipate or patients may drop out at a higher rate than we anticipate;

• our third-party contractors may fail to comply with regulatory requirements or meet their contractual obligations to us in a timely manner, or at all;

• we might have to suspend or terminate clinical trials of our drug candidates for various reasons, including a finding of a lack of clinical response or a finding that participants are being exposed to unacceptable health risks;

• regulators, IRBs or ethics committees may require that we or our investigators suspend or terminate clinical research for various reasons, including noncompliance with regulatory requirements;

• the cost of clinical trials of our drug candidates may be greater than we anticipate;

• the supply or quality of our drug candidates or other materials necessary to conduct clinical trials of our drug candidates may be insufficient or inadequate; and

• our drug candidates may cause adverse events, have undesirable side effects or other unexpected characteristics, causing us or our investigators to suspend or terminate the trials.

If we are required to conduct additional clinical trials or other testing of our drug candidates beyond those that we currently contemplate, if we are unable to successfully complete clinical trials of our drug candidates or other testing, if the results of these trials or tests are not positive or are only modestly positive or if they raise safety concerns, we may:

• be delayed in obtaining regulatory approval for our drug candidates;

• not obtain regulatory approval at all;

• obtain approval for indications that are not as broad as intended;

• have the drug removed from the market after obtaining regulatory approval;

• be subject to additional post-marketing testing requirements;

• be subject to restrictions on how the drug is distributed or used; or

• be unable to obtain reimbursement for use of the drug.

Delays in testing or approvals may result in increases in our drug development costs. We do not know whether any clinical trials will begin as planned, will need to be restructured or will be completed on schedule, or at all.

Significant clinical trial delays also could shorten any periods during which we have the exclusive right to commercialize our drug candidates or allow our competitors to bring drugs to market before we do and impair our ability to commercialize our drug candidates and may harm our business and results of operations.

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Manufacturing risks, including our inability to manufacture API and clinical products used in the clinical trials of our proprietary product candidates could adversely affect our ability to commercialize our product candidates.

Our business strategy depends on our ability to manufacture API in sufficient quantities and on a timely basis so as to meet our needs to manufacture our product candidates for our clinical trials and to meet consumer demand for our future products, while adhering to product quality standards, complying with regulatory requirements and managing manufacturing costs. We are subject to numerous risks relating to our manufacturing capabilities, including:

• Our inability to manufacture API and clinical products in sufficient quantities to meet the needs of our clinical trials or to commercialize our products;

• our inability to secure product components in a timely manner, in sufficient quantities or on commercially reasonable terms;

• our failure to increase production of products to meet demand;

• our inability to modify production lines to enable us to efficiently produce future products or implement changes in current products in response to regulatory requirements;

• difficulty identifying and qualifying alternative suppliers for components in a timely manner; and

• potential damage to or destruction of our manufacturing equipment or manufacturing facility.

In addition, we conduct manufacturing operations at our facility in Chongqing, China to manufacture our proprietary product candidates. As a result, our business is subject to risks associated with doing business in China, including:

• adverse political and economic conditions, particularly those negatively affecting the trade relationship between the U.S. and China;

• trade protection measures, such as tariff increases, and import and export licensing and control requirements;

• potentially negative consequences from changes in tax laws;

• difficulties associated with the Chinese legal system, including increased costs and uncertainties associated with enforcing contractual obligations in China;

• historically lower protection of intellectual property rights;

• unexpected or unfavorable changes in regulatory requirements;

• possible patient or physician preferences for more established pharmaceutical products and medical devices manufactured in the U.S.; and

• difficulties in managing foreign relationships and operations generally.

These risks are likely to be exacerbated by our limited experience with our current products and manufacturing processes. If, as we expect, our need for API increases, or demand for our products increase, we will have to invest additional resources to purchase components, hire and train employees, and enhance our manufacturing processes. If we fail to increase our production capacity efficiently, our sales may not increase in line with our forecasts and our operating margins could fluctuate or decline. Any of these factors may affect our ability to manufacture our product and could reduce our revenues and profitability.

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Risks Related to Obtaining Regulatory Approval for Our Drug Candidates

The regulatory approval processes of the FDA, CFDA and other regulatory authorities are lengthy, time consuming and inherently unpredictable, and if we are ultimately unable to obtain regulatory approval for our drug candidates, our business will be substantially harmed.

The time required to obtain approval by the FDA, CFDA and other regulatory authorities in jurisdictions where we seek such approval is unpredictable but typically takes many years following the commencement of preclinical studies and clinical trials and depends upon numerous factors, including the substantial discretion of the regulatory authorities. In addition, approval policies, regulations or the type and amount of clinical data necessary to gain approval may change during the course of a drug candidate’s clinical development and may vary among jurisdictions. We have not obtained regulatory approval for any drug candidate, and it is possible that none of our existing drug candidates or any drug candidates we may discover, in-license or acquire and seek to develop in the future will ever obtain regulatory approval.

Our drug candidates could fail to receive regulatory approval from the FDA, CFDA or a regulatory authority for many reasons, including:

• disagreement with the design or implementation of our clinical trials;

• failure to demonstrate that a drug candidate is safe and effective or safe, pure, and potent for its proposed indication;

• failure of clinical trial results to meet the level of statistical significance required for approval;

• failure to demonstrate that a drug candidate’s clinical and other benefits outweigh its safety risks;

• disagreement with our interpretation of data from preclinical studies or clinical trials;

• the insufficiency of data collected from clinical trials of our drug candidates to support the submission and filing of a new drug application, or NDA, or other submission or to obtain regulatory approval;

• the FDA, CFDA or regulatory authority’s finding of deficiencies related to the product, manufacturing processes or facilities of ours or of third-party manufacturers with whom we contract for clinical and commercial supplies; and

• changes in approval policies or regulations that render our preclinical and clinical data insufficient for approval.

The FDA, CFDA or a regulatory authority may require more information, including additional preclinical or clinical data, to support approval, which may delay or prevent approval and our commercialization plans, or we may decide to abandon the development program. If we were to obtain approval, regulatory authorities may approve any of our drug candidates for fewer or more limited indications than we request, may grant approval contingent on the performance of costly post-marketing clinical trials, or may approve a drug candidate with a label that is not desirable for the successful commercialization of that drug candidate. In addition, if our drug candidate produces undesirable side effects or safety issues, the FDA may require the establishment of Risk Evaluation Mitigation Strategies, or REMS, or the CFDA or a regulatory authority may require the establishment of a similar strategy, that may, for instance, restrict distribution of our drug candidates and impose burdensome implementation requirements on us. Any of the foregoing scenarios could materially harm the commercial prospects of our drug candidates.

The approval process for pharmaceutical products outside the U.S. varies among countries and may limit our ability to develop, manufacture and sell our products internationally. Failure to obtain marketing approval in international jurisdictions would prevent our product candidates from being marketed abroad.

In order to market and sell our products internationally, we must obtain separate marketing approvals and comply with numerous and varying regulatory requirements. The approval procedure varies among countries and

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may involve additional testing. We may conduct clinical trials for, and seek regulatory approval to market, our product candidates in countries other than the U.S. and the PRC. Depending on the results of clinical trials and the process for obtaining regulatory approvals in other countries, we may decide to first seek regulatory approvals of a product candidate in countries other than the U.S., or we may simultaneously seek regulatory approvals in the U.S. and other countries. If we seek marketing approval for a product candidate outside the U.S., we will be subject to the regulatory requirements of health authorities in each country in which we seek approval. With respect to marketing authorizations in China, we will be required to seek regulatory approval from the CFDA. The approval procedure varies among regions and countries and may involve additional testing, and the time required to obtain approval may differ from that required to obtain FDA approval.

Obtaining regulatory approvals from health authorities in countries outside the U.S. is likely to subject us to all of the risks associated with obtaining FDA approval described above. In addition, marketing approval by the FDA does not ensure approval by the health authorities of any other country, and marketing approvals by foreign health authorities do not ensure a similar approval by the FDA.

We are conducting, and may in the future conduct, clinical trials for our product candidates in sites outside the U.S. and the FDA may not accept data from trials conducted in such locations.

We have conducted, and may in the future conduct, certain of our clinical trials outside of the U.S. Although the FDA may accept data from clinical trials conducted outside the U.S., acceptance of this data is subject to certain conditions imposed by the FDA. There can be no assurance the FDA will accept data from any clinical trials we conduct outside of the U.S. If the FDA does not accept the data from any of our clinical trials conducted outside the U.S., it would likely result in the need for additional clinical trials in the U.S., which would be costly and time-consuming and could delay or prevent the commercialization of any of our product candidates.

Regulatory approval may be substantially delayed or may not be obtained for one or all of our drug candidates for a variety of reasons.

We may be unable to complete development of our drug candidates on schedule, if at all. The completion of the studies for our drug candidates will require funding beyond the proceeds of this offering. In addition, if regulatory authorities require additional time or studies to assess the safety or efficacy of our drug candidates, we may not have or be able to obtain adequate funding to complete the necessary steps for approval for any or all of our drug candidates. Preclinical studies and clinical trials required to demonstrate the safety and efficacy of our drug candidates are time consuming and expensive and together take several years or more to complete. For example, our current lead product candidate, Oraxol, currently in Phase 3 clinical trials, has been in development since 2011. Delays in clinical trials, regulatory approvals or rejections of applications for regulatory approval in the U.S., Taiwan, New Zealand, China or other markets may result from many factors, including:

• our inability to obtain sufficient funds required for a clinical trial;

• regulatory requests for additional analyses, reports, data, non-clinical and preclinical studies and clinical trials;

• regulatory questions regarding interpretations of data and results and the emergence of new information regarding our drug candidates or other products;

• clinical holds, other regulatory objections to commencing or continuing a clinical trial or the inability to obtain regulatory approval to commence a clinical trial in countries that require such approvals;

• failure to reach agreement with the FDA, CFDA or other regulators regarding the scope or design of our clinical trials;

• delay or failure in obtaining authorization to commence a trial or inability to comply with conditions imposed by a regulatory authority regarding the scope or design of a clinical trial;

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• our inability to enroll a sufficient number of patients who meet the inclusion and exclusion criteria in a clinical trial;

• our inability to conduct a clinical trial in accordance with regulatory requirements or our clinical protocols;

• clinical sites and investigators deviating from trial protocol, failing to conduct the trial in accordance with regulatory requirements, or dropping out of a trial;

• withdrawal of clinical trial sites from our clinical trials as a result of changing standards of care or the ineligibility of a site to participate in our clinical trials;

• inability to identify and maintain a sufficient number of trial sites, many of which may already be engaged in other clinical trial programs, including some that may be for the same indication;

• failure of our third-party clinical trial managers to satisfy their contractual duties or meet expected deadlines;

• delay or failure in adding new clinical trial sites;

• ambiguous or negative interim results, or results that are inconsistent with earlier results;

• unfavorable or inconclusive results of clinical trials and supportive non-clinical studies, including unfavorable results regarding effectiveness of drug candidates during clinical trials;

• feedback from the FDA, CFDA, an IRB, data safety monitoring boards, or comparable entities, or results from earlier stage or concurrent preclinical studies and clinical trials, that might require modification to the protocol;

• unacceptable risk-benefit profile or unforeseen safety issues or adverse side effects;

• decision by the FDA, CFDA, an IRB, comparable entities, or the company, or recommendation by a data safety monitoring board or comparable regulatory entity, to suspend or terminate clinical trials at any time for safety issues or for any other reason;

• failure to demonstrate a benefit from using a drug or biologic;

• lack of adequate funding to continue the clinical trial due to unforeseen costs or other business decisions;

• our inability to reach agreements on acceptable terms with prospective contract research organizations, or CROs, and trial sites, the terms of which can be subject to extensive negotiation and may vary significantly among different CROs and trial sites;

• our inability to obtain approval from IRBs or ethics committees to conduct clinical trials at their respective sites;

• manufacturing issues, including problems with manufacturing or timely obtaining from third parties sufficient quantities of a drug candidate for use in a clinical trial; and

• difficulty in maintaining contact with patients after treatment, resulting in incomplete data.

Changes in regulatory requirements and guidance may also occur, and we may need to amend clinical trial protocols submitted to applicable regulatory authorities to reflect these changes. Amendments may require us to resubmit clinical trial protocols to IRBs or ethics committees for re-examination, which may impact the costs, timing or successful completion of a clinical trial.

According to the Provisions for Drug Registration and the Reform Plan Regarding the Category of the Registration of Chemical Medicines promulgated by the CFDA, the registrations of chemical medicines in China are divided into five categories, among which, Category 1 means the registration of innovative drugs that are not

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marketed either domestically or abroad, and Category 5 for the registration of drugs that have been marketed abroad and are being registered for marketing in the PRC for the first time. Our drug candidates are all new therapeutic agents and we have built both research and development, clinical trial capacities, and commercial manufacturing facilities in China. As a result, we expect all of our current drug candidates to fall within the Category 1 application process, but cannot be sure we will be granted or be able to maintain Category 1 designation. We believe the local drug registration pathway, Category 1, is a faster and more efficient path to obtain approval in the Chinese market than the drug registration pathway for imported drugs under Category 5. Category 5 drug candidates may not qualify to benefit from fast track review with priority at the Clinical Trial Application stage. Category 1 drugs receive special examination and approval treatment. The advantages of such treatment include a separate pathway for Category 1 application to queue up for examination by the Center for Drug Evaluation of the CFDA, or the CDE, and a working mechanism for communication with the applicants for discussion of relevant technical issues. The applications for Category 1 drugs are handled with higher priority and enhanced communications with the CDE. Compared with Category 5 drugs, Category 1 drugs are qualified to apply for special examination and approval at both the Clinical Trial Application stage and the production registration application stage. If the special examination and approval are granted at the Clinical Trial Application stage, such treatment will apply to the production registration application stage without further approval. During the Clinical Trial Application stage, reduction or exemption of clinical trial may be available if Category 1 drugs are for orphan diseases or other special diseases. The advantages also include, by providing priority resources, shortening time limits to review and exam applications of Category 1 drugs’ clinical trials and of production registration, and to handle document submission and approval process. We cannot be sure that the CFDA will grant such priority treatment to any of our drugs candidates. Please see “Business—Government Regulation and Product Approval—PRC Government Regulation.”

If we experience delays in the completion of, or the termination of, a clinical trial, of any of our drug candidates, the commercial prospects of our drug candidates will be harmed, and our ability to generate revenues from the sale of any of those drug candidates will be delayed. In addition, any delays in completing our clinical trials will increase our costs, slow down our drug candidate development and approval process, and jeopardize our ability to commence product sales and generate revenues. Any of these occurrences may harm our business, financial condition and prospects significantly. In addition, many of the factors that cause, or lead to, a delay in the commencement or completion of clinical trials may also ultimately lead to the denial of regulatory approval of our drug candidates.

Our drug candidates have caused and may cause undesirable adverse events or have other properties that could delay or prevent their regulatory approval, limit the commercial profile of an approved label, or result in significant negative consequences following any regulatory approval.

Undesirable adverse events caused by our drug candidates could cause us or regulatory authorities to interrupt, delay or halt clinical trials and could result in a more restrictive label or the delay or denial of regulatory approval by the FDA, CFDA or other regulatory authority. Results of our trials could reveal a high and unacceptable severity or prevalence of adverse events. In such an event, our trials could be suspended or terminated and the FDA, CFDA or other regulatory authorities could order us to cease further development of, or deny approval of, our drug candidates for any or all targeted indications. Drug-related adverse events could affect patient recruitment or the ability of enrolled subjects to complete the trial, and could result in potential product liability claims. Any of these occurrences may significantly harm our reputation, business, financial condition and prospects.

In our clinical studies to date, we have observed the following serious adverse effects with respect to each of our product candidates:

• Oraxol - severe neutropenia, febrile neutropenia, sepsis, septic shock, altered state of consciousness, hypokalemia and cardiac arrest, dehydration, pneumonia, tracheal obstruction, death, nausea, vomiting, diarrhea, fatigue, abdominal and breast pain, anorexia, acute gastroenteritis, atrioventricular block,

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bacteremia, cerebral hemorrhage, constipation, disease progression, hematuria, liver dysfunction, neoplasm, pain, pancytopenia, pyrexia, syncope, urinary tract infection, urinary tract obstruction and death;

• Oratecan - diarrhea, rash, gastrointestinal hemorrhage, vomiting, nausea, increased bilirubin, leukopenia, pulmonary embolism, asthenia, neutropenia, anorexia, increased alanine aminotransferase, increased aspartate aminotransferase, enteritis and acute kidney injury;

• KX-01 oral - allergic reaction, bacteremia, fatigue, rash, syncope, tremor, dermatitis, neutropenic fever, hyponatremia, failure to thrive, lower extremity edema, mucositis, neutropenia, pancytopenia, thrombocytopenia, seizure and motor vehicle accident, embolic stroke, pneumonitis, fever, acute kidney injury, lung infection and increased blood platelet, albumin and bilirubin levels, abdominal pain, arm pain, pyrexia, rigors, tachypenia, oxygen desaturation pneumonia, anemia, elevated ALT and AST, dehydration and leukopenia; and

• KX-02 - thromboembolic event.

Additionally, if one or more of our drug candidates receives regulatory approval, and we or others later identify undesirable side effects caused by such drugs, a number of potentially significant negative consequences could result, including:

• we may suspend marketing of the drug;

• regulatory authorities may withdraw approvals of the drug;

• regulatory authorities may require additional warnings on the label;

• we may be required to develop a REMS for the drug or, if a REMS is already in place, to incorporate additional requirements under the REMS, or to develop a similar strategy as required by a regulatory authority;

• we may be required to conduct post-marketing studies;

• we could be sued and held liable for harm caused to subjects or patients; and

• our reputation may suffer.

Any of these events could prevent us from achieving or maintaining market acceptance of the particular drug candidate, if approved, and could significantly harm our business, results of operations and prospects.

We may seek Orphan Drug Exclusivity for some of our drug candidates, and we may be unsuccessful.

We have received Orphan Drug Designation from the FDA for our KX-02 proprietary product candidate. As part of our business strategy, we may seek Orphan Drug Designation for our product candidates and we may be unsuccessful. Regulatory authorities in some jurisdictions, including the U.S. and Europe, may designate drugs for relatively small patient populations as orphan drugs. Under the Orphan Drug Act, the FDA may designate a drug as an orphan drug if it is a drug intended to treat a rare disease or condition, which is generally defined as a disease with a patient population of fewer than 200,000 individuals in the U.S., or a patient population greater than 200,000 in the U.S. where there is no reasonable expectation that the cost of developing the drug will be recovered from sales in the U.S.

Generally, if a drug with an Orphan Drug Designation subsequently receives the first regulatory approval for the indication for which it has such designation, the drug is entitled to a period of marketing exclusivity, which precludes the FDA from approving another marketing application for the same drug for the same indication during the period of exclusivity, with certain limited exceptions. The applicable period is seven years in the U.S. and 10 years in Europe. The European exclusivity period can be reduced to six years if a drug no longer meets the criteria for Orphan Drug Designation or if the drug is sufficiently profitable so that market exclusivity is no longer justified. Orphan Drug Exclusivity may be lost if the FDA determines that the request for designation was materially defective or if the manufacturer is unable to assure sufficient quantity of the drug to meet the needs of patients with the rare disease or condition.

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Even if we obtain Orphan Drug Exclusivity for a drug candidate, exclusivity may not effectively protect the drug candidate from competition because different drugs can be approved for the same condition and the same drugs can be approved for a different condition but used off-label for any orphan indication we may obtain. Even after an orphan drug is approved, the FDA can subsequently approve a different drug for the same condition if the FDA concludes that the later drug is clinically superior in that it is shown to be safer, more effective or makes a major contribution to patient care.

Risks Related to Commercialization of Our Drug Candidates

If we are not able to obtain, or experience delays in obtaining, required regulatory approvals, we will not be able to commercialize our drug candidates, and our ability to generate revenue will be materially impaired.

We currently do not have any proprietary drug candidates that have gained regulatory approval for sale in the U.S., China or any other country, and we cannot guarantee that we will ever obtain regulatory approval for marketable proprietary drugs. Our business is substantially dependent on our ability to complete the development of, obtain regulatory approval for and successfully commercialize drug candidates in a timely manner. We cannot commercialize drug candidates without first obtaining regulatory approval to market each drug from the FDA, CFDA or regulatory authorities in the relevant jurisdictions. Our proprietary drug candidates are currently undergoing various phases of FDA clinical trials. We cannot predict whether these trials and future trials will be successful or whether regulators will agree with our conclusions regarding the preclinical studies and clinical trials we have conducted to date.

Before obtaining regulatory approvals for the commercial sale of any drug candidate for a target indication, we must demonstrate in preclinical studies and well-controlled clinical trials, and, with respect to approval in the U.S., to the satisfaction of the FDA, that the drug candidate is safe and effective for use for that target indication and that the manufacturing facilities, processes and controls are adequate. An NDA must include extensive preclinical and clinical data and supporting information to establish the drug candidate’s safety and effectiveness. The NDA must also include significant information regarding the chemistry, manufacturing and controls for the drug. Obtaining approval of an NDA is a lengthy, expensive and uncertain process, and approval may not be obtained. If we submit an NDA to the FDA, the FDA decides whether to accept or reject the submission for filing. We cannot be certain that any submissions will be accepted for filing and review by the FDA.

Regulatory authorities outside of the U.S., such as the regulatory authorities in emerging markets, also have requirements for approval of drugs for commercial sale with which we must comply prior to marketing in those areas. Regulatory requirements can vary widely from country to country and could delay or prevent the introduction of our drug candidates. Clinical trials conducted in one country may not be accepted by regulatory authorities in other countries, and obtaining regulatory approval in one country does not mean that regulatory approval will be obtained in any other country. Approval processes vary among countries and can involve additional product testing and validation and additional administrative review periods. Seeking non-U.S. regulatory approval could require additional non-clinical studies or clinical trials, which could be costly and time-consuming. The non-U.S. regulatory approval process may include all of the risks associated with obtaining FDA approval and other risks specific to the relevant jurisdiction. For all of these reasons, we may not obtain non-U.S. regulatory approvals on a timely basis, if at all.

If we are unable to obtain regulatory approval for our drug candidates in one or more jurisdictions, or any approval contains significant limitations, our target market will be reduced and our ability to realize the full market potential of our drug candidates will be harmed. Furthermore, if we are not able to obtain, or experience delays in obtaining, required regulatory approvals, we will not be able to commercialize our drug candidates, and our ability to generate revenue will be materially impaired.

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Even if any of our drug candidates receives regulatory approval, they may fail to achieve the degree of market acceptance by physicians, patients, third-party payors and others in the medical community necessary for commercial success.

If any of our drug candidates receives regulatory approval, it may nonetheless fail to gain sufficient market acceptance by physicians, patients, third-party payors and others in the medical community. For example, current cancer treatments like chemotherapy and radiation therapy are well established in the medical community, and doctors may continue to rely on these treatments to the exclusion of our drug candidates. In addition, physicians, patients and third-party payors may prefer other novel products to ours, and we may experience difficulties gaining acceptance for our orally administered drug candidates. We are also subject to regulatory restrictions on how we market our drug candidates. If our drug candidates do not achieve an adequate level of acceptance, we may not generate significant product sales revenues and we may not become profitable. The degree of market acceptance of our drug candidates, if approved for commercial sale, will depend on a number of factors, including:

• the clinical indications for which our drug candidates are approved;

• physicians, hospitals, cancer treatment centers and patients considering our drug candidates as a safe and effective treatment;

• the potential and perceived advantages of our drug candidates over alternative treatments;

• the prevalence and severity of any side effects;

• product labeling or product insert requirements of the FDA, CFDA or other regulatory authorities;

• limitations or warnings contained in the labeling approved by the FDA, CFDA or other regulatory authorities;

• the timing of market introduction of our drug candidates as well as competitive drugs;

• the cost of treatment in relation to alternative treatments;

• the amount of upfront costs or training required for physicians to administer our drug candidates;

• the availability of adequate coverage, reimbursement and pricing by third-party payors and government authorities (including U.S. federal healthcare programs);

• the willingness of patients to pay out-of-pocket in the absence of coverage and reimbursement by third-party payors and government authorities;

• relative convenience and ease of administration, including as compared to alternative treatments and competitive therapies; and

• the effectiveness of our sales and marketing efforts.

If our drug candidates are approved but fail to achieve market acceptance among physicians, patients, hospitals, cancer treatment centers or others in the medical community, we will not be able to generate significant revenue. Even if our drugs achieve market acceptance, we may not be able to maintain that market acceptance over time if new products or technologies are introduced that are more favorably received than our drugs, are more cost effective or render our drugs obsolete.

Even if we receive regulatory approval for our drug candidates, we will be subject to ongoing regulatory obligations and continued regulatory review, which may result in significant additional expense and we may be subject to penalties if we fail to comply with regulatory requirements or experience unanticipated problems with our drug candidates.

If our drug candidates are approved, they will be subject to ongoing regulatory requirements for manufacturing, labeling, packaging, storage, advertising, promotion, sampling, record-keeping, conduct of post-marketing studies, and submission of safety, efficacy, and other post-marketing information, including both federal and state requirements in the U.S. and requirements of regulatory authorities.

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Manufacturers and manufacturers’ facilities are required to comply with extensive requirements of the FDA, CFDA and regulatory authorities, including, in the U.S., ensuring that quality control and manufacturing procedures conform to current cGMP regulations. As such, we and our contract manufacturers will be subject to continual review and inspections to assess compliance with cGMP and adherence to commitments made in any NDA or other marketing application, and previous responses to inspection observations. Accordingly, we and others with whom we work must continue to expend time, money and effort in all areas of regulatory compliance, including manufacturing, production and quality control.

Any regulatory approvals that we receive for our drug candidates may be subject to limitations on the approved indicated uses for which the drug may be marketed or to the conditions of approval, or contain requirements for potentially costly post-marketing testing, including Phase 4 clinical trials and surveillance to monitor the safety and efficacy of the drug candidate. The FDA may also require a REMS program as a condition of approval of one or more of our drug candidates, which could entail requirements for long-term patient follow-up, a medication guide, physician communication plans or additional elements to ensure safe use, such as restricted distribution methods, patient registries and other risk minimization tools. In addition, if the FDA, CFDA or a regulatory authority approves our drug candidates, we will have to comply with requirements including, for example, submissions of safety and other post-marketing information and reports, registration, and continued compliance with cGMPs and Good Clinical Practices, or GCPs, for any clinical trials that we conduct post-approval.

The FDA may impose consent decrees or withdraw approval if compliance with regulatory requirements and standards is not maintained or if problems occur after the drug reaches the market. Later discovery of previously unknown problems with our drug candidates, including adverse events of unanticipated severity or frequency, or with our third-party manufacturers or manufacturing processes, or failure to comply with regulatory requirements, may result in revisions to the approved labeling to add new safety information; imposition of post-marketing studies or clinical studies to assess new safety risks; or imposition of distribution restrictions or other restrictions under a REMS program. Other potential consequences include, among other things:

• restrictions on the marketing or manufacturing of our drugs, withdrawal of the product from the market, or voluntary or mandatory product recalls;

• fines, untitled or warning letters, or holds on clinical trials;

• refusal by the FDA to approve pending applications or supplements to approved applications filed by us or suspension or revocation of license approvals;

• product seizure or detention, or refusal to permit the import or export of our drug candidates; and

• injunctions or the imposition of civil or criminal penalties.

The FDA strictly regulates marketing, labeling, advertising and promotion of products that are placed on the market. Drugs may be promoted only for the approved indications and in accordance with the provisions of the approved label. The FDA, CFDA and other regulatory authorities actively enforce the laws and regulations prohibiting the promotion of off-label uses, and a company that is found to have improperly promoted off-label uses may be subject to significant liability. The policies of the FDA, CFDA and of other regulatory authorities may change and additional government regulations may be enacted that could prevent, limit or delay regulatory approval of our drug candidates. We cannot predict the likelihood, nature or extent of government regulation that may arise from future legislation or administrative action, either in the U.S. or abroad. If we are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or if we are not able to maintain regulatory compliance, we may lose any regulatory approval that we may have obtained and we may not achieve or sustain profitability.

In addition, if we were able to obtain accelerated approval of any of our drug candidates, the FDA would require us to conduct a confirmatory study to verify the predicted clinical benefit and additional safety studies.

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Other regulatory authorities outside the U.S., such as the CFDA, may have similar requirements. The results from the confirmatory study may not support the clinical benefit, which would result in the approval being withdrawn. While operating under accelerated approval, we will be subject to certain restrictions that we would not be subject to upon receiving regular approval.

Our manufacturing experience is limited and any failure by us to manufacture our products for commercial sale after receiving FDA approval would materially impact our revenue and financial condition.

The manufacture of drugs for commercial sale is subject to regulation by the FDA under cGMP regulations and by other regulators under other laws and regulations. We cannot assure you that we will continue to manufacture our products under cGMP regulations or other laws and regulations in sufficient quantities for commercial sale, or in a timely or economical manner.

Our manufacturing facilities require specialized personnel and are expensive to operate and maintain. Any delay in the regulatory approval or market launch of product candidates to be manufactured in these facilities will require us to continue to operate these expensive facilities and retain specialized personnel, which may increase our expected losses.

Through our public-private partnerships, additional cGMP manufacturing facilities for our use are currently being built in Dunkirk, New York and Chongqing, China. Our facility in Dunkirk, New York is being built pursuant to an agreement with Fort Schuyler Management Corporation, or FSMC, a not-for-profit corporation organized by the State of New York. Under the current arrangement, we will select and hire contractors for the project and oversee the development of the Dunkirk facility. Empire State Development, or ESD, the parent entity of FSMC, is responsible for the costs of construction and all equipment for the facility, up to an aggregate of $200 million, and ESD, not us, will own the facility and equipment. We have limited experience in overseeing the development of such a facility and we may not be able to complete the development within the timeframe expected, within the expected budget, or at all. If development of the Dunkirk facility is delayed or not completed it could materially adversely affect our operations and financial results.

Additionally, upon completion, both the Dunkirk and Chongqing facilities will need to be cGMP validated prior to operating. Validation is a lengthy process that must be completed before we can manufacture under cGMP guidelines. We cannot guarantee that the FDA or foreign regulatory agencies will approve any of the other facilities or, once they are approved, that such facilities will remain in compliance with cGMP regulations.

The manufacture of pharmaceutical products is a highly complex process in which a variety of difficulties may arise from time to time. We may not be able to resolve any such difficulties in a timely fashion, if at all. If anything were to interfere with the continuing manufacturing operations in our facilities, it could materially adversely affect our business and financial condition.

Currently, many of our product candidates are manufactured in small quantities for use in clinical trials. We cannot assure you that we will be able to successfully scale up the manufacture of each of our product candidates in a timely or economical manner, or at all. If any of these product candidates are approved by the FDA or other drug regulatory authorities for commercial sale, we will need to manufacture them in larger quantities. If we are unable to successfully scale up our manufacturing capacity, the regulatory approval or commercial launch of such product candidate may be delayed or there may be a shortage in supply of such product candidate.

If we fail to develop manufacturing capacity and experience, fail to continue to contract for manufacturing on acceptable terms, or fail to manufacture our product candidates economically on a commercial scale or in accordance with cGMP regulations, our development programs will be materially adversely affected. This may result in delays in receiving FDA or foreign regulatory approval for one or more of our product candidates or delays in the commercial production of a product that has already been approved. Any such delays could materially adversely affect our business and financial condition.

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The manufacture of API is highly regulated by FDA, CFDA and other regulatory bodies and is subject to current good manufacturing practice requirements and to inspection by such regulators, which may result in adverse findings and actions against certain API manufacturing facilities.

API manufacturing facilities are subject to regulation by the applicable regulatory bodies in the place of manufacture as well as the regulatory agency in the country to which the product is exported. For instance, FDA’s cGMP regulations apply to these facilities and violation of these, or other, regulations may result in adverse action against the facility, including cessation of manufacturing activities. Our API manufacturing facilities in Chongqing are also subject to regulation by the CFDA. If the FDA, CFDA or other regulators discover a problem at one facility, we may be subject to increased scrutiny and/or adverse actions across our operations, including fines or orders to cease manufacturing, which could have a material impact on our operations, clinical development, business strategy or results of operations.

We have limited experience in marketing proprietary drug products. If we are unable to establish such marketing and sales capabilities or enter into agreements with third parties to market and sell our proprietary drug candidates, we may not be able to generate sales revenue from such products.

We have limited sales, marketing and commercial product experience. We intend to continue to develop our in-house commercial organization and sales force for such products, which will require significant capital expenditures, management resources and time. We will have to compete with other pharmaceutical and biotechnology companies to recruit, hire, train and retain marketing and sales personnel.

If we are unable to establish internal sales, marketing and commercial distribution capabilities for our proprietary drug candidates, we will need to pursue collaborative arrangements for the sales and marketing of our proprietary drugs. However, there can be no assurance that we will be able to establish or maintain such collaborative arrangements, or if we are able to do so, that they will have effective sales forces. Any revenue we receive will depend upon the efforts of such third parties, which may not be successful. We may have less control over the marketing and sales efforts of such third parties which may present fraud and abuse and other regulatory considerations, and our revenue from product sales may be lower than if we had commercialized our proprietary drug candidates ourselves. We also face competition in our search for third parties to assist us with the sales and marketing efforts of our proprietary drug candidates.

There can be no assurance that we will be able to develop our in-house sales and commercial distribution capabilities or establish or maintain relationships with third-party collaborators to successfully commercialize any proprietary product, and as a result, we may not be able to generate sales revenue from such products.

We face substantial competition, and our competitors may discover, develop or commercialize competing drugs before or more successfully than we do.

The development and commercialization of new drugs is highly competitive. We face competition with respect to our current drug candidates, and will face competition with respect to any drug candidates that we may seek to develop or commercialize in the future, from major pharmaceutical companies, specialty pharmaceutical companies and biotechnology companies worldwide. There are a number of large pharmaceutical and biotechnology companies that currently market and sell drugs or are pursuing the development of drugs for the treatment of the types of cancer for which we are developing our drug candidates. Some of these competitive drugs and therapies are based on scientific approaches that are the same as or similar to our approach, and others are based on entirely different approaches. Potential competitors also include academic institutions, government agencies and other public and private research organizations that conduct research, seek patent protection and establish collaborative arrangements for research, development, manufacturing and commercialization.

Our commercial opportunity could be reduced or eliminated if our competitors develop and commercialize drugs that are safer, more effective, have fewer or less severe side effects, are more convenient or are less

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expensive than any drugs that we may develop. Our competitors also may obtain approval from the FDA, CFDA or other regulatory authorities for their drugs more rapidly than we may obtain approval for ours, which could result in our competitors establishing a strong market position before we are able to enter the market and/or slow our regulatory approval.

Many of the companies against which we are competing or against which we may compete in the future have significantly greater financial resources and expertise in research and development, manufacturing, preclinical testing, conducting clinical trials, obtaining regulatory approvals and marketing approved drugs than we do. Mergers and acquisitions in the pharmaceutical and biotechnology industries may result in even more resources being concentrated among a smaller number of our competitors. Smaller and other early-stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies. These third parties compete with us in recruiting and retaining qualified scientific and management personnel, establishing clinical trial sites and patient registration for clinical trials, as well as in acquiring technologies complementary to, or necessary for, our programs.

Even if we are able to commercialize any drug candidates, the drugs may become subject to unfavorable pricing regulations, third party reimbursement practices or healthcare reform initiatives, which could harm our business.

Successful sales of our drug candidates, if approved, depend on the availability of adequate coverage and reimbursement from third-party payors. Patients who are provided medical treatment for their conditions generally rely on third-party payors to reimburse all or part of the costs associated with their treatment. Adequate coverage and reimbursement from governmental healthcare programs, such as Medicare and Medicaid in the U.S., and commercial payors are critical to new drug acceptance.

The regulations that govern regulatory approvals, pricing and reimbursement for new therapeutic products vary widely from country to country. Some countries require approval of the sale price of a drug before it can be marketed. In many countries, the pricing review period begins after marketing or licensing approval is granted. In some non-U.S. markets, prescription pharmaceutical pricing remains subject to continuing governmental control even after initial approval is granted. As a result, we might obtain regulatory approval for a drug in a particular country, but be subject to price regulations that delay our commercial launch of the drug and negatively impact the revenues we are able to generate from the sale of the drug in that country. For example, according to the guidance issued in March 2015 by the central government of the PRC, each province will decide which drugs to include in its provincial major illness reimbursement lists and the percentage of reimbursement, based on local funding. Adverse pricing limitations may hinder our ability to recover our investment in one or more drug candidates, even if our drug candidates obtain regulatory approval. For example, in China, according to a statement, Opinions on reforming the review and approval process for pharmaceutical products and medical devices, issued by the State Council in August 2015, the enterprises applying for new drug approval will be required to undertake that the selling price of new drug on PRC mainland market shall not be higher than the comparable market prices of the product in its country of origin or PRC’s neighboring markets, as applicable.

Our ability to commercialize any drugs successfully also will depend in part on the extent to which coverage and reimbursement for these drugs and related treatments will be available from government health administration authorities, private health insurers and other organizations. Government authorities and third-party payors, such as private health insurers and health maintenance organizations, decide which medications they will pay for and establish reimbursement levels. Coverage and reimbursement by a third-party payor may depend upon a number of factors, including the third-party payor’s determination that use of a drug is:

• a covered benefit under its health plan;

• safe, effective and medically necessary;

• appropriate for the specific patient;

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• cost-effective; and

• neither experimental nor investigational.

We cannot be sure that reimbursement will be available for any drug that we commercialize and, if coverage and reimbursement are available, what the level of reimbursement will be. Reimbursement may impact the demand for, or the price of, any drug for which we obtain regulatory approval. Obtaining reimbursement for our drugs may be particularly difficult because of the higher prices often associated with branded drugs and drugs administered under the supervision of a physician. If reimbursement is not available or is available only at limited levels, we may not be able to successfully commercialize any drug candidate that we successfully develop.

In the U.S., no uniform policy of coverage and reimbursement for drugs exists among third-party payors. As a result, obtaining coverage and reimbursement approval of a drug from a government or other third-party payor is a time-consuming and costly process that could require us to provide to each payor supporting scientific, clinical and cost-effectiveness data for the use of our drugs on a payor-by-payor basis, with no assurance that coverage and adequate reimbursement will be obtained. Even if we obtain coverage for a given drug, the resulting reimbursement payment rates might not be adequate for us to achieve or sustain profitability or may require co-payments that patients find unacceptably high. Additionally, third-party payors may not cover, or provide adequate reimbursement for, long-term follow-up evaluations required following the use of our drugs. However, under Medicare Part D – Medicare’s outpatient prescription drug benefit – there are protections in place to ensure coverage and reimbursement for oncology products and all Part D prescription drug plans are required to cover substantially all anti-cancer agents.

The State Council required central and provincial authorities across the PRC to promote a medical insurance program for major illnesses, which targets covering at least 50% of the medical cost as incurred by treating major illnesses, but falls out of the coverage of the basic insurance programs. The State Council requires provincial authorities to increase reimbursement rates over the next three years.

We intend to seek approval to market our drug candidates in the U.S., China, and in other selected jurisdictions. If we obtain approval in one or more non-U.S. jurisdictions for our drug candidates, we will be subject to rules and regulations in those jurisdictions. In some non-U.S. countries, the pricing of drugs and biologics is subject to governmental control. In these countries, pricing negotiations with governmental authorities can take considerable time after obtaining regulatory approval of a drug candidate. In addition, market acceptance and sales of our drug candidates will depend significantly on the availability of adequate coverage and reimbursement from third-party payors for our drug candidates and may be affected by existing and future health care reform measures.

Recently enacted and future legislation may increase the difficulty and cost for us to obtain regulatory approval of and commercialize our drug candidates and affect the prices we may obtain.

In the U.S., China and certain other jurisdictions, there have been a number of legislative and regulatory changes and proposed changes regarding the healthcare system that could prevent or delay regulatory approval of our drug candidates, restrict or regulate post-approval activities and affect our ability to profitably sell any drug candidates for which we obtain regulatory approval.

In the U.S., the Medicare Prescription Drug, Improvement, and Modernization Act of 2003, or the MMA, changed the way Medicare covers and pays for pharmaceutical products. The legislation expanded Medicare coverage for drug purchases by the elderly and introduced a new reimbursement methodology based on average sales prices for physician-administered drugs. In addition, this legislation provided authority for limiting the number of drugs that will be covered in any therapeutic class. Cost reduction initiatives and other provisions of this legislation could decrease the coverage and price that we receive for any approved products. While the

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MMA only applies to drug benefits for Medicare beneficiaries, private payors often follow Medicare coverage policy and payment limitations in setting their own reimbursement rates. Therefore, any reduction in reimbursement that results from the MMA may result in a similar reduction in payments from private payors.

More recently, in March 2010, President Obama signed into law the Affordable Care Act, or ACA, a sweeping law intended to broaden access to health insurance, reduce or constrain the growth of healthcare spending, enhance remedies against fraud and abuse, add new transparency requirements for the healthcare and health insurance industries, impose new taxes and fees on the health industry and impose additional health policy reforms.

Among the provisions of the Affordable Care Act of importance to our potential drug candidates are the following:

• an annual, nondeductible fee on any entity that manufactures or imports specified branded prescription drugs and biologics;

• an increase in the statutory minimum rebates a manufacturer must pay under the Medicaid Drug Rebate Program;

• expansion of healthcare fraud and abuse laws, including the False Claims Act and the Anti-Kickback Statute, new government investigative powers, and enhanced penalties for noncompliance;

• a new Medicare Part D coverage gap discount program, in which manufacturers must agree to offer 50% point-of-sale discounts off negotiated prices;

• extension of manufacturers’ Medicaid rebate liability;

• expansion of eligibility criteria for Medicaid programs;

• expansion of the entities eligible for discounts under the Public Health Service Act pharmaceutical pricing program;

• new requirements to report payments and other transfers of value made to physicians or teaching hospitals;

• a new requirement to annually report drug samples that manufacturers and distributors provide to physicians; and

• a new Patient-Centered Outcomes Research Institute to oversee, identify priorities in, and conduct comparative clinical effectiveness research, along with funding for such research.

In addition, other legislative changes have been proposed and adopted in the U.S. since the Affordable Care Act was enacted. These changes included aggregate reductions to Medicare payments to providers of up to 2% per fiscal year, starting in 2013. In January 2013, President Obama signed into law the American Taxpayer Relief Act of 2012, which, among other things, reduced Medicare payments to several providers, and increased the statute of limitations period for the government to recover overpayments to providers from three to five years. These new laws may result in additional reductions in Medicare and other healthcare funding.

We expect that the Affordable Care Act, as well as other healthcare reform legislative measures that have been since adopted or may be adopted in the future, may result in more rigorous coverage criteria and an additional downward pressure on the price that we receive for any approved drug. Any reduction in reimbursement from Medicare or other government programs may result in a similar reduction in payments from private payors. The implementation of cost containment measures or other healthcare reforms may prevent us from being able to generate revenue, attain profitability or commercialize our drugs. In particular, we expect that the new presidential administration and U.S. Congress will seek to modify, repeal, or otherwise invalidate all, or certain provisions of, the ACA. Since taking office, President Trump has continued to support the repeal of all or portions of the ACA. President Trump has also issued an executive order in which he stated that it is his

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administration’s policy to seek the prompt repeal of the ACA and directed executive departments and federal agencies to waive, defer, grant exemptions from, or delay the implementation of the provisions of the ACA to the maximum extent permitted by law. There is still uncertainty with respect to the impact President Trump’s administration and the U.S. Congress may have, if any, and any changes will likely take time to unfold. Such reforms could have an adverse effect on anticipated revenues from therapeutic candidates that we may successfully develop and for which we may obtain regulatory approval and may affect our overall financial condition and ability to develop therapeutic candidates. However, we cannot predict the ultimate content, timing or effect of any healthcare reform legislation or the impact of potential legislation on us.

Other legislative and regulatory proposals have been made to expand post-approval requirements and restrict coverage and reimbursement and sales and promotional activities, for pharmaceutical products. We cannot be sure whether additional legislative changes will be enacted, or whether agencies such as the FDA or Centers for Medicare and Medicaid Services will issue new regulations, guidance or interpretations that may impact our drug candidates. In addition, increased scrutiny by the U.S. Congress of the FDA’s approval process may significantly delay or prevent regulatory approval, as well as subject us to more stringent product labeling and post-marketing testing and other requirements.

We may be subject, directly or indirectly, to applicable U.S. federal and state anti-kickback, false claims laws, physician payment transparency laws, fraud and abuse laws or similar healthcare and privacy and security laws and regulations, which could expose us to criminal sanctions, civil penalties, contractual damages, reputational harm and diminished profits and future earnings.

Healthcare providers, physicians and others play a primary role in the recommendation and prescription of any products for which we obtain regulatory approval. If we obtain FDA approval for any of our drug candidates and begin commercializing those drugs in the U.S., our operations may be subject to various federal and state fraud and abuse laws, including, without limitation, the federal Anti-Kickback Statute, the federal False Claims Act and physician payment transparency laws and regulations. These laws may impact, among other things, our proposed sales and marketing programs as well as any patient support programs we may consider offering. In addition, we may be subject to patient privacy regulation by both the federal government and the states in which we conduct our business. The laws that may affect our ability to operate include:

• the federal Anti-Kickback Statute, which prohibits, among other things, knowingly and willfully soliciting, receiving, offering or paying any remuneration (including any kickback, bribe or rebate), directly or indirectly, overtly or covertly, in cash or in kind, to induce, or in return for, either the referral of an individual, or the purchase, lease, order or recommendation of any good, facility, item or service for which payment may be made, in whole or in part, under a federal healthcare program, such as the Medicare and Medicaid programs;

• federal civil and criminal false claims laws and civil monetary penalty laws, such as the federal False Claims Act which imposes criminal and civil penalties, including civil whistleblower or qui tam actions, against individuals or entities for knowingly presenting, or causing to be presented, to the federal government, claims for payment or approval from Medicare, Medicaid or other third-party payors that are false or fraudulent, including failure to timely return an overpayment received from the federal government or making a false statement to avoid, decrease or conceal an obligation to pay money to the federal government;

• provisions of the federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, which created new federal criminal statutes referred to as the “HIPAA All-Payor Fraud Prohibition,” prohibit knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program or obtain, by means of false or fraudulent pretenses, representations or promises, any of the money or property owned by, or under the custody or control of, any healthcare

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benefit program, regardless of the payor (e.g., public or private) and knowingly and willfully falsifying, concealing or covering up by any trick or device a material fact or making any materially false statements in connection with the delivery of, or payment for, healthcare benefits, items or services relating to healthcare matters;

• provisions of HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act of 2009 and their respective implementing regulations, which impose requirements on certain covered healthcare providers, health plans, and healthcare clearinghouses as well as their respective business associates that perform services for them that involve the use, or disclosure of, individually identifiable health information, relating to the privacy, security and transmission of individually identifiable health information without appropriate authorization;

• the federal transparency requirements under the Affordable Care Act, including the provision commonly referred to as the Physician Payments Sunshine Act, which requires manufacturers of drugs, devices, biologics and medical supplies for which payment is available under Medicare, Medicaid or the Children’s Health Insurance Program to report annually to the U.S. Department of Health and Human Services information related to all payments or other transfers of value made to physicians and teaching hospitals, as well as ownership and investment interests held by physicians and their immediate family members unless a specific exclusion applies; and

• federal consumer protection and unfair competition laws, which broadly regulate marketplace activities and activities that potentially harm consumers.

Additionally, we are subject to state and non-U.S. equivalents of each of the healthcare laws described above, among others, some of which may be broader in scope and may apply regardless of the payor. Many U.S. states have adopted laws similar to the Federal Anti-Kickback Statute, some of which apply to the referral of patients for healthcare services reimbursed by any source, not just governmental payors, including private insurers. In addition, some states have passed laws that require pharmaceutical companies to comply with the April 2003 Office of Inspector General Compliance Program Guidance for Pharmaceutical Manufacturers and/or the Pharmaceutical Research and Manufacturers of America’s Code on Interactions with Healthcare Professionals. Several states also impose other marketing restrictions or require pharmaceutical companies to make marketing or price disclosures to the state. There are ambiguities as to what is required to comply with these state requirements and if we fail to comply with an applicable state law requirement we could be subject to penalties.

Because of the breadth of these laws and the narrowness of the statutory exceptions and safe harbors available, it is possible that some of our business activities could be subject to challenge under one or more of such laws. In addition, recent health care reform legislation has strengthened these laws. For example, the Affordable Care Act, among other things, amends the intent requirement of the federal Anti-Kickback and criminal healthcare fraud statutes. As a result of such amendment, a person or entity no longer needs to have actual knowledge of these statutes or specific intent to violate them in order to have committed a violation. Moreover, the Affordable Care Act provides that the government may assert that a claim including items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the False Claims Act.

Violations of fraud and abuse laws may be punishable by criminal and/or civil sanctions, including penalties, fines and/or exclusion or suspension from federal and state healthcare programs such as Medicare and Medicaid and debarment from contracting with the U.S. government. In addition, private individuals have the ability to bring actions on behalf of the U.S. government under the Federal False Claims Act as well as under the false claims laws of several states.

Law enforcement authorities are increasingly focused on enforcing these laws, and it is possible that some of our practices may be challenged under these laws. Efforts to ensure that our business arrangements with third

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parties will comply with applicable healthcare laws and regulations will involve substantial costs. It is possible that governmental authorities will conclude that our business practices may not comply with current or future statutes, regulations or case law involving applicable fraud and abuse or other healthcare laws and regulations. If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could have a significant impact on our business, including the imposition of civil, criminal and administrative penalties, damages, disgorgement, monetary fines, possible exclusion from participation in Medicare, Medicaid and other federal healthcare programs, contractual damages, reputational harm, diminished profits and future earnings, and curtailment of our operations, any of which could adversely affect our ability to operate our business and our results of operations. In addition, the approval and commercialization of any of our drug candidates outside the U.S. will also likely subject us to non-U.S. equivalents of the healthcare laws mentioned above, among other non-U.S. laws.

If any of the physicians or other providers or entities with whom we expect to do business is found to be not in compliance with applicable laws, they may be subject to criminal, civil or administrative sanctions, including exclusions from government funded healthcare programs.

We expect that the new presidential administration and U.S. Congress will seek to modify, repeal, or otherwise invalidate all, or certain provisions of, the ACA, which could impact provisions of the existing fraud and abuse, privacy and security or other health care laws and regulations. There is still uncertainty with respect to the impact President Trump’s administration and the U.S. Congress may have, if any, and any changes will likely take time to unfold. Such reforms could have an adverse effect on anticipated revenues from therapeutic candidates that we may successfully develop and for which we may obtain regulatory approval and may affect our overall financial condition and ability to develop therapeutic candidates. However, we cannot predict the ultimate content, timing or effect of any healthcare reform legislation or the impact of potential legislation on us.

Lastly, political, economic, and regulatory influences are subjecting the health care industry in the United States to fundamental change. Initiatives to reduce the federal budget and debt and to reform health care coverage are increasing cost-containment efforts. We anticipate that federal agencies, Congress, state legislatures, and the private sector will continue to review and assess alternative health care benefits, controls on health care spending, and other fundamental changes to the healthcare delivery system. Any proposed or actual changes could limit coverage for or the amounts that federal and state governments will pay for health care products and services, which could also result in reduced demand for our products or additional pricing pressures, and limit or eliminate our spending on development projects and affect our ultimate profitability.

We intend to market our drugs, if approved, in a variety of international markets and we are exploring the licensing of commercialization rights or other forms of collaboration worldwide, which exposes us to additional risks of conducting business in additional international markets.

We conduct business operations in regions including the U.S., China, Taiwan and New Zealand, and non-U.S. markets are an important component of our growth strategy. If we fail to obtain licenses or enter into collaboration arrangements with third parties in these markets, or if these parties are not successful, our revenue-generating growth potential will be adversely affected.

Moreover, international business relationships subject us to additional risks that may materially adversely affect our ability to attain or sustain profitable operations, including:

• initiatives to develop an international sales, marketing and distribution organization may increase our expenses, divert our management’s attention from the acquisition or development of drug candidates or cause us to forgo profitable licensing opportunities in these geographies;

• efforts to enter into collaboration or licensing arrangements with third parties in connection with our international sales, marketing and distribution efforts may increase our expenses or divert our management’s attention from the acquisition or development of drug candidates;

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• changes in a specific country’s or region’s laws, regulations or political and cultural climate or economic condition;

• differing regulatory requirements for drug approvals and marketing internationally;

• difficulty of effective enforcement of contractual provisions and intellectual property rights in local jurisdictions;

• potentially reduced protection for intellectual property rights;

• potential third-party patent rights;

• unexpected changes in tariffs, trade barriers and regulatory requirements, such as Export Administration Regulations promulgated by the U.S. Department of Commerce and fines, penalties or suspension or revocation of export privileges;

• economic weakness, including inflation or political instability, particularly in non-U.S. economies and markets;

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

• the effects of applicable non-U.S. tax structures and potentially adverse tax consequences;

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

• workforce uncertainty and labor unrest, particularly in non-U.S. countries where labor unrest is more common than in the U.S.;

• the potential for so-called parallel importing, which is what happens when a local seller, faced with high or higher local prices, opts to import goods from a non-U.S. market with low or lower prices rather than buying them locally;

• failure of our employees and contracted third parties to comply with Office of Foreign Asset Control rules and regulations and the Foreign Corrupt Practices Act;

• production shortages resulting from any events affecting raw material supply or manufacturing capabilities abroad; and

• business interruptions resulting from geo-political actions, including war and terrorism, or natural disasters, including earthquakes, volcanoes, typhoons, floods, hurricanes and fires.

These and other risks may materially adversely affect our ability to obtain or sustain revenue from international markets.

The use of legal, regulatory, and legislative strategies by both brand and generic competitors, including but not limited to “authorized generics” and regulatory petitions, as well as the potential impact of proposed and newly enacted legislation, may increase costs associated with the introduction or marketing of our generic products, could delay or prevent such introduction, and could adversely affect our results of operations.

Our competitors, both branded and generic, often pursue strategies to prevent, delay, or eliminate competition from generic alternatives to branded products. These strategies include, but are not limited to:

· entering into agreements whereby other generic companies will begin to market an authorized generic, a generic equivalent of a branded product, at the same time or after generic competition initially enters the market;

• launching a generic version of their own branded product prior to or at the same time or after generic competition initially enters the market;

• filing petitions with the FDA or other regulatory bodies seeking to prevent or delay approvals, including timing the filings so as to thwart generic competition by causing delays of our product approvals;

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• seeking to establish regulatory and legal obstacles that would make it more difficult to demonstrate bioequivalence or to meet other requirements for approval, and/or to prevent regulatory agency review of applications, such as through the establishment of patent linkage (laws and regulations barring the issuance of regulatory approvals prior to patent expiration);

• initiating legislative or other efforts to limit the substitution of generic versions of brand pharmaceuticals;

• filing suits for patent infringement and other claims that may delay or prevent regulatory approval, manufacture, and/or scale of generic products;

• introducing “next-generation” products prior to the expiration of market exclusivity for the reference product, which often materially reduces the demand for the generic or the reference product for which we seek regulatory approval;

• persuading regulatory bodies to withdraw the approval of brand name drugs for which the patents are about to expire and converting the market to another product of the brand company on which longer patent protection exists;

• obtaining extensions of market exclusivity by conducting clinical trials of brand drugs in pediatric populations or by other methods; and

• seeking to obtain new patents on drugs for which patent protection is about to expire.

If any other actions by our competitors and other third parties to prevent or delay activities necessary to the approval, manufacture, or distribution of our products are successful, our entry into the market and our ability to generate revenues associated with new products may be delayed, reduced, or eliminated, which could have a material adverse effect on our business, financial condition, results of operations, cash flows, and/or share price.

Our compounded preparations and the pharmacy compounding industry are subject to regulatory and customer scrutiny, which may impair our growth and sales.

Formulations prepared and dispensed by compounding pharmacies contain FDA-approved ingredients, but are not themselves approved by the FDA. As a 503B outsourcing facility, our compounded formulations are not subject to the FDA approval process. Certain compounding pharmacies have been the subject of widespread negative media coverage in recent years, and the actions of these pharmacies have resulted in increased scrutiny of compounding pharmacy activities from the FDA and state governmental agencies. For example, the FDA has in the past requested that a number of compounding pharmacies conduct a recall of all non-expired, purportedly sterile drug products and cease sterile compounding operations due to lack of sterility assurance, and additional compounding pharmacies have suspended sterile production or voluntarily recalled certain sterile compounding products after an FDA inspection of the relevant facilities. As a result of this exercise of caution, some physicians may be hesitant to prescribe, and some patients may be hesitant to purchase and use, these compounded formulations.

If a compounded drug formulation provided through our compounding services leads to patient injury or death or results in a product recall, we may be exposed to significant liabilities and reputational harm.

The production, labeling and packaging of compounded drugs is inherently risky. The success of our compounded formulations and pharmacy operations depends to a significant extent upon perceptions of the safety and quality of our products. We could be adversely affected if our formulations are subject to negative publicity. We could also be adversely affected if any of our formulations or other products, any similar products sold by other companies, or any products sold by other compounding outsourcing facilities, prove to be, or are asserted to be, harmful to patients. There are a number of factors that could result in the injury or death of a patient who receives one of our compounded formulations, including quality issues, manufacturing or labeling flaws, improper packaging or unanticipated or improper uses of the products, any of which could result from

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human or other error. Any of these situations could lead to a recall of, or safety alert relating to, one or more of our products. Similarly, to the extent any of the components of approved drugs or other ingredients used by us to produce compounded formulations have quality or other problems that adversely affect the finished compounded preparations, our sales could be adversely affected. In addition, in the ordinary course of business, we may voluntarily retrieve products in response to a customer complaint. Because of our dependence upon medical and patient perceptions, any adverse publicity associated with illness or other adverse effects resulting from the use or misuse of our products, any similar products sold by other companies or any other compounded formulations, could have a material adverse impact on our business, results of operations and financial condition.

Risks Related to Our Intellectual Property

A significant portion of our intellectual property portfolio currently comprises pending patent applications that have not yet been issued as granted patents, and if our pending patent applications fail to issue our business will be adversely affected. If we are unable to obtain and maintain patent protection for our technology and drugs, our competitors could develop and commercialize technology and drugs similar or identical to ours, and our ability to successfully commercialize our technology and drugs may be adversely affected.

Our success depends in large part on our ability to obtain and maintain patent protection in the U.S., the PRC and other countries with respect to our proprietary technology and drug candidates. We have sought to protect our proprietary position by filing patent applications in the U.S., the PRC and other countries related to novel technologies and drug candidates that we consider are important to our business. As of March 31, 2017, we owned more than 100 granted patents and more than 40 pending patent applications worldwide, including one pending international patent application under the Patent Cooperation Treaty, or PCT, which we plan to file nationally in the U.S. and other jurisdictions. The process of obtaining patent protection is expensive and time-consuming, and we may not be able to file and prosecute all necessary or desirable patent applications at a reasonable cost or in a timely manner. It is also possible that we will fail to identify patentable aspects of our research and development output before it is too late to obtain patent protection. There can be no assurance that our pending patent applications will result in issued patents in the U.S. or non-U.S. jurisdictions in which such applications are pending. Moreover, even our issued patents do not guarantee us the right to practice our technology in relation to the commercialization of our platforms’ product candidates. The area of patent and other intellectual property rights in biotechnology is an evolving one with many risks and uncertainties, and third parties may have blocking patents that could be used to prevent us from commercializing our patented technologies, platforms and product candidates and practicing our proprietary technology. There can also be no assurance that a third party will not challenge the validity of our patents or that we will obtain sufficient claim scope in those patents to prevent a third party from competing successfully with our drug candidates.

The patent position of biotechnology and pharmaceutical companies generally is highly uncertain, involves complex legal and factual questions and has in recent years been the subject of much litigation. As a result, the issuance, scope, validity, enforceability and commercial value of our patent rights are highly uncertain. Our pending and future patent applications may not result in patents being issued that protect our technology or drug candidates, or that effectively prevent others from commercializing competitive technologies and drug candidates. Changes in either the patent laws or interpretation of the patent laws in the U.S. and other countries may diminish the value of our patents or narrow the scope of our patent protection. Publications of discoveries in the scientific literature often lag behind the actual discoveries, and patent applications in the U.S. and other jurisdictions are typically not published until 18 months after filing, or in some cases not at all. Therefore, we cannot be certain that we were the first to make the inventions claimed in our patents or pending patent applications, or that we were the first to file for patent protection of such inventions. Under the America Invents Act enacted in 2011, the U.S. moved to a first-to-file system in early 2013 from the previous system under which the first to make the claimed invention was entitled to the patent. Assuming the other requirements for patentability are met, the first to file a patent application is entitled to the patent.

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Even if our patent applications issue as patents, they may not issue in a form that will provide us with any meaningful protection, prevent competitors from competing with us or otherwise provide us with any competitive advantage. Our competitors may be able to circumvent our patents by developing similar or alternative technologies or drug candidates in a non-infringing manner. The issuance of a patent is not conclusive as to its scope, validity or enforceability, and our owned and licensed patents may be challenged in the courts or patent offices in the U.S. and abroad, which proceedings are time-consuming, costly and of uncertain outcome. We may become involved in interference, inter partes review, post grant review, ex parte reexamination, derivation, opposition or similar other proceedings challenging our patent rights or the patent rights of others. Such challenges may result in patent claims being narrowed, invalidated or held unenforceable, which could limit our ability to stop or prevent us from stopping others from using or commercializing similar or identical technology and drug candidates, or limit the duration of the patent protection of our technology and drug candidates. Given the amount of time required for the development, testing and regulatory review of new drug candidates, patents protecting such candidates might expire before or shortly after such candidates are commercialized. As a result, our patent portfolio may not provide us with sufficient rights to exclude others from commercializing drug candidates similar or identical to ours.

We may not be able to protect our intellectual property rights throughout the world.

The patent positions of companies like ours are generally uncertain and involve complex legal and factual questions. No consistent policy regarding the scope of claims allowable in patents has emerged in the U.S. The patent situation outside of the U.S. is even more uncertain. Changes in the patent laws and rules, either by legislation, judicial decisions, or regulatory interpretation in the U.S. and other countries may diminish our ability to protect our inventions and enforce our intellectual property rights, and more generally could affect the value of our intellectual property.

In addition, the laws of certain non-U.S. countries do not protect intellectual property rights to the same extent as U.S. federal and state laws do. Consequently, we may not be able to prevent third parties from practicing our inventions in all countries outside the U.S., or from selling or importing drugs made using our inventions in and into the U.S. or non-U.S. jurisdictions. Competitors may use our technologies in jurisdictions where we have not obtained patent protection to develop their own drugs and further, may export otherwise infringing drugs to non-U.S. jurisdictions where we have patent protection, but where enforcement rights are not as strong as those in the U.S. These drugs may compete with our drug candidates and our patent rights or other intellectual property rights may not be effective or adequate to prevent them from competing.

Many companies have encountered significant problems in protecting and defending intellectual property rights in certain jurisdictions, including China. The legal systems of some countries do not favor the enforcement of patents, trade secrets and other intellectual property, particularly those relating to biopharmaceutical products, which could make it difficult in those jurisdictions for us to stop the infringement or misappropriation of our patents or other intellectual property rights, or the marketing of competing drugs in violation of our proprietary rights. Proceedings to enforce our patent and other intellectual property rights in non-U.S. jurisdictions could result in substantial costs and divert our efforts and attention from other aspects of our business.

Furthermore, such proceedings could put our patents at risk of being invalidated, held unenforceable, or interpreted narrowly, could put our patent applications at risk of not issuing, and could provoke third parties to assert claims of infringement or misappropriation against us. We may not prevail in any lawsuits that we initiate and the damages or other remedies awarded, if any, may not be commercially meaningful. Accordingly, our efforts to enforce our intellectual property rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual property that we develop.

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We may become involved in lawsuits to protect or enforce our intellectual property, which could be expensive, time-consuming and unsuccessful and our patent rights relating to our drug candidates could be found invalid or unenforceable if challenged in court or before the U.S. Patent and Trademark Office or comparable non-U.S. authority.

Competitors may infringe our patent rights or misappropriate or otherwise violate our intellectual property rights. To counter infringement or unauthorized use, litigation may be necessary in the future to enforce or defend our intellectual property rights, to protect our trade secrets or to determine the validity and scope of our own intellectual property rights or the proprietary rights of others. Such litigation can be expensive and time-consuming. Any claims that we assert against perceived infringers could also provoke these parties to assert counterclaims against us alleging that we infringe their intellectual property rights. Many of our current and potential competitors have the ability to dedicate substantially greater resources to enforce and/or defend their intellectual property rights than we can. Accordingly, despite our efforts, we may not be able to prevent third parties from infringing upon or misappropriating our intellectual property. Litigation could result in substantial costs and diversion of management resources, which could harm our business and financial results. In addition, in an infringement proceeding, a court may decide that patent rights or other intellectual property rights owned by us are invalid or unenforceable, or may refuse to stop the other party from using the technology at issue on the grounds that our patent rights or other intellectual property rights do not cover the technology in question. An adverse result in any litigation proceeding could put our patent, as well as any patents that may issue in the future from our pending patent applications, at risk of being invalidated, held unenforceable or interpreted narrowly. Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure during this type of litigation.

If we initiate legal proceedings against a third party to enforce any patent, or any patents that may issue in the future from our patent applications, that relates to one of our drug candidates, the defendant could counterclaim that such patent rights are invalid or unenforceable. In patent litigation in the U.S., defendant counterclaims alleging invalidity or unenforceability are commonplace, and there are numerous grounds upon which a third party can assert invalidity or unenforceability of a patent. Third parties may also raise similar claims before administrative bodies in the U.S. or abroad, even outside the context of litigation. Such mechanisms include ex parte re-examination, inter partes review, post-grant review, derivation and equivalent proceedings in non-U.S. jurisdictions, such as opposition proceedings. Such proceedings could result in revocation or amendment to our patents in such a way that they no longer cover and protect our drug candidates. The outcome following legal assertions of invalidity and unenforceability is unpredictable. With respect to the validity of our patents, for example, we cannot be certain that there is no invalidating prior art of which we, our patent counsel, and the patent examiner were unaware during prosecution. If a defendant were to prevail on a legal assertion of invalidity and/or unenforceability, we would lose at least part, and perhaps all, of the patent protection on our drug candidates. Such a loss of patent protection could have a material adverse impact on our business.

We may not be able to prevent misappropriation of our trade secrets or confidential information, particularly in countries where the laws may not protect those rights as fully as in the U.S. Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure during this type of litigation.

We may be subject to claims challenging the inventorship of our patents and other intellectual property.

Although we are not currently experiencing any claims challenging the inventorship of our patents or ownership of our intellectual property, we may in the future be subject to claims that former employees, collaborators or other third parties have an interest in our patents or other intellectual property as inventors or co-inventors. For example, we may have inventorship disputes arise from conflicting obligations of consultants or others who are involved in developing our drug candidates. Litigation may be necessary to defend against these and other claims challenging inventorship. If we fail in defending any such claims, in addition to paying

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monetary damages, we may lose rights such as exclusive ownership of, or right to use, our patent rights or other intellectual property. Such an outcome could have a material adverse effect on our business. Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to management and other employees.

If we are sued for infringing intellectual property rights of third parties, such litigation could be costly and time-consuming and could prevent or delay us from developing or commercializing our drug candidates.

Our commercial success depends in part on our avoiding infringement of the patents and other intellectual property rights of third parties. There is a substantial amount of litigation involving patent and other intellectual property rights in the biotechnology and pharmaceutical industries, including litigation in the U.S. courts, inter partes review, post grant review, interference and ex parte reexamination proceedings before the U.S. Patent and Trademark Office, or USPTO, or oppositions and other comparable proceedings in non-U.S. jurisdictions. Numerous issued patents and pending patent applications, which are owned by third parties, exist in the fields in which we are developing drug candidates. As the biotechnology and pharmaceutical industries expand and more patents are issued, the risk increases that our drug candidates or manufacturing processes may give rise to claims of infringement of the patent rights of others.

Third parties may assert that we are employing their proprietary technology without authorization. There may be third-party patents of which we are currently unaware with claims to materials, formulations, methods of manufacture or methods for treatment related to the use or manufacture of our drug candidates. Because patent applications can take many years to issue, there may be currently pending patent applications which may later result in issued patents that our drug candidates may infringe. In addition, third parties may obtain patents in the future and claim that use of our technologies infringes upon these patents. If any third-party patents were held by a court of competent jurisdiction to cover the manufacturing process of any of our drug candidates, any molecules formed during the manufacturing process or any final product itself, the holders of any such patents may be able to prevent us from commercializing such drug candidate unless we obtain a license under the applicable patents, or until such patents expire or they are finally determined to be held invalid or unenforceable. Similarly, if any third-party patent were held by a court of competent jurisdiction to cover aspects of our formulations, processes for manufacture or methods of use, including combination therapy or patient selection methods, the holders of any such patent may be able to block our ability to develop and commercialize the applicable drug candidate unless we obtain a license, limit our uses, or until such patent expires or is finally determined to be held invalid or unenforceable. In either case, such a license may not be available on commercially reasonable terms or at all.

Third parties who bring successful claims against us for infringement of their intellectual property rights may obtain injunctive or other equitable relief, which could prevent us from developing and commercializing one or more of our drug candidates. Defense of these claims, regardless of their merit, would involve substantial litigation expense and would be a substantial diversion of management and employee resources from our business. In the event of a successful claim of infringement or misappropriation against us, we may have to pay substantial damages, including treble damages and attorneys’ fees in the case of willful infringement, obtain one or more licenses from third parties, pay royalties or redesign our infringing drug candidates, which may be impossible or require substantial time and monetary expenditure and undertaking additional preclinical studies, clinical trials or regulatory review. In the event of an adverse result in any such litigation, or even in the absence of litigation, we may need to obtain licenses from third parties to advance our research or allow commercialization of our drug candidates. We cannot predict whether any required license would be available at all or whether it would be available on commercially reasonable terms, and we may fail to obtain any of these licenses on commercially reasonable terms, if at all. In the event that we are unable to obtain such a license, we would be unable to further develop and commercialize one or more of our drug candidates, which could harm our business significantly. We may also elect to enter into license agreements in order to settle patent infringement claims or to resolve disputes prior to litigation and any such license agreements may require us to pay royalties and other fees that could significantly harm our business.

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Even if resolved in our favor, litigation or other legal proceedings relating to intellectual property claims may cause us to incur significant expenses, and could distract our technical personnel, management personnel, or both from their normal responsibilities. In addition, there could be public announcements of the results of hearings, motions or other interim proceedings or developments and if securities analysts or investors perceive these results to be negative, it could have a substantial adverse effect on the market price of our common stock. Such litigation or proceedings could substantially increase our operating losses and reduce the resources available for development activities or any future sales, marketing or distribution activities. We may not have sufficient financial or other resources to adequately conduct such litigation or proceedings. Some of our competitors may be able to sustain the costs of such litigation or proceedings more effectively than we can because of their greater financial resources. Uncertainties resulting from the initiation and continuation of patent litigation or other proceedings could have a material adverse effect on our ability to compete in the marketplace.

If our products conflict with the intellectual property rights of third parties, we may incur substantial liabilities and we may be unable to commercialize products in a profitable manner or at all.

We seek to launch generic pharmaceutical products either where patent protection or other regulatory exclusivity of equivalent branded products has expired, where patents have been declared invalid or where products do not infringe on the patents of others. However, at times, we may seek approval to market generic products before the expiration of patents relating to the branded versions of those products, based upon our belief that such patents are invalid or otherwise unenforceable or would not be infringed by our products. Our success depends in part on our ability to operate without infringing the patents and proprietary rights of third parties. The manufacture, use and sale of generic versions of products has been subject to substantial litigation in the pharmaceutical industry. These lawsuits relate to the validity and infringement of patents or proprietary rights of third parties. If our products were found to be infringing on the intellectual property rights of a third-party, we could be required to cease selling the infringing products, causing us to lose future sales revenue from such products and face substantial liabilities for patent infringement, in the form of either payment for the innovator’s lost profits or a royalty on our sales of the infringing product. These damages may be significant and could materially adversely affect our business. Any litigation, regardless of the merits or eventual outcome, would be costly and time consuming and we could incur significant costs and/or a significant reduction in revenue in defending the action and from the resulting delays in manufacturing, marketing or selling any of our products subject to such claims.

Obtaining and maintaining our patent protection depends on compliance with various procedural, document submission, fee payment, and other requirements imposed by governmental patent agencies, and our patent protection could be reduced or eliminated for noncompliance with these requirements.

Periodic maintenance fees on any issued patent are due to be paid to the USPTO and other patent agencies in several stages over the lifetime of the patent. The USPTO and various non-U.S. governmental patent agencies require compliance with a number of procedural, documentary, fee payment, and other similar provisions during the patent application process. Although an inadvertent lapse can in many cases be cured by payment of a late fee or by other means in accordance with the applicable rules, there are situations in which noncompliance can result in abandonment or lapse of the patent or patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction. Noncompliance events that could result in abandonment or lapse of a patent or patent application include failure to respond to official actions within prescribed time limits, non-payment of fees, and failure to properly legalize and submit formal documents. In any such event, our competitors might be able to enter the market, which would have a material adverse effect on our business.

The terms of our patents may not be sufficient to effectively protect our drug candidates and business.

In most countries in which we file patent applications, including the U.S., the term of an issued patent is generally 20 years from the earliest claimed filing date of a non-provisional patent application in the applicable country. With respect to any issued patents in the U.S., we may be entitled to obtain a patent term extension or

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extend the patent expiration date provided we meet the applicable requirements for obtaining such patent term extensions. Although various such extensions may be available, the life of a patent and the protection it affords is by definition limited. Even if patents covering our drug candidates are obtained, we may be open to competition from other companies as well as generic medications once the patent life has expired for a drug. If patents are issued on our currently pending patent applications, the resulting patents will be expected to expire on dates ranging from 2025 to 2038, excluding any potential patent term extension or adjustment. Upon the expiration of our issued patent or patents that may issue from our pending patent applications, we will not be able to assert such patent rights against potential competitors and our business and results of operations may be adversely affected.

In addition, the rights granted under any issued patents may not provide us with protection or competitive advantages against competitors with similar technology. Furthermore, our competitors may independently develop similar technologies. For these reasons, we may have competition for our technologies, platforms and product candidates. Moreover, because of the extensive time required for development, testing and regulatory review of a potential product, it is possible that, before any particular product candidate can be commercialized, any related patent may expire or remain in force for only a short period following commercialization, thereby reducing any advantage of the patent.

If we do not obtain additional protection under the Hatch-Waxman Amendments and similar legislation in other countries extending the terms of our patents, if issued, relating to our drug candidates, our business may be materially harmed.

Depending upon the timing, duration and specifics of FDA regulatory approval for our drug candidates, one or more of our U.S. patents, if issued, may be eligible for limited patent term restoration under the Drug Price Competition and Patent Term Restoration Act of 1984, referred to as the Hatch-Waxman Amendments. The Hatch-Waxman Amendments permit a patent term extension of up to five years as compensation for patent term lost during drug development and the FDA regulatory review process. Patent term extensions, however, cannot extend the remaining term of a patent beyond a total of 14 years from the date of drug approval by the FDA, and only one patent can be extended for a particular drug.

The application for patent term extension is subject to approval by the USPTO, in conjunction with the FDA. We may not be granted an extension because of, for example, failing to apply within applicable deadlines, failing to apply prior to expiration of relevant patents or otherwise failing to satisfy applicable requirements. Moreover, the applicable time period or the scope of patent protection afforded could be less than we request. If we are unable to obtain a patent term extension for a given patent or the term of any such extension is less than we request, the period during which we will have the right to exclusively market our drug will be shortened and our competitors may obtain earlier approval of competing drugs, and our ability to generate revenues could be materially adversely affected.

Changes in patent law could diminish the value of patents in general, thereby impairing our ability to protect our drug candidates.

As is the case with other biopharmaceutical companies, our success is heavily dependent on intellectual property, particularly patent rights. Obtaining and enforcing patents in the biopharmaceutical industry involves both technological and legal complexity, and is therefore costly, time-consuming, and inherently uncertain. In addition, the U.S. has recently enacted and is currently implementing wide-ranging patent reform legislation. Recent U.S. Supreme Court rulings have narrowed the scope of patent protection available in certain circumstances and weakened the rights of patent owners in certain situations. In addition to increasing uncertainty with regard to our ability to obtain patents in the future, this combination of events has created uncertainty with respect to the value of patents once obtained, if any. Depending on decisions by the U.S. Congress, the federal courts and the USPTO, the laws and regulations governing patents could change in unpredictable ways that would weaken our ability to obtain new patents or to enforce our existing patents and

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patents that we might obtain in the future. For example, in a recent case, Assoc. for Molecular Pathology v. Myriad Genetics, Inc., the U.S. Supreme Court held that certain claims to naturally-occurring substances are not patentable. Although we do not believe that our currently-issued patents and any patents that may issue from our pending patent applications directed to our drug candidates if issued in their currently pending forms, as well as patent rights licensed by us, will be found invalid based on this decision, we cannot predict how future decisions by the courts, the U.S. Congress or the USPTO may impact the value of our patent rights. There could be similar changes in the laws of foreign jurisdictions that may impact the value of our patent rights or our other intellectual property rights.

If we are unable to protect the confidentiality of our trade secrets, our business and competitive position would be harmed. We may be subject to claims that our employees have wrongfully used or disclosed alleged trade secrets of their former employers.

In addition to our issued patents and pending patent applications, we rely on trade secrets, including unpatented know-how, technology and other proprietary information, to maintain our competitive position and to protect our drug candidates. We seek to protect these trade secrets, in part, by entering into non-disclosure and confidentiality agreements with parties that have access to them, such as our employees, corporate collaborators, outside scientific collaborators, sponsored researchers, contract manufacturers, consultants, advisors and other third parties. We also enter into confidentiality and invention or patent assignment agreements with our employees and consultants. These agreements provide that all confidential information concerning our business or financial affairs developed or made known to the individual during the course of the individual’s relationship with us is to be kept confidential and not disclosed to third parties except in specific circumstances. In the case of employees, the agreements provide that all inventions conceived by the individual, and which are related to our current or planned business or research and development or made during normal working hours, on our premises or using our equipment or proprietary information, are our exclusive property. In many cases our confidentiality and other agreements with consultants, outside scientific collaborators, sponsored researchers and other advisors require them to assign to us or grant us licenses to inventions they invent as a result of the work or services they render under such agreements or grant us an option to negotiate a license to use such inventions. However, any of these parties may breach such agreements and disclose our proprietary information, and we may not be able to obtain adequate remedies for such breaches. Enforcing a claim that a party illegally disclosed or misappropriated a trade secret can be difficult, expensive and time-consuming, and the outcome is unpredictable. If any of our trade secrets were to be lawfully obtained or independently developed by a competitor, we would have no right to prevent them from using that technology or information to compete with us and our competitive position would be harmed.

Furthermore, many of our employees, including our senior management, were previously employed at other biotechnology or pharmaceutical companies, including our competitors or potential competitors. Some of these employees, including each member of our senior management, executed proprietary rights, non-disclosure and non-competition agreements in connection with such previous employment. Although we try to ensure that our employees do not use the proprietary information or know-how of others in their work for us, we may be subject to claims that we or these employees have used or disclosed intellectual property, including trade secrets or other proprietary information, of any such employee’s former employer. We are not aware of any threatened or pending claims related to these matters or concerning the agreements with our senior management, but in the future litigation may be necessary to defend against such claims. If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights or personnel. Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to management.

In addition, while we typically require our employees, consultants and contractors who may be involved in the development of intellectual property to execute agreements assigning such intellectual property to us, we may be unsuccessful in executing such an agreement with each party who in fact develops intellectual property that we regard as our own, which may result in claims by or against us related to the ownership of such intellectual

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property. If we fail in prosecuting or defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights. Even if we are successful in prosecuting or defending against such claims, litigation could result in substantial costs and be a distraction to our management and scientific personnel.

We also seek to preserve the integrity and confidentiality of our proprietary technology and processes by maintaining physical security of our premises and physical and electronic security of our information technology systems. Although we have confidence in these individuals, organizations, and systems, agreements or security measures may be breached and we may not have adequate remedies for any breach. To the extent that our employees, contractors, consultants, collaborators, and advisors use intellectual property owned by others in their work for us, disputes may arise as to the rights in related or resulting know-how and inventions.

We may not be successful in obtaining or maintaining necessary rights for our development pipeline through acquisitions and in-licenses.

Because our programs may involve additional drug candidates that may require the use of proprietary rights held by third parties, the growth of our business may depend in part on our ability to acquire and maintain licenses or other rights to use these proprietary rights. We may be unable to acquire or in-license any compositions, methods of use, or other third-party intellectual property rights from third parties that we identify. The licensing and acquisition of third-party intellectual property rights is a competitive area, and a number of more established companies are also pursuing strategies to license or acquire third-party intellectual property rights that we may consider attractive. These established companies may have a competitive advantage over us due to their size, cash resources and greater clinical development and commercialization capabilities.

In addition, companies that perceive us to be a competitor may be unwilling to assign or license rights to us. We also may be unable to license or acquire third-party intellectual property rights on terms that would allow us to make an appropriate return on our investment. If we are unable to successfully obtain rights to required third-party intellectual property rights, our business, financial condition and prospects for growth could suffer.

If we fail to comply with our obligations in the agreements under which we license intellectual property rights from third parties or otherwise experience disruptions to our business relationships with our licensors, we could be required to pay monetary damages or could lose license rights that are important to our business.

We have entered into license agreements with third parties providing us with rights under various third-party patents and patent applications, including the rights to prosecute patent applications and to enforce patents. Certain of these license agreements impose and, for a variety of purposes, we may enter into additional licensing and funding arrangements with third parties that also may impose diligence, development or commercialization timelines and milestone payment, royalty, insurance and other obligations on us. Certain of these license agreements provide us with the exclusive right to practice technologies in major markets including North America, South America, European Union, Australia, New Zealand, Eastern Europe, China, Taiwan, Hong Kong, Macau and parts of Southeast Asia, although the right to practice the technologies and any inventions arising out of such technologies outside of these territories may be reserved to the licensing company. In addition, under certain of our existing licensing agreements, we are obligated to pay royalties on net product sales of our drug candidates once commercialized, pay a percentage of sublicensing revenues, make other specified payments relating to our drug candidates or pay license maintenance and other fees. We also have diligence and clinical development obligations under certain of these agreements that we are required to satisfy. If we fail to comply with our obligations under our current or future license agreements, our counterparties may have the right to terminate these agreements, in which event we might not be able to develop, manufacture or market any drug or drug candidate that is covered by the licenses provided for under these agreements or we may face claims for monetary damages or other penalties under these agreements. Such an occurrence could diminish the value of these products and our company. Termination of the licenses provided for under these agreements or reduction or elimination of our rights under these agreements may result in our having to negotiate new or reinstated agreements with less favorable terms, or cause us to lose our rights under these agreements, including our rights to important intellectual property or technology.

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In particular, our ability to stop third parties from making, using, selling, offering to sell, or importing any of our patented inventions, either directly or indirectly, will depend in part on our success in obtaining, defending, and enforcing patent claims that cover our technology, inventions, and improvements. With respect to both licensed and company-owned intellectual property, we cannot be sure that patents will be granted with respect to any of our pending patent applications or with respect to any patent applications filed by us in the future, nor can we be sure that any of our existing patents or any patents that may be granted to us in the future will be commercially useful in protecting our platforms and product candidates and the methods used to manufacture those platforms and product candidates. Our issued patents and those that may issue in the future may be challenged, invalidated, or circumvented, which could limit our ability to stop competitors from marketing related platforms or product candidates or limit the length of the term of patent protection that we may have for our technologies, platforms, and product candidates.

We also rely on trade secret protection for our confidential and proprietary information. Although we take steps to protect our confidential and proprietary information as trade secrets, including through contractual means with our employees and consultants, third parties may independently develop substantially equivalent proprietary information and techniques or otherwise gain access to our trade secrets or technology. Thus, we may not be able to meaningfully protect our trade secrets. It is our policy to require our employees, consultants, outside scientific collaborators, sponsored researchers and other advisors to execute confidentiality agreements upon the commencement of employment or consulting relationships with us.

If our licensing and sublicensing activities result in non-compliance with our licensing agreements, our business relationships with our licensing partners may suffer and we may be required to pay monetary damages or rescind or amend existing agreements which are important to our business.

We have entered into agreements with third parties under which we have granted licenses to use certain of our patents and patent applications, including the rights to develop, seek regulatory approval for and sell products using our KX-01 and KX-02 products. We have also entered into similar agreements sublicensing the intellectual property for the Orascovery platform, which we have licensed from Hanmi. We have granted exclusive patent rights to certain of these partners and have granted them certain additional rights with respect to the intellectual property we have licensed to them. From time to time we may engage in other licensing transactions in which we acquire licenses to certain intellectual property or sublicense intellectual property rights. If we fail to comply with or are found to have violated the terms of any of our licenses, we may be required to rescind or amend our license agreements or pay damages to license counterparties or other rightsholders. This may also negatively impact our relationships with our licensing and sublicencing partners for our candidate platforms. For further information regarding the terms of our licenses, please see “Business—License and Collaboration Agreements”.

Risks Related to Our Reliance on Third Parties

We depend on our agreements with Hanmi Pharmaceutical Co. Ltd, or Hanmi, to provide rights to the intellectual property relating to certain of our lead product candidates. Any termination or loss of significant rights under those agreements would adversely affect our development or commercialization of our lead product candidates.

We have licensed the intellectual property rights related to HM30181A, an integral part of our current product candidates, from Hanmi pursuant to two license agreements. If, for any reason, our license agreements are terminated or we otherwise lose those rights, it would adversely affect our business. Our license agreements with Hanmi impose on us obligations relating to exclusivity, territorial rights, development, commercialization, funding, payment, diligence, sublicensing, insurance, intellectual property protection and other matters. If we breach any material obligations, or use the intellectual property licensed to us in an unauthorized manner, we may be required to pay damages to Hanmi and Hanmi may have the right to terminate our license, which could result in us being unable to develop, manufacture and sell our product candidates that incorporate HM30181A.

In addition, under our 2013 license agreement with Hanmi, we have granted Hanmi a one-time right of first negotiation that, at Hanmi’s discretion, requires us to negotiate in good faith the sale of our rights in Oraxol and

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Oratecan under such agreement to Hanmi at a purchase price determined by an internationally-recognized investment banking firm with an office in Hong Kong at any time prior to the earlier of (i) our first commercial sale of products using such technology or (ii) receipt by Hanmi of written notice from our company of the sublicense of the rights in an applicable product to a third party. If Hanmi exercises this right of first negotiation and we reach an agreement to sell our rights under that licensing agreement, our ability to continue to develop certain of our product candidates would be significantly impaired and would adversely affect our business and results of operations.

Each of our license agreements with Hanmi expires on the earlier of (i) expiration of the last of Hanmi’s patent rights licensed under the agreement or (ii) invalidation of Hanmi’s patent rights which are the subject of the agreement, provided that the term will automatically be extended for consecutive one year periods unless either party gives notice to the other at least 90 days prior to expiration of the patent rights licensed under the agreement or before the then current annual expiration date of the agreement. The patent rights licensed to us under the agreements with Hanmi have expiry dates ranging from 2023 to 2033, unless the terms of such licensed patents are able to be extended in accordance with applicable laws and regulations. Subject to certain conditions, Hanmi may also terminate the license agreements if we fail to comply with certain development milestones set out in each of the agreements. The agreements also contain customary termination rights for either party, such as in the event of a breach of the agreement or the initiation of bankruptcy proceedings by the other party or by mutual agreement. For further information regarding the license terms, right of first negotiation and termination provisions of the Hanmi in-license agreements, please see “Business—License and Collaboration Agreements—Hanmi Licensing Agreements—In-Licenses.”

We may rely on third parties to conduct our preclinical studies and clinical trials. If these third parties do not successfully carry out their contractual duties, meet expected deadlines, perform satisfactorily or operate in compliance with laws and regulations, we may not be able to obtain regulatory approval for or commercialize our drug candidates and our business could be substantially harmed.

We have relied upon and may, in the future, rely upon third-party CROs to monitor and manage data for our ongoing preclinical and clinical programs. We rely on these parties for execution of our preclinical studies and clinical trials, and control only certain aspects of their activities. Nevertheless, we are responsible for ensuring that each of our studies is conducted in accordance with the applicable protocol, legal, and regulatory requirements and scientific standards, and our reliance on the CROs does not relieve us of our regulatory responsibilities. We and our CROs are required to comply with GCPs, which are regulations and guidelines enforced by the FDA, CFDA and other regulatory authorities for all of our drugs in clinical development. Regulatory authorities enforce these GCPs through periodic inspections of trial sponsors, principal investigators and trial sites. If we or any of our CROs fail to comply with applicable GCPs, the clinical data generated in our clinical trials may be deemed unreliable and the FDA, CFDA or regulatory authorities may require us to perform additional clinical trials before approving our marketing applications. We cannot assure you that upon inspection by a given regulatory authority, such regulatory authority will determine that any of our clinical trials comply with GCP regulations. In addition, our clinical trials must be conducted with product produced under cGMP regulations. Our failure to comply with these regulations may require us to repeat clinical trials, which would delay the regulatory approval process.

If any of our relationships with these third-party CROs terminate, we may not be able to enter into arrangements with alternative CROs or to do so on commercially reasonable terms. In addition, our CROs are not our employees, and except for remedies available to us under our agreements with such CROs, we cannot control whether or not they devote sufficient time and resources to our ongoing clinical, non-clinical and preclinical programs. If CROs do not successfully carry out their contractual duties or obligations or meet expected deadlines, if they need to be replaced or if the quality or accuracy of the clinical data they obtain is compromised due to the failure to adhere to our clinical protocols, regulatory requirements, environmental, health and safety laws and regulations, or for other reasons, our clinical trials may be extended, delayed or terminated and we may not be able to obtain regulatory approval for or successfully commercialize our drug candidates. As a result, our

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results of operations and the commercial prospects for our drug candidates would be harmed, our costs could increase and our ability to generate revenues could be delayed.

Our total revenue is highly dependent on a limited number of API customers, and the loss of, or any significant decrease in business from, any one or more of our major API customers could adversely affect our financial condition and results of operations.

We have in the past derived, and, until we further diversify our sources of revenue from the sales of new products and drugs, we believe that we will continue to derive, a significant portion of our revenue from a limited number of customers. We generated 46% and 62% in the years ended December 31, 2015 and 2016, respectively, of our total revenue from our two largest customers, Intas Pharmaceuticals and Ebewe Pharmaceuticals, during those periods. No other customer accounted for 10% or more of our total revenue during those periods. While our business model relies on API sales to generate the substantial majority of our revenue, we expect our total revenue will continue to be highly dependent on a limited number of API customers.

There are a number of factors that could cause us to lose major customers. We do not enter into long-term sales contracts with customers, but sell API to them based on short-term purchase orders. Accordingly, these customers may choose to use other suppliers with little or no notice, based upon considerations of price, quality, shipping time, competitive or other reasons. In addition, our API customers use the API to manufacture drugs, and they are subject to regulation and oversight by the FDA and other relevant regulatory agencies. If for any reason, any such customer violates an FDA regulation that results in their being prohibited from manufacturing drugs, they would no longer purchase API from us. Such sanctions or regulatory action against drug manufacturers could happen without notice, and our revenue stream could be adversely affected without notice.

The loss of any of our major API customers could materially and adversely affect our financial condition and results of operations.

Additionally, Polymed, our wholly owned subsidiary, sells API to third parties for use in those third parties’ products, which may be manufactured in cGMP facilities. In the event Polymed’s customers fail to remain in compliance with cGMP regulations, their operations may be adversely impacted, causing them to cancel or cease API orders from Polymed. Any decrease in orders by Polymed’s customers may impact Polymed’s revenue and, as a result, our overall financial condition.

If our Global Supply Chain Platform is insufficient, we may rely on third parties to manufacture at least a portion of our drug candidate supplies, and for at least a portion of the manufacturing process of our drug candidates, if approved. Our business could be harmed if those third parties fail to provide us with sufficient quantities of product or fail to do so at acceptable quality levels or prices.

Although we currently have a facility that may be used as our clinical-scale manufacturing and processing facility, we partially rely on outside vendors to manufacture supplies and process our drug candidates. We have not yet begun to manufacture or process our drug candidates on a commercial scale and may not be able to do so for any of our drug candidates.

We have limited experience in managing the manufacturing process, and our process may be more difficult or expensive than the approaches currently in use.

Although we do intend to further develop our manufacturing facilities, and those leased to us under our public-private partnerships, we may also use third parties as part of our manufacturing process. Our reliance on third-party manufacturers may expose us to the following risks:

• we may be unable to identify manufacturers on acceptable terms or at all because the number of potential manufacturers is limited and the FDA, CFDA or other regulatory authorities must approve

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any manufacturers. This approval would require new testing and cGMP-compliance inspections by FDA, CFDA or other regulatory authorities. In addition, a new manufacturer would have to be educated in, or develop substantially equivalent processes for, production of our drugs.

• our manufacturers may have little or no experience with manufacturing our drug candidates, and therefore may experience quality issues or require a significant amount of support from us in order to implement and maintain the infrastructure and processes required to manufacture our drug candidates.

• our third-party manufacturers might be unable to timely manufacture our drug or produce the quantity and quality required to meet our clinical and commercial needs, if any.

• contract manufacturers may not be able to execute our manufacturing procedures and other logistical support requirements appropriately.

• our future contract manufacturers may not perform as agreed, may not devote sufficient resources to our drugs, or may not remain in the contract manufacturing business for the time required to supply our clinical trials or to successfully produce, store and distribute our drugs.

• we may not own, or may have to share, the intellectual property rights to any improvements made by our third-party manufacturers in the manufacturing process for our drugs.

• our third-party manufacturers could breach or terminate their agreement with us.

• raw materials and components used in the manufacturing process, particularly those for which we have no other source or supplier, may not be available or may not be suitable or acceptable for use due to material or component defects.

• our contract manufacturers and critical reagent suppliers may be subject to inclement weather, as well as natural or man-made disasters.

• our contract manufacturers may have unacceptable or inconsistent product quality success rates and yields.

Each of these risks could delay or prevent the completion of our clinical trials or the approval of any of our drug candidates by the FDA, CFDA or other regulatory authorities, result in higher costs or adversely impact commercialization of our drug candidates. In addition, we will rely on third parties to perform certain specification tests on our drug candidates prior to delivery to patients. If these tests are not conducted appropriately and test data are not reliable, patients could be put at risk of serious harm and the FDA, CFDA or other regulatory authorities could place significant restrictions on our company until deficiencies are remedied.

The manufacture of drug and biological products is complex and requires significant expertise and capital investment, including the development of advanced manufacturing techniques and process controls.

Currently, raw materials used in our manufacturing activities, including the pacific yew used in many of the API products we manufacture, are supplied by multiple suppliers. We have agreements for the supply of such raw materials with manufacturers or suppliers that we believe have sufficient capacity to meet our demands. In addition, we believe that adequate alternative sources for such supplies exist. However, there is a risk that, if supplies are interrupted, it would materially harm our business.

Manufacturers of drug and biological products often encounter difficulties in production, particularly in scaling up or out, validating the production process, and assuring high reliability of the manufacturing process (including the absence of contamination). These problems include logistics and shipping, difficulties with production costs and yields, quality control, including stability of the product, product testing, operator error, availability of qualified personnel, as well as compliance with strictly enforced federal, state and non-U.S. regulations. Furthermore, if contaminants are discovered in our supply of our drug candidates or in the manufacturing facilities, such manufacturing facilities may need to be closed for an extended period of time to

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investigate and remedy the contamination. We cannot assure you that any stability failures or other issues relating to the manufacture of our drug candidates will not occur in the future. Additionally, our manufacturers may experience manufacturing difficulties due to resource constraints or as a result of labor disputes or unstable political environments. If our manufacturers were to encounter any of these difficulties, or otherwise fail to comply with their contractual obligations, our ability to provide our drug candidate to patients in clinical trials would be jeopardized. Any delay or interruption in the supply of clinical trial supplies could delay the completion of clinical trials, increase the costs associated with maintaining clinical trial programs and, depending upon the period of delay, require us to begin new clinical trials at additional expense or terminate clinical trials completely.

If third-party manufacturers fail to comply with pharmaceutical manufacturing regulations, our financial results and financial condition will be adversely affected.

Before a third party can begin commercial manufacture of our drug candidates and potential drugs, contract manufacturers are subject to regulatory inspections of their manufacturing facilities, processes and quality systems. Due to the complexity of the processes used to manufacture drug and biological products and our drug candidates, any potential third-party manufacturer may be unable to initially pass federal, state or international regulatory inspections in a cost effective manner in order for us to obtain regulatory approval of our drug candidates. If our contract manufacturers do not pass their inspections by the FDA, CFDA or other regulatory authorities, our commercial supply of drug product or substance will be significantly delayed and may result in significant additional costs, including the delay or denial of any marketing application for our drug candidates. In addition, drug and biological manufacturing facilities are continuously subject to inspection by the FDA, CFDA and other regulatory authorities, before and after drug approval, and must comply with cGMPs. Our contract manufacturers may encounter difficulties in achieving quality control and quality assurance and may experience shortages in qualified personnel. In addition, contract manufacturers’ failure to achieve and maintain high manufacturing standards in accordance with applicable regulatory requirements, or the incidence of manufacturing errors, could result in patient injury, product liability claims, product shortages, product recalls or withdrawals, delays or failures in product testing or delivery, cost overruns or other problems that could seriously harm our business, reputation or corporate image. If a third-party manufacturer with whom we contract is unable to comply with manufacturing regulations, we may also be subject to fines, unanticipated compliance expenses, recall or seizure of our drugs, product liability claims, total or partial suspension of production and/or enforcement actions, including injunctions, and criminal or civil prosecution. These possible sanctions could materially adversely affect our financial results and financial condition.

Furthermore, changes in the manufacturing process or procedure, including a change in the location where the product is manufactured or a change of a third-party manufacturer, could require prior review by the FDA, CFDA or other regulatory authorities and/or approval of the manufacturing process and procedures in accordance with the FDA or CFDA’s regulations, or comparable requirements. This review may be costly and time consuming and could delay or prevent the launch of a product. The new facility will also be subject to pre-approval inspection. In addition, we have to demonstrate that the product made at the new facility is equivalent to the product made at the former facility by physical and chemical methods, which are costly and time consuming. It is also possible that the FDA, CFDA or other regulatory authorities may require clinical testing as a way to prove equivalency, which would result in additional costs and delay.

We have entered into collaborations and may form or seek collaborations or strategic alliances or enter into additional licensing arrangements in the future, and we may not realize the benefits of such alliances or licensing arrangements.

We have partnered with companies such as Hanmi, Gland Pharma Limited and SunGen Pharma LLC and may form or seek strategic alliances, create joint ventures or collaborations, or enter into additional licensing arrangements with third parties that we believe will complement or augment our development and commercialization efforts with respect to our drug candidates and any future drug candidates that we may

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develop. Any of these relationships may require us to incur non-recurring and other charges, increase our near and long-term expenditures, issue securities that dilute our existing shareholders, or disrupt our management and business. In addition, we face significant competition in seeking appropriate strategic partners and the negotiation process is time-consuming and complex. Moreover, we may not be successful in our efforts to establish a strategic partnership or other alternative arrangements for our drug candidates because they may be deemed to be at too early of a stage of development for collaborative effort and third parties may not view our drug candidates as having the requisite potential to demonstrate safety and efficacy. If and when we collaborate with a third party for development and commercialization of a drug candidate, we can expect to relinquish some or all of the control over the future success of that drug candidate to the third party.

Further, collaborations involving our drug candidates are subject to numerous risks, which may include the following:

• collaborators have significant discretion in determining the efforts and resources that they will apply to a collaboration;

• collaborators may not pursue development and commercialization of our drug candidates or may elect not to continue or renew development or commercialization programs based on clinical trial results, changes in their strategic focus due to the acquisition of competitive drugs, availability of funding, or other external factors, such as a business combination that diverts resources or creates competing priorities;

• collaborators may delay clinical trials, provide insufficient funding for a clinical trial, stop a clinical trial, abandon a drug candidate, repeat or conduct new clinical trials, or require a new formulation of a drug candidate for clinical testing;

• collaborators could independently develop, or develop with third parties, drugs that compete directly or indirectly with our drugs or drug candidates;

• a collaborator with marketing and distribution rights to one or more drugs may not commit sufficient resources to their marketing and distribution;

• collaborators may not properly maintain or defend our intellectual property rights or may use our intellectual property or proprietary information in a way that gives rise to actual or threatened litigation that could jeopardize or invalidate our intellectual property or proprietary information or expose us to potential liability;

• disputes may arise between us and a collaborator that cause the delay or termination of the research, development or commercialization of our drug candidates, or that result in costly litigation or arbitration that diverts management attention and resources;

• collaborations may be terminated and, if terminated, may result in a need for additional capital to pursue further development or commercialization of the applicable drug candidates; and

• collaborators may own or co-own intellectual property covering our drugs that results from our collaborating with them, and in such cases, we would not have the exclusive right to commercialize such intellectual property.

As a result, if we enter into collaboration agreements and strategic partnerships or license our drugs, we may not be able to realize the benefit of such transactions if we are unable to successfully integrate them with our existing operations and company culture, which could delay our timelines or otherwise adversely affect our business. We also cannot be certain that, following a strategic transaction or license, we will achieve the revenue or specific net income that justifies such transaction. If we are unable to reach agreements with suitable collaborators on a timely basis, on acceptable terms, or at all, we may have to curtail the development of a drug candidate, reduce or delay its development program or one or more of our other development programs, delay its potential commercialization or reduce the scope of any sales or marketing activities, or increase our expenditures and undertake development or commercialization activities at our own expense. If we elect to fund and undertake

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development or commercialization activities on our own, we may need to obtain additional expertise and additional capital, which may not be available to us on acceptable terms or at all. If we fail to enter into collaborations and do not have sufficient funds or expertise to undertake the necessary development and commercialization activities, we may not be able to further develop our drug candidates or bring them to market and generate product sales revenue, which would harm our business prospects, financial condition and results of operations.

We have engaged and will rely on a single vendor to manage our order to cash cycle and our distribution activities in the U.S., and the loss or disruption of service from this vendor could adversely affect our operations and financial condition.

Our U.S. customer management, order processing, invoicing, cash application, chargeback and rebate processing and distribution and logistics activities are managed by Dohmen Life Science Services, or DLSS, a managed services provider with a focus on life sciences companies. If we were to lose the availability of DLSS’s services due to a dispute, termination of or inability to renew the contract, or other factors such as fire, natural disaster or other disruption, such loss could have a material adverse effect on our operations. Although multiple providers of such services exist, there can be no assurance that we could secure another source to handle these transactions on acceptable terms or otherwise to our specifications in the event of a disruption of services at operational centers.

Risks Related to Our Industry, Business and Operation

Our future success depends on our ability to retain our Chief Executive Officer and other key executives and to attract, retain and motivate qualified personnel. Additionally, certain members of our leadership may engage in other business ventures that may have interests in conflict with ours.

We are highly dependent on Dr. Lau, our Chief Executive Officer, and the other principal members of our management and scientific teams. We do not maintain “key person” insurance for any of our executives or other employees. The loss of the services of any of these persons could impede the achievement of our research, development and commercialization objectives.

To induce valuable employees to remain at our company, in addition to salary and cash incentives, we have provided stock option grants that vest over time. The value to employees of these equity grants that vest over time may be significantly affected by changes in the price of our common stock that are beyond our control, and may at any time be insufficient to counteract more lucrative offers from other companies. Although we have employment agreements with our key employees, any of our employees could leave our employment at any time, with or without notice.

Recruiting and retaining qualified scientific, clinical, manufacturing and sales and marketing personnel or consultants will also be critical to our success. In addition, we rely on consultants and advisors, including scientific and clinical advisors, to assist us in formulating our discovery and preclinical development and commercialization strategy. The loss of the services of our executive officers or other key employees and consultants could impede the achievement of our research, development and commercialization objectives and seriously harm our ability to successfully implement our business strategy.

Furthermore, replacing executive officers and key employees or consultants may be difficult and may take an extended period of time because of the limited number of individuals in our industry with the breadth of skills and experience required to successfully develop, gain regulatory approval of and commercialize products. Competition to hire from this limited pool is intense, and we may be unable to hire, train, retain or motivate these key personnel or consultants on acceptable terms given the competition among numerous pharmaceutical and biotechnology companies for similar personnel.

We may choose to hire part-time employees or use consultants. As a result, certain of our employees, officers, directors and consultants may not devote all of their time to our business, and may from time to time

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serve as officers, directors and consultants of other companies. These other companies may have interests in conflict with ours. For instance, Dr. Johnson Lau, who serves as our Chief Executive Officer and Chairman, Dr. Manson Fok and Mr. Song-Yi Zhang, who serve on our board of directors, and another of our employees are also directors of Avalon Global Holdings Limited, or Avalon, a shareholder of ours. In addition, Dr. Rudolf Kwan, our Chief Medical Officer, in the past provided services to our Company through RSJ Consulting, LLC, an entity which he controls.

We also face competition for the hiring of scientific and clinical personnel from universities and research institutions. Our consultants and advisors may be employed by employers other than us and may have commitments under consulting or advisory contracts with other entities that may limit their availability to us. If we are unable to continue to attract and retain high quality personnel, our ability to pursue our growth strategy will be limited.

We are substantially dependent on our public-private partnerships and if we or our counterparties fail to meet the obligations of those agreements and we lose the benefits of those partnerships, it would materially impact our development, operations and prospects.

Our long-term public-private partnerships with governments and government agencies, including in certain emerging markets, include agreements to build and/or maintain manufacturing facilities for us. For example, we entered into an agreement with FSMC, whereby FSMC agreed to fund the costs of construction of a new manufacturing facility in Dunkirk, New York. FSMC is responsible for the costs of construction and of all equipment for the facility, up to an amount not to exceed $225 million, and shall retain ownership of the facility and the equipment. We are entitled to lease the facility and all equipment at a rate of $1.00 per year for an initial 10-year term, and for the same rate if we elect to extend the lease for an additional 10-year term. We are responsible for all operating costs and expenses for the facility. In exchange, we have committed to spending $1.5 billion on operational expenses in the Dunkirk facility in our first 10-year term in the facility, and an additional $1.5 billion on operational expenses if we elect to extend the lease for a second 10-year term. We have also committed to hiring 450 permanent employees within the first 5 years at the Dunkirk facility. We have also entered into similar arrangements with FSMC relating to our headquarters, and Chongqing Maliu Riverside Development & Investment Co., Ltd. relating to a plant in Chongqing, PRC, under which we have committed to achieving certain operating, revenue and tax generation milestones. If we are unable to comply with our obligations under these arrangements, including the milestones we have committed to achieve, we may lose access to the properties covered by such arrangements which could disrupt our operations and manufacturing activities, cause us to divert resources to finding alternative facilities, which would not have any subsidies, and would have a significant impact on our operations and financial performance. Furthermore, there is no guarantee that the counterparties to our public-private partnerships will comply with the terms of the agreements, including that their ability to fund their capital commitments under the agreements may be subject to their ability to raise additional capital and that construction timetables may not be met, nor is there guarantee that the successors to such counterparties will continue to comply with terms of the agreements, regardless of existence of such government stipulations as a guideline released on November 4, 2016 by the State Council of China, which provides that, among others governments and relevant departments at all levels shall strictly keep policy commitments lawfully made to society and administrative counterparties, shall carefully perform all the contracts lawfully entered into with investment subjects in activities like attraction of investment and public-private partnership, shall not breach contracts with such excuses as government transition and replacement of leaders, and shall bear legal and economic liability in event of their infringements and contract breaches. If our public-private partnership counterparties or their successors fail to comply with their obligations under these arrangements, our development programs and prospects will be materially adversely affected. Public-private partnerships are also subject to risks associated with government and government agency counterparties, including risks related to government relations compliance, sovereign immunity, shifts in the political environment, changing economic and legal conditions and social dynamics.

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We will need to increase the size and capabilities of our organization, and we may experience difficulties in managing our growth.

As of December 31, 2016, we had 391 employees and consultants and most of our employees are full-time. As our development and commercialization plans and strategies develop, and as we transition into operating as a public company, we must add a significant number of additional managerial, operational, sales, marketing, financial and other personnel. Future growth will impose significant added responsibilities on members of management, including:

• identifying, recruiting, integrating, maintaining, and motivating additional employees;

• managing our internal development efforts effectively, including the clinical and FDA or other comparable authority review process for our drug candidates, while complying with our contractual obligations to contractors and other third parties; and

• improving our operational, financial and management controls, reporting systems and procedures.

Our future financial performance and our ability to commercialize our drug candidates will depend, in part, on our ability to effectively manage any future growth, and our management may also have to divert a disproportionate amount of its attention away from day-to-day activities in order to devote a substantial amount of time to managing these growth activities. In addition, we expect to incur additional costs in hiring, training and retaining such additional personnel.

If we are not able to effectively expand our organization by hiring new employees and expanding our groups of consultants and contractors, we may not be able to successfully implement the tasks necessary to further develop and commercialize our drug candidates and, accordingly, may not achieve our research, development and commercialization goals.

We previously identified material weaknesses in our internal control over financial reporting. If we fail to maintain effective internal control over financial reporting, we may not be able to accurately report our consolidated financial results.

In connection with the preparation of our consolidated financial statements as of and for the years ended December 31, 2014 and 2015, we and our independent registered public accounting firm identified material weaknesses related to our internal controls regarding: (1) the thoroughness of review and determination of appropriate accounting treatment for complex, non-routine transactions, including consideration of fair value concepts, notably for purchase price allocation and accounting for stock options; (2) the precision of review and application of available information through retrospective review to record accounting estimates accurately based on known, available information; and (3) the precision of review and evaluation of capitalization policies to ensure amounts capitalized as assets related to items for which an identifiable benefit has been received and will be realizable. We have concluded that such material weaknesses have been remediated as of December 31, 2016.

Management believes that at such times we did not have the appropriate resources or personnel to provide a full review of complex transactions to allow us, in the normal course of business, to prevent or identify a material misstatement on a timely basis and that constituted material weaknesses in our internal control over financial reporting under the standards established by the U.S. Public Company Accounting Oversight Board. Under standards established by the Public Company Accounting Oversight Board, a deficiency in internal control over financial reporting exists when the design or operation of a control does not allow management or personnel, in the normal course of performing their assigned functions, to prevent or detect misstatements on a timely basis. A material weakness is a deficiency or combination of deficiencies in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim consolidated financial statements will not be prevented or detected and corrected on a timely basis. Management implemented a remediation plan to address these material weaknesses identified. In addition, management has hired additional accounting personnel with appropriate experience to assist us in applying U.S. GAAP technical accounting

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guidance and financial reporting, with a particular emphasis on events outside the ordinary course of business and complex transactions including estimates. As a newly public company, we will also need to establish and maintain effective disclosure and financial controls and make changes in our corporate governance practices. We cannot assure that there will not be additional material weaknesses and significant deficiencies that our independent registered public accounting firm or we will identify in the future. If we identify such issues or if we are unable to produce accurate and timely financial statements, our stock price may be adversely affected and we may be unable to maintain compliance with applicable listing requirements. Moreover, there is no assurance that we will be able to recruit additional accounting and financial personnel or maintain such personnel. Even if we are able to hire appropriate personnel, our existing operating expenses and operations will be impacted by the direct costs of their employment and the indirect consequences relating to the diversion of management resources from product development efforts.

Our employees, independent contractors, consultants, commercial partners and vendors may engage in misconduct or other improper activities, including noncompliance with regulatory standards and requirements.

We are exposed to the risk of fraud, misconduct or other illegal activity by our employees, independent contractors, consultants, commercial partners and vendors. Misconduct by these parties could include intentional, reckless and negligent conduct that fails to: comply with the laws of the FDA and other similar non-U.S. regulatory authorities; provide true, complete and accurate information to the FDA and other similar non-U.S. regulatory authorities; comply with manufacturing standards we have established; comply with healthcare fraud and abuse and privacy laws in the U.S. and similar non-U.S. fraudulent misconduct laws; or report financial information or data accurately or to disclose unauthorized activities to us. If we obtain FDA approval of any of our drug candidates and begin commercializing those drugs in the U.S., our potential exposure under U.S. laws will increase significantly and our costs associated with compliance with such laws are also likely to increase. These laws may impact, among other things, our current activities with principal investigators and research patients, as well as proposed and future sales, marketing and education programs. In particular, the promotion, sales and marketing of healthcare items and services, as well as certain business arrangements in the healthcare industry, are subject to extensive laws designed to prevent fraud, kickbacks, self-dealing and other abusive practices. These laws and regulations may restrict or prohibit a wide range of pricing, discounting, marketing and promotion, structuring and commission(s), certain customer incentive programs and other business arrangements generally. Activities subject to these laws also involve the improper use of information obtained in the course of patient recruitment for clinical trials, which could result in regulatory sanctions and cause serious harm to our reputation. It is not always possible to identify and deter misconduct by employees and other parties, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to comply with these laws or regulations. If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could have a significant impact on our business, including the imposition of significant fines or other sanctions.

If we engage in future acquisitions or strategic partnerships, this may increase our capital requirements, dilute our shareholders, cause us to incur debt or assume contingent liabilities, and subject us to other risks.

We may evaluate various acquisitions and strategic partnerships, including licensing or acquiring complementary products, intellectual property rights, technologies or businesses. Any potential acquisition or strategic partnership may entail numerous risks, including:

• increased operating expenses and cash requirements;

• assimilation of operations, intellectual property and products of an acquired company, including difficulties associated with integrating new personnel;

• the diversion of our management’s attention from our existing product programs and initiatives in pursuing such a strategic merger or acquisition;

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• retention of key employees, the loss of key personnel, and uncertainties in our ability to maintain key business relationships;

• risks and uncertainties associated with the other party to such a transaction, including the prospects of that party and their existing drugs or drug candidates and regulatory approvals; and

• our inability to generate revenue from acquired technology and/or products sufficient to meet our objectives in undertaking the acquisition or even to offset the associated acquisition and maintenance costs.

In addition, if we undertake acquisitions, we may issue dilutive securities, assume or incur debt obligations, incur large one-time expenses and acquire intangible assets that could result in significant future amortization expense. Moreover, we may not be able to locate suitable acquisition opportunities and this inability could impair our ability to grow or obtain access to technology or products that may be important to the development of our business.

Our business is subject to applicable laws and regulations relating to sanctions, anti-money laundering and anti-bribery practices, the violation of which could adversely affect our operations.

We must comply with all applicable economic sanctions, anti-money laundering and anti-bribery laws and regulations of the U.S. and other foreign jurisdictions where we operate, including the PRC. U.S. laws and regulations applicable to us include the economic trade sanctions laws and regulations administered by the U.S. Department of the Treasury’s Office of Foreign Assets Control, or OFAC, as well as certain laws administered by the U.S. Department of State. Our business is also subject to anti-money laundering laws and regulations, including the Proceeds of Crime Act 2002, the Terrorism Act 2000 and the Money Laundering Regulations 2007 in the U.K., the Bank Secrecy Act of 1970, the Money Laundering Control Act of 1986 and the USA PATRIOT Act of 2001 in the U.S. and equivalent or similar legislation in the other countries where we do business. In addition, we are subject to the Foreign Corrupt Practices Act of 1977, or FCPA, and other anti-bribery laws such as the U.K. Bribery Act 2010 that generally prohibit the corrupt provision of anything of value to foreign governments and their officials and political parties for the purpose of influencing official conduct or obtaining or retaining an undue business advantage. Applicable anti-bribery laws also may prohibit commercial bribery.

We have operations, conduct clinical trials, deal with government entities, including hospitals and public health regulators, and have contracts in countries known to experience corruption and commercial bribery. Our activities in these countries create the risk of unauthorized payments or offers of payments by our employees, brokers or agents that could be in violation of various laws, including the FCPA, even though these parties are not always subject to our control and supervision. There is no assurance that our existing safeguards and procedures will be completely effective in ensuring compliance with such laws, and our employees, brokers or agents may engage in conduct for which we may be held responsible. Violations of the FCPA or other anti-bribery laws may result in severe criminal or civil sanctions, and we may be subject to other liabilities, which could negatively affect our reputation, business, operating results, and financial condition.

Regulations administered by OFAC govern transactions with countries and persons subject to U.S. trade sanctions. We are also subject to U.S. Government restrictions on transactions with specific entities and individuals, including, without limitation, those set forth on the Entity List, the Specially Designated Nationals List, the Denied Persons List, the Unverified List, and the U.S. State Department’s lists of debarred parties and sanctioned entities, and we may also be subject to restrictions on transactions with specific entities and individuals subject to the sanctions administered by the United Nations Security Council, the European Union, Her Majesty’s Treasury, or other relevant sanctions authority. These regulations prohibit us from entering into or facilitating unlicensed transactions with, for the benefit of, or in some cases involving the property and property interests of such persons, governments, or countries designated by the relevant sanctions authority under one or more sanctions regimes. Failure to comply with these sanctions and embargoes may result in material fines, sanctions or other penalties being imposed on us or other governmental investigations. In addition, various state

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and municipal governments, universities and other investors maintain prohibitions or restrictions on investments in companies that do business involving sanctioned countries or entities.

International economic and trade sanctions are complex and subject to frequent change, including jurisdictional reach and the lists of countries, entities, and individuals subject to the sanctions. Current or future economic and trade sanctions regulations or developments might have a negative impact on our business or reputation, and we may incur significant costs related to current, new, or changing sanctions programs, as well as investigations, fines, fees or settlements, which may be difficult to predict. In addition, companies subject to SEC reporting obligations are required under Section 13 of the Exchange Act to disclose in their periodic reports specified dealings or transactions involving Iran or other individuals and entities targeted by certain sanctions promulgated by OFAC that the reporting company or any of its affiliates engaged in during the period covered by the relevant periodic report. In some cases Section 13 requires companies to disclose transactions even if they are permissible under U.S. law. The SEC is required to post this notice of disclosure pursuant to Section 13 on its website and report to the President and certain congressional committees regarding such filings.

On January 16, 2016, OFAC issued General License H, which authorized certain transactions relating to Iran. Pursuant to General License H, certain of our non-U.S. subsidiaries may conduct business relating to Iran. SEC guidance to date indicates that activities authorized by General License H generally are not subject to disclosure under Section 13, but should applicable SEC guidance or disclosure requirements change, or should our non-U.S. subsidiaries engage in activities subject to disclosure under Section 13, we may be required to disclose certain Iran-related transactions in future periodic reports with the SEC. Even if such activity is permitted under applicable law, disclosure could harm our reputation and have a negative impact on our business. Our non-U.S. subsidiaries also remain subject to OFAC secondary sanctions governing trade with Iran, and any violations of OFAC secondary sanctions regulations could negatively affect our reputation, business, operating results, and financial condition.

Although we have policies and controls in place that are designed to ensure compliance with these laws and regulations, it is possible that an employee or intermediary could fail to comply with applicable laws and regulations. In such event, we could be exposed to civil penalties, criminal penalties and other sanctions, including fines or other punitive actions, and the government may seek to impose modifications to business practices, including cessation of business activities in sanctioned countries, and modifications to compliance programs, which may increase compliance costs. In addition, such violations could damage our business and/or our reputation. Such criminal or civil sanctions, penalties, other sanctions, and damage to our business and/or reputation could have a material adverse effect on our financial condition and results of operations.

Any failure to comply with applicable regulations and industry standards or obtain various licenses and permits could harm our reputation and our business, results of operations and prospects.

A number of governmental agencies or industry regulatory bodies in the U.S., and in non-U.S. jurisdictions including the PRC, impose strict rules, regulations and industry standards governing pharmaceutical and biotechnology research and development and manufacturing and marketing activities, which apply to us. Our failure to comply with such regulations could result in the termination of ongoing research or manufacturing and marketing, administrative penalties imposed by regulatory bodies or the disqualification of data for submission to regulatory authorities. This could harm our reputation, prospects for future work and operating results. For example, if we were to treat research animals inhumanely or in violation of international standards set out by the Association for Assessment and Accreditation of Laboratory Animal Care, it could revoke any such accreditation and the accuracy of our animal research data could be questioned.

If we fail to comply with environmental, health and safety laws and regulations, we could become subject to fines or penalties or incur costs that could have a material adverse effect on the success of our business.

We are subject to numerous environmental, health and safety laws and regulations, including those governing laboratory procedures and the handling, use, storage, treatment and disposal of hazardous materials

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and wastes. Our operations involve the use of hazardous and flammable materials, including chemicals. Our operations also produce hazardous waste products. We generally contract with third parties for the disposal of these materials and wastes. We cannot eliminate the risk of contamination or injury from these materials. In the event of contamination or injury resulting from our use of hazardous materials, we could be held liable for any resulting damages, and any liability could exceed our resources. We also could incur significant costs associated with civil or criminal fines and penalties.

Although we maintain workers’ compensation insurance to cover us for costs and expenses we may incur due to injuries to our employees resulting from the use of or exposure to hazardous materials, this insurance may not provide adequate coverage against potential liabilities. We do not maintain insurance for environmental liability or toxic tort claims that may be asserted against us in connection with our storage, use or disposal of biological or hazardous materials.

In addition, we may be required to incur substantial costs to comply with current or future environmental, health and safety laws and regulations. These current or future laws and regulations may impair our research, development or production efforts. Failure to comply with these laws and regulations also may result in substantial fines, penalties or other sanctions.

If we face allegations of noncompliance with the law and encounter sanctions, our reputation, revenues and liquidity may suffer, and our drugs could be subject to restrictions or withdrawal from the market.

Any government investigation of alleged violations of law could require us to expend significant time and resources in response, and could generate negative publicity. Any failure to comply with ongoing regulatory requirements may significantly and adversely affect our ability to commercialize and generate revenues from our drugs. If regulatory sanctions are applied or if regulatory approval is withdrawn, the value of our company and our operating results will be adversely affected. Additionally, if we are unable to generate revenues from our product sales, our potential for achieving profitability will be diminished and the capital necessary to fund our operations will be increased.

Our internal computer systems, or those used by our CROs or other contractors or consultants, may fail or suffer security breaches.

Despite the implementation of security measures, our internal computer systems and those of our current and future CROs and other contractors and consultants are vulnerable to damage from computer viruses and unauthorized access. For example, the loss of clinical trial data from completed or future clinical trials could result in delays in our regulatory approval efforts and significantly increase our costs to recover or reproduce the data. Likewise, we partially rely on our third-party research institution collaborators for research and development of our drug candidates and other third parties for the manufacture of our drug candidates and to conduct clinical trials, and similar events relating to their computer systems could also have a material adverse effect on our business. Certain data breaches must be reported to affected individuals and the government, and in some cases to the media, under provisions of HIPAA, other U.S. federal and state law, and requirements of non-U.S. jurisdictions, and financial penalties may also apply. To the extent that any disruption or security breach were to result in a loss of, or damage to, our data or applications, or inappropriate disclosure of confidential or proprietary information, we could incur liability and reputational damage and the further development and commercialization of our drug candidates could be delayed.

We are aware of a security breach that occurred in March 2017. That incident occurred when the credentials of an approved consultant were compromised, and the consultant’s credentials were used to access the remote desktop server and active directory server of our wholly-owned subsidiary, Athenex Pharma Solutions, or APS. Upon discovery of the breach, we immediately took steps to void the compromised credentials and reset all credentials having access to APS’ systems. These particular APS information systems are independent of ours, and did not contain any drug candidate, clinical trial or patient-specific data. However, information stored on

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APS’ systems may have been vulnerable during the intrusion. We have retained a third party security firm to determine the extent of the breach and what, if any, data may have been compromised, and this analysis is ongoing. To help mitigate future incidents we have enhanced security measures required for access by consultants. Notwithstanding such measures, we cannot be certain that no future security breaches will occur or that future breaches will not result in a material disruption of our development programs and our business operations.

Business disruptions could seriously harm our future revenue and financial condition and increase our costs and expenses.

Our operations, and those of our third-party research institution collaborators, CROs, suppliers and other contractors and consultants, could be subject to earthquakes, power shortages, telecommunications failures, water shortages, floods, hurricanes, typhoons, fires, extreme weather conditions, medical epidemics and other natural or man-made disasters or business interruptions, for which we are predominantly self-insured. In addition, we partially rely on our third-party research collaborators for conducting research and development of our drug candidates, and they may be affected by government shutdowns or withdrawn funding. The occurrence of any of these business disruptions could seriously harm our operations and financial condition and increase our costs and expenses. Our ability to obtain clinical supplies of our drug candidates could be disrupted if the operations of these suppliers are affected by a man-made or natural disaster or other business interruption. Damage or extended periods of interruption to our corporate, development or research facilities due to fire, natural disaster, power loss, communications failure, unauthorized entry or other events could cause us to cease or delay development of some or all of our drug candidates. Although we maintain property damage and business interruption insurance coverage on these facilities, our insurance might not cover all losses under such circumstances and our business may be seriously harmed by such delays and interruption.

If product liability lawsuits are brought against us, we may incur substantial liabilities and may be required to limit commercialization of our drug candidates or our 503B products.

We face an inherent risk of product liability as a result of the clinical testing of our drug candidates and will face an even greater risk if we commercialize any of our clinical candidates. For example, we may be sued if our drug candidates or 503B products we plan to manufacture cause or are perceived to cause injury or are found to be otherwise unsuitable during clinical testing, manufacturing, marketing or sale. Any such product liability claims may include allegations of defects in manufacturing, defects in design, a failure to warn of dangers inherent in the drug, negligence, strict liability or a breach of warranties. Claims could also be asserted under state consumer protection acts. If we cannot successfully defend ourselves against product liability claims, we may incur substantial liabilities or be required to limit commercialization of our drug candidates. Even successful defense would require significant financial and management resources. Regardless of the merits or eventual outcome, liability claims may result in:

• decreased demand for our drugs;

• injury to our reputation;

• withdrawal of clinical trial participants and inability to continue clinical trials;

• initiation of investigations by regulators;

• costs to defend the related litigation;

• a diversion of management’s time and our resources;

• substantial monetary awards to trial participants or patients;

• product recalls, withdrawals or labeling, marketing or promotional restrictions;

• loss of revenue;

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• exhaustion of any available insurance and our capital resources;

• the inability to commercialize any drug candidate; and

• a decline in the price of our common stock.

Our inability to obtain sufficient product liability insurance at an acceptable cost to protect against potential product liability claims could prevent or inhibit the commercialization of drugs we develop, alone or with collaborators. Although we currently carry clinical trial insurance, which we believe to be adequate for our current operations, the amount of such insurance coverage may not be adequate now, or in the future, and we may be unable to maintain such insurance, or we may not be able to obtain additional or replacement insurance at a reasonable cost, if at all. Our insurance policies may also have various exclusions, and we may be subject to a product liability claim for which we have no coverage. We may have to pay any amounts awarded by a court or negotiated in a settlement that exceed our coverage limitations or that are not covered by our insurance, and we may not have, or be able to obtain, sufficient capital to pay such amounts. Even if our agreements with any future corporate collaborators entitle us to indemnification against losses, such indemnification may not be available or adequate should any claim arise.

Additionally, we may be sued if the products that we commercialize, market or distribute for our partners cause or are perceived to cause injury or are found to be otherwise unsuitable, and may result in:

• decreased demand for those products;

• damage to our reputation;

• costs incurred related to product recalls;

• limiting our opportunities to enter into future commercial partnership; and

• a decline in the price of our common stock.

We have limited insurance coverage, and any claims beyond our insurance coverage may result in our incurring substantial costs and a diversion of resources.

We maintain property insurance policies covering physical damage to, or loss of, our buildings and their improvements, equipment, office furniture and inventory. We hold employer’s liability insurance generally covering death or work-related injury of employees. We hold public liability insurance covering certain incidents involving third parties that occur on or in the premises of the company. We hold directors and officers liability insurance. We do not maintain key-man life insurance on any of our senior management or key personnel, or business interruption insurance. Our insurance coverage may be insufficient to cover any claim for product liability, damage to our fixed assets or employee injuries. Any liability or damage to, or caused by, our facilities or our personnel beyond our insurance coverage may result in our incurring substantial costs and a diversion of resources.

We may increasingly become a target for public scrutiny, including complaints to regulatory agencies, negative media coverage, including social media and malicious reports, all of which could severely damage our reputation and materially and adversely affect our business and prospects.

We focus on the development of drugs used in the treatment of cancers, and such drugs may be the subject of regulatory, watchdog and media scrutiny and coverage, which also the possibility of heightened attention from the public, the media and our participants. In addition, members of our management and board include high-profile public figures who may be the subject of media and public scrutiny and attention. From time to time, these objections or allegations, regardless of their veracity, may result in public protests or negative publicity, which could result in government inquiry or harm our reputation. Corporate transactions we or related parties undertake may also subject us to increased media exposure and public scrutiny. There is no assurance that we would not become a target for public scrutiny in the future or such scrutiny and public exposure would not severely damage our reputation as well as our business and prospects.

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In addition, our directors and management have been in the past, and may continue to be, subject to scrutiny by the media and the public regarding their activities in and outside our company, which may result in unverified, inaccurate or misleading information about them being reported by the press. Negative publicity about our directors or management, even if untrue or inaccurate, may harm our reputation.

Our business, financial condition and results of operations may be adversely affected by global economic conditions.

Our business and operating results could be affected by global economic conditions. When global economic conditions deteriorate or economic uncertainty continues, customers and potential customers may delay or cancellation of plans to purchase our products, governments may reduce healthcare expenditures, and other payors may reduce their reimbursement coverage or reimbursement rates. Our sensitivity to economic cycles and any related fluctuations in the businesses of our customers or potential customers could have a material adverse impact on our business and financial results. Although we are uncertain about the extent to which global financial market disruptions or a slowdown of the U.S. or Chinese economy would impact our business in the long term, there is a risk that our business, results of operations and prospects would be materially and adversely affected by any global economic downturn or the slowdown of the U.S. or Chinese economy.

If our manufacturing facilities are damaged or destroyed or production at such facilities is otherwise interrupted, our business and prospects would be negatively affected.

If our manufacturing facilities or the equipment in them is damaged or destroyed, we may not be able to quickly or inexpensively replace our manufacturing capacity or replace it at all. In the event of a temporary or protracted loss of the facilities or equipment, we might not be able to transfer manufacturing to a third party. Even if we could transfer manufacturing to a third party, the shift would likely be expensive and time-consuming, particularly since the new facility would need to comply with the necessary regulatory requirements and we would need FDA, CFDA or and other comparable regulatory agency approval before selling any drugs manufactured at that facility. Such an event could delay our clinical trials or reduce our product sales if and when we are able to successfully commercialize one or more of our drug candidates.

Any interruption in manufacturing operations at our manufacturing facilities could result in our inability to satisfy the demands of our clinical trials or commercialization. A number of factors could cause interruptions, including:

• equipment malfunctions or failures;

• malfunctions or compromise by third party actors of our technology systems;

• work stoppages;

• damage to or destruction of either facility due to natural disasters;

• regional power shortages;

• product tampering; or

• terrorist activities.

Any disruption that impedes our ability to manufacture our drug candidates in a timely manner could materially harm our business, financial condition and operating results.

Currently, we maintain insurance coverage against damage to our property and equipment. However, our insurance coverage may not reimburse us, or may not be sufficient to reimburse us, for any expenses or losses we may suffer. We may be unable to meet our requirements for our drug candidates if there were a catastrophic event or failure of our manufacturing facilities or processes.

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Risks Related to Our Doing Business in the PRC

The pharmaceutical industry in China is highly regulated and such regulations are subject to change which may affect approval and commercialization of our drugs.

Certain of our research operations and manufacturing facilities are in China. The pharmaceutical industry in China is subject to comprehensive government regulation and supervision, encompassing the approval, registration, manufacturing, packaging, licensing and marketing of new drugs. In recent years, the regulatory framework in China regarding the pharmaceutical industry has undergone significant changes, and we expect that it will continue to undergo significant changes. Any such changes or amendments may result in increased compliance costs on our business or cause delays in or prevent the successful development or commercialization of our drug candidates in China and reduce the current benefits we believe are available to us from developing and manufacturing drugs in China. Chinese authorities have become increasingly vigilant in enforcing laws in the pharmaceutical industry and any failure by us or our partners to maintain compliance with applicable laws and regulations or obtain and maintain required licenses and permits may result in the suspension or termination of our business activities in China. We believe our strategy and approach is aligned with the Chinese government’s policies, but we cannot ensure that our strategy and approach will continue to be aligned.

Fluctuations in exchange rates could result in foreign currency exchange losses, which may adversely affect our financial condition, results of operations and cash flows.

We incur portions of our expenses, and may in the future derive revenues, in currencies other than U.S. dollars, in particular, the Renminbi. As a result, we are exposed to foreign currency exchange risk as our results of operations and cash flows are subject to fluctuations in foreign currency exchange rates. For example, a portion of our clinical trial activities are conducted outside of the U.S., and associated costs may be incurred in the local currency of the country in which the trial is being conducted, which costs could be subject to fluctuations in currency exchange rates. We currently do not engage in hedging transactions to protect against uncertainty in future exchange rates between particular foreign currencies and the U.S. dollar. A decline in the value of the U.S. dollar against currencies in countries in which we conduct clinical trials could have a negative impact on our research and development costs.

The value of the Renminbi against the U.S. dollar and other currencies may fluctuate and is affected by, among other things, changes in political and economic conditions and the foreign exchange policy adopted by the PRC and other non-U.S. governments. Specifically in the PRC, on July 21, 2005, the PRC government changed its policy of pegging the value of the Renminbi to the U.S. dollar. Following the removal of the U.S. dollar peg, the Renminbi appreciated more than 20% against the U.S. dollar over the following three years. Between July 2008 and June 2010, this appreciation halted and the exchange rate between the Renminbi and the U.S. dollar remained within a narrow band. Since June 2010, the PRC government has allowed the Renminbi to appreciate slowly against the U.S. dollar again, and it has appreciated more than 10% since June 2010. In April 2012, the PRC government announced that it would allow more Renminbi exchange rate fluctuation and in August 2015, China’s central bank executed a 2% devaluation in the Renminbi. From December 31, 2015 to December 31, 2016, the Renminbi depreciated approximately 6.7% against the U.S. dollar. It remains unclear what further fluctuations may occur or what impact this will have on the currency.

It is difficult to predict how market forces or PRC, U.S. or other government policies may impact the exchange rate between the Renminbi, U.S. dollar and other currencies in the future. There remains significant international pressure on the PRC government to adopt a more flexible currency policy, which could result in greater fluctuation of the Renminbi against the U.S. dollar. Substantially all of our revenues are denominated in U.S. dollars and our costs are denominated in U.S. dollars and Renminbi, and a large portion of our financial assets is denominated in U.S. dollars. To the extent that we need to convert U.S. dollars we receive from this offering into Renminbi for our operations, appreciation of the Renminbi against the U.S. dollar would have an adverse effect on the Renminbi amount we would receive. Conversely, if we decide to convert our Renminbi into U.S. dollars for other business purposes, appreciation of the U.S. dollar against the Renminbi would have a

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negative effect on the U.S. dollar amount we would receive. We cannot predict the impact of foreign currency fluctuations, and foreign currency fluctuations in the future may adversely affect our financial condition, results of operations and cash flows.

Changes in the political and economic policies of the PRC government may materially and adversely affect our business, financial condition and results of operations and may result in our inability to sustain our growth and expansion strategies.

A significant portion of our operations are in the PRC. Accordingly, our financial condition and results of operations are affected to a large extent by economic, political and legal developments in the PRC.

The PRC economy differs from the economies of most developed countries in many respects, including the extent of government involvement, level of development, growth rate, control of foreign exchange and allocation of resources. Although the PRC government has implemented measures emphasizing the utilization of market forces for economic reform, the reduction of state ownership of productive assets, and the establishment of improved corporate governance in business enterprises, a substantial portion of productive assets in China is still owned by the government. In addition, the PRC government continues to play a significant role in regulating industry development by imposing industrial policies. The PRC government also exercises significant control over China’s economic growth by allocating resources, controlling payment of foreign currency-denominated obligations, setting monetary policy, regulating financial services and institutions and providing preferential treatment to particular industries or companies.

While the PRC economy has experienced significant growth in the past three decades, growth has been uneven, both geographically and among various sectors of the economy. The PRC government has implemented various measures to encourage economic growth and guide the allocation of resources. Some of these measures may benefit the overall PRC economy, but may also have a negative effect on us. Our financial condition and results of operation could be materially and adversely affected by government control over capital investments or changes in tax regulations that are applicable to us and consequently have a material adverse effect on our businesses, financial condition and results of operations.

There are uncertainties regarding the interpretation and enforcement of PRC laws, rules and regulations.

A portion of our operations are conducted in the PRC through our PRC subsidiaries, and are governed by PRC laws, rules and regulations. Our PRC subsidiaries are subject to laws, rules and regulations applicable to foreign investment in China. The PRC legal system is a civil law system based on written statutes. Unlike the common law system, prior court decisions may be cited for reference but have limited precedential value.

In 1979, the PRC government began to promulgate a comprehensive system of laws, rules and regulations governing economic matters in general. The overall effect of legislation over the past three decades has significantly enhanced the protections afforded to various forms of foreign investment in China. However, China has not developed a fully integrated legal system, and recently enacted laws, rules and regulations may not sufficiently cover all aspects of economic activities in China or may be subject to significant degrees of interpretation by PRC regulatory agencies. In particular, because these laws, rules and regulations are relatively new, and because of the limited number of published decisions and the nonbinding nature of such decisions, and because the laws, rules and regulations often give the relevant regulator significant discretion in how to enforce them, the interpretation and enforcement of these laws, rules and regulations involve uncertainties and can be inconsistent and unpredictable. In addition, the PRC legal system is based in part on government policies and internal rules, some of which are not published on a timely basis or at all, and which may have a retroactive effect. As a result, we may not be aware of our violation of these policies and rules until after the occurrence of the violation.

Any administrative and court proceedings in China may be protracted, resulting in substantial costs and diversion of resources and management attention. Since PRC administrative and court authorities have

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significant discretion in interpreting and implementing statutory and contractual terms, it may be more difficult to evaluate the outcome of administrative and court proceedings and the level of legal protection we enjoy than in more developed legal systems. These uncertainties may impede our ability to enforce the contracts we have entered into and could materially and adversely affect our business, financial condition and results of operations.

Substantial uncertainties exist with respect to the enactment timetable, the final version, interpretation and implementation of draft PRC Foreign Investment Law and how it may impact the viability of our current corporate governance.

The Ministry of Commerce published a discussion draft of the proposed Foreign Investment Law in January 2015 aiming to, upon its enactment, replace the trio of existing laws regulating foreign investment in China, namely, the Sino-foreign Equity Joint Venture Enterprise Law, the Sino-foreign Cooperative Joint Venture Enterprise Law and the Wholly Foreign-invested Enterprise Law, together with their implementation rules and ancillary regulations. The draft Foreign Investment Law embodies an expected PRC regulatory trend to rationalize its foreign investment regulatory regime in line with prevailing international practice and the legislative efforts to unify the corporate legal requirements for both foreign and domestic investments. The Ministry of Commerce has solicited comments on this draft and substantial uncertainties exist with respect to its enactment timetable, the final version, interpretation and implementation. The draft Foreign Investment Law, if enacted as proposed, may materially impact the viability of our current corporate governance if we, in the future, have PRC shareholders.

Among other things, the draft Foreign Investment Law expands the definition of foreign investment and introduces the principle of “actual control” in determining whether a company is considered a foreign-invested enterprise, or an FIE. The draft Foreign Investment Law specifically provides that entities established in China but “controlled” by foreign investors will be treated as FIEs, whereas an entity set up in a foreign jurisdiction would nonetheless be, upon market entry clearance by the Ministry of Commerce or its local counterparts, treated as a PRC domestic investor provided that the entity is “controlled” by PRC entities and/or citizens. In this connection, “control” is broadly defined in the draft law to cover the following summarized categories: (1) holding 50% of more of the shares, equity or voting rights of the subject entity; (2) holding less than 50% of the voting rights of the subject entity but having the power to secure at least 50% of the seats on the board or other equivalent decision making bodies, or having the voting power to exert material influence on the board, the shareholders’ meeting or other equivalent decision making bodies; or (3) having the power to exert decisive influence, via contractual or trust arrangements, over the subject entity’s operations, financial matters or other key aspects of business operations. Once an entity is determined to be an FIE, it will be subject to the foreign investment restrictions or prohibitions, if the FIE is engaged in the industry listed in the “negative list” which will be separately issued by the State Council later. Unless the underlying business of the FIE falls within the negative list, which calls for market entry clearance by the Ministry of Commerce or its local counterparts, prior approval from the government authorities as mandated by the existing foreign investment legal regime would no longer be required for establishment of the FIE.

The draft Foreign Investment Law, if enacted as proposed, may also materially impact our corporate governance practice and increase our compliance costs. For instance, the draft Foreign Investment Law imposes stringent ad hoc and periodic information reporting requirements on foreign investors and the applicable FIEs. Aside from investment implementation report and investment amendment report that are required at each investment and alteration of investment specifics, an annual report is mandatory, and large foreign investors meeting certain criteria are required to report on a quarterly basis. Any company found to be non-compliant with these information reporting obligations may potentially be subject to fines and/or administrative or criminal liabilities, and the persons directly responsible may be subject to criminal liabilities.

PRC regulations relating to investments in offshore companies by PRC residents may subject our future PRC-resident beneficial owners or our PRC subsidiaries to liability or penalties, limit our ability to inject capital

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into our PRC subsidiaries or limit our PRC subsidiaries’ ability to increase their registered capital or distribute profits.

The State Administration of Foreign Exchange, or SAFE promulgated the Circular on Relevant Issues Concerning Foreign Exchange Control on Domestic Residents’ Offshore Investment and Financing and Roundtrip Investment through Special Purpose Vehicles, or SAFE Circular 37, on July 4, 2014, which replaced the former circular, commonly known as SAFE Circular 75, promulgated by SAFE on October 21, 2005. SAFE Circular 37 and other SAFE rules require PRC residents to register with banks or local branches of SAFE (only in the case of supplement registration) in connection with their direct establishment or indirect control of an offshore entity, for the purpose of overseas investment and financing, with such PRC residents’ legally owned assets or equity interests in domestic enterprises or offshore assets or interests, referred to in SAFE Circular 37 as a “special purpose vehicle”. SAFE Circular 37 further requires amendment to the registration in the event of any significant changes with respect to the special purpose vehicle, such as increase or decrease of capital contributed by PRC individuals, share transfer or exchange, merger, division or other material events. In the event that a PRC shareholder holding interests in a special purpose vehicle fails to fulfill the required registration, the PRC subsidiaries of that special purpose vehicle may be prohibited from making profit distributions to the offshore parent and from carrying out subsequent cross-border foreign exchange activities, and the special purpose vehicle may be restricted in its ability to contribute additional capital into its PRC subsidiary. Moreover, failure to comply with the various registration requirements described above could result in liability under PRC law for evasion of foreign exchange controls.

We believe that certain of our shareholders are PRC residents under SAFE Circular 37. These certain shareholders have undertaken to (i) apply to register with local SAFE branch or its delegated commercial bank as soon as possible after exercising their options, and (ii) indemnify and hold harmless us and our subsidiaries against any loss suffered arising from their failure to complete the registration. We do not have control over the shareholders and our other beneficial owners and cannot assure you that all of our PRC-resident beneficial owners have complied with, and will in the future comply with, SAFE Circular 37 and subsequent implementation rules. The failure of PRC-resident beneficial owners to register or amend their SAFE registrations in a timely manner pursuant to SAFE Circular 37 and subsequent implementation rules, or the failure of future PRC-resident beneficial owners of our company to comply with the registration procedures set forth in SAFE Circular 37 and subsequent implementation rules, may subject such beneficial owners or our PRC subsidiaries to fines and legal sanctions. Furthermore, SAFE Circular 37 is unclear how this regulation, and any future regulation concerning offshore or cross-border transactions, will be interpreted, amended and implemented by the relevant PRC government authorities, and we cannot predict how these regulations will affect our business operations or future strategy. Failure to register or comply with relevant requirements may also limit our ability to contribute additional capital to our PRC subsidiaries and limit our PRC subsidiaries’ ability to distribute dividends to us. These risks could in the future have a material adverse effect on our business, financial condition and results of operations.

We may be treated as a resident enterprise for PRC tax purposes under the PRC Enterprise Income Tax Law, and we may therefore be subject to PRC income tax on our global income.

Under the PRC Enterprise Income Tax Law and its implementing rules, both of which came into effect on January 1, 2008, enterprises established under the laws of jurisdictions outside of China with “de facto management bodies” located in China may be considered PRC tax resident enterprises for tax purposes and may be subject to the PRC enterprise income tax at the rate of 25% on their global income. “De facto management body” refers to a managing body that exercises substantive and overall management and control over the production and business, personnel, accounting books and assets of an enterprise. The State Administration of Taxation has issued guidance, known as Circular 82 that provides certain specific criteria for determining whether the “de facto management body” of a Chinese-controlled offshore-incorporated enterprise is located in China. Although Circular 82 only applies to offshore enterprises controlled by PRC enterprises, not those, such as us, controlled by foreign enterprises or individuals, the determining criteria set forth in Circular 82 may reflect

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the State Administration of Taxation’s general position on how the “de facto management body” test should be applied in determining the tax resident status of offshore enterprises, regardless of whether they are controlled by PRC enterprises. Currently, our management is located in the U.S., and we generate a portion of our revenues within the PRC and a portion outside the PRC. We believe that neither we nor any of our subsidiaries outside of China is a PRC resident enterprise for PRC tax purposes. However, the tax resident status of an enterprise is subject to determination by the PRC tax authorities and uncertainties remain with respect to the interpretation of the term “de facto management body”. If we were to be considered a PRC resident enterprise, we would be subject to PRC enterprise income tax at the rate of 25% on our global income. In such case, our profitability and cash flow may be materially reduced as a result of our global income being taxed under the PRC Enterprise Income Tax Law.

Dividends payable to our foreign investors and gains on the sale of our common stock by our foreign investors may become subject to PRC tax law.

Under the PRC Enterprise Income Tax Law and its implementing rules issued by the State Council, in general, a 10% PRC withholding tax is applicable to dividends payable to investors that are non-resident enterprises that do not have an establishment or place of business in the PRC or which have such establishment or place of business but the dividends are not effectively connected with such establishment or place of business, to the extent such dividends are derived from sources within the PRC. Similarly, any gain realized on the transfer of shares of our common stock by such investors is also subject to PRC tax at a current rate of 10%, subject to any reduction or exemption set forth in relevant tax treaties, if such gain is regarded as income derived from sources within the PRC. If we are deemed a PRC resident enterprise, dividends paid on our common stock, and any gain realized from the transfer of our common stock, would be treated as income derived from sources within the PRC and would as a result be subject to PRC taxation. Furthermore, if we are deemed a PRC resident enterprise, dividends payable to individual investors who are non-PRC residents and any gain realized on the transfer of common stock by such investors may be subject to PRC tax at a current rate of 20%, subject to any reduction or exemption set forth in applicable tax treaties. It is unclear whether we or any of our subsidiaries established outside China are considered a PRC resident enterprise, holders of our common stock would be able to claim the benefit of income tax treaties or agreements entered into between China and other countries or areas. If dividends payable to our non-PRC investors or gains from the transfer of our common stock by such investors are subject to PRC tax, the value of your investment in our common stock may decline significantly.

We and our shareholders face uncertainties with respect to indirect transfers of equity interests in PRC resident enterprises by their non-PRC holding companies.

Pursuant to a notice, or Circular 698, issued by the State Administration of Taxation, where a non-resident enterprise conducts an “indirect transfer” by transferring the equity interests of a PRC resident enterprise indirectly via disposing of the equity interests of an overseas holding company, and such overseas holding company is located in a tax jurisdiction that: (1) has an effective tax rate less than 12.5%; or (2) does not tax foreign income of its residents, the non-resident enterprise, being the transferor, shall report to the relevant tax authority of the PRC resident enterprise such indirect transfer. Using a “substance over form” principle, the PRC tax authority may disregard the existence of the overseas holding company if it lacks a reasonable commercial purpose and was established for the purpose of reducing, avoiding or deferring PRC tax. As a result, gains derived from such indirect transfer may be subject to PRC enterprise income tax, currently at a rate of 10%. In 2015, the State Administration of Taxation issued a circular, known as Circular 7, which replaced or supplemented certain previous rules under Circular 698. Circular 7 sets out a wider scope of indirect transfer of PRC assets that might be subject to PRC enterprise income tax, and more detailed guidelines on the circumstances when such indirect transfer is considered to lack a bona fide commercial purpose and thus regarded as avoiding PRC tax. The conditional reporting obligation of the non-PRC investor under Circular 698 is replaced by a voluntary reporting by the transferor, the transferee or the underlying PRC resident enterprise being transferred. Furthermore, if the indirect transfer is subject to PRC enterprise income tax, the transferee has an obligation to withhold tax from the sale proceeds, unless the transferor reports the transaction to the PRC tax

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authority under Circular 7. Late payment of applicable tax will subject the transferor to default interest. Gains derived from the sale of shares by investors through a public stock exchange are not subject to the PRC enterprise income tax pursuant to Circular 7 where such shares were acquired in a transaction through a public stock exchange.

As newly implemented, there is uncertainty as to the application of Circular 7. Circular 7 may be determined by the tax authorities to be applicable to our offshore restructuring transactions or sale of the shares of our offshore subsidiaries where non-resident enterprises, being the transferors, were involved. The PRC tax authorities may pursue such non-resident enterprises with respect to a filing regarding the transactions and request our PRC subsidiaries to assist in the filing. As a result, we and our non-resident enterprises in such transactions may become at risk of being subject to filing obligations or being taxed under Circular 7, and may be required to expend valuable resources to comply with Circular 7 or to establish that we and our non-resident enterprises should not be taxed under Circular 7, for our previous and future restructuring or disposal of shares of our offshore subsidiaries, which may have a material adverse effect on our financial condition and results of operations.

Restrictions on currency exchange may limit our ability to utilize our revenue effectively.

The PRC government imposes controls on the convertibility of Renminbi into foreign currencies and, in certain cases, the remittance of currency out of China. A portion of our revenue may in the future be denominated in Renminbi. Shortages in availability of foreign currency may then restrict the ability of our PRC subsidiaries to remit sufficient foreign currency to our offshore entities for our offshore entities to pay dividends or make other payments or otherwise to satisfy our foreign currency denominated obligations. The Renminbi is currently convertible under the “current account,” which includes dividends, trade and service-related foreign exchange transactions, but not under the “capital account”, which includes foreign direct investment and loans, including loans we may secure from our onshore subsidiaries. Currently, our PRC subsidiaries, which are wholly-foreign owned enterprises, may purchase foreign currency for settlement of “current account transactions,” including payment of dividends to us, without the approval of SAFE by complying with certain procedural requirements. However, the relevant PRC governmental authorities may limit or eliminate our ability to purchase foreign currencies in the future for current account transactions. Since a portion of our future revenue may be denominated in Renminbi, any existing and future restrictions on currency exchange may limit our ability to utilize revenue generated in Renminbi to fund our business activities outside of the PRC or pay dividends in foreign currencies to our shareholders, including holders of our common stock. Foreign exchange transactions under the capital account remain subject to limitations and require approvals from, or registration with, SAFE and other relevant PRC governmental authorities. This could affect our ability to obtain foreign currency through debt or equity financing for our subsidiaries.

Recent litigation and negative publicity surrounding China-based companies listed in the U.S. may result in increased regulatory scrutiny of us and negatively impact the trading price of our common stock and could have a material adverse effect upon our business, including its results of operations, financial condition, cash flows and prospects.

We believe that litigation and negative publicity surrounding companies with operations in China, including concerning the directors and officers of such companies, that are listed in the U.S. have negatively impacted stock prices for such companies. Various equity-based research organizations have published reports on China-based companies after examining, among other things, their corporate governance practices, related party transactions, sales practices and financial statements that have led to special investigations and stock suspensions on national exchanges, including as a result of purported whistle-blowing or leaking by employees or former employees. Any similar scrutiny of us, regardless of its lack of merit, could result in a diversion of management resources and energy, potential costs to defend ourselves against rumors, decreases and volatility in the trading price of our common stock, and increased directors and officers insurance premiums and could have a material adverse effect upon our business, including its results of operations, financial condition, cash flows and prospects.

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Risks Related to Our Common Stock and This Offering

An active public market for our common stock may not develop and our common stock may trade below the public offering price.

Prior to this offering, there has been no public market for our common stock. We intend to apply to have our stock listed on the NASDAQ. However, a liquid public market for our common stock may not develop. If an active trading market for our common stock does not develop after this offering, the market price and liquidity of our common stock may be materially and adversely affected. The public offering price for our common stock has been determined by negotiation among us and the underwriters based upon several factors, and the price at which our common stock trade after this offering may decline below the public offering price. Investors in our common stock may experience a significant decrease in the value of their investment regardless of our operating performance or prospects.

The trading price of our common stock is likely to be volatile, which could result in substantial losses to you.

The trading price of our common stock is likely to be volatile and could fluctuate widely in response to a variety of factors, many of which are beyond our control. In addition, the performance and fluctuation of the market prices of other companies with a portion of their business operations located in China that have listed their securities in the U.S. may affect the volatility in the price of and trading volumes for our common stock. Some of these companies have experienced significant volatility, including significant price declines after their initial public offerings. The trading performances of these companies’ securities at the time of or after their offerings may affect the overall investor sentiment towards other companies with significant China operations listed in the U.S. and consequently may impact the trading performance of our common stock.

In addition to market and industry factors, the price and trading volume for our common stock may be highly volatile for specific business reasons, including:

• announcements of regulatory approval or a complete response letter, or specific label indications or patient populations for its use, or changes or delays in the regulatory review process;

• announcements of therapeutic innovations or new products by us or our competitors;

• adverse actions taken by regulatory agencies with respect to our clinical trials, manufacturing supply chain or sales and marketing activities;

• any adverse changes to our relationship with manufacturers or suppliers;

• the results of our testing and clinical trials;

• the results of our efforts to acquire or license additional drug candidates;

• variations in the level of expenses related to our existing drug candidates or preclinical and clinical development programs;

• any intellectual property infringement actions in which we may become involved;

• announcements concerning our competitors or the pharmaceutical industry in general;

• achievement of expected product sales and profitability;

• manufacture, supply or distribution shortages;

• variations in our results of operations;

• announcements about our earnings that are not in line with analyst expectations, the risk of which is enhanced because it is our policy not to give guidance on earnings;

• publication of operating or industry metrics by third parties, including government statistical agencies, that differ from expectations of industry or financial analysts;

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• changes in financial estimates by securities research analysts;

• announcements made by us or our competitors of new product and service offerings, acquisitions, strategic relationships, joint ventures or capital commitments;

• press reports or other negative publicity, whether or not true, about our business;

• additions to or departures of our management;

• fluctuations of exchange rates between the Renminbi and the U.S. dollar;

• release or expiry of lock-up or other transfer restrictions on our outstanding common stock;

• sales or perceived potential sales of additional common stock;

• sales of our common stock by us, our executive officers and directors or our shareholders in the future;

• general economic and market conditions and overall fluctuations in the U.S. equity markets;

• changes in accounting principles; and

• changes or developments in the PRC or global regulatory environment.

Any of these factors may result in large and sudden changes in the volume and trading price of our common stock. In the past, following periods of volatility in the market price of a company’s securities, shareholders have often instituted securities class action litigation against that company. If we were involved in a class action suit, it could divert the attention of management, and, if adversely determined, have a material adverse effect on our financial condition and results of operations.

In addition, the stock market, in general, and small pharmaceutical and biotechnology companies have experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of these companies. Broad market and industry factors may negatively affect the market price of our common stock, regardless of our actual operating performance. Further, the current decline in the financial markets and related factors beyond our control may cause our common stock price to decline rapidly and unexpectedly.

We may be subject to securities litigation, which is expensive and could divert management attention.

The price of our common stock may be volatile, and in the past companies that have experienced volatility in the market price of their common stock have been subject to securities class action litigation. We may be the target of this type of litigation in the future. Securities litigation against us could result in substantial costs and divert our management’s attention from other business concerns, which could seriously harm our business.

Our disclosure controls and procedures may not prevent or detect all errors or acts of fraud.

Upon completion of this offering, we will become subject to the periodic reporting requirements of the U.S. Securities Exchange Act of 1934, as amended, or the Exchange Act. Our disclosure controls and procedures are designed to reasonably assure that information required to be disclosed by us in reports we file or submit under the Exchange Act is accumulated and communicated to management, and recorded, processed, summarized and reported within the time periods specified in the rules and forms of the U.S. Securities and Exchange Commission, or SEC.

We believe that any disclosure controls and procedures or internal controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met.

These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the

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individual acts of some persons, by collusion of two or more people or by an unauthorized override of the controls. Accordingly, because of the inherent limitations in our control system, misstatements due to error or fraud may occur and not be detected.

Substantial future sales or perceived potential sales of our common stock or other equity securities in the public market could cause the price of our common stock to decline significantly.

Sales of our common stock or other equity securities in the public market after this offering, or the perception that these sales could occur, could cause the market price of our common stock to decline significantly. Upon completion of this offering, we will have              shares of common stock outstanding, assuming the underwriters do not exercise their option to purchase additional shares. The shares of our common stock outstanding after this offering will be available for sale, upon the expiration of the lock-up periods described elsewhere in this prospectus beginning from the date of this prospectus (if applicable to such holder), subject to volume and other restrictions as applicable under Rules 144 and 701 under the Securities Act. Any or all of these shares may be released prior to the expiration of the applicable lock-up period at the discretion of one of the designated representatives. To the extent shares are released before the expiration of the applicable lock-up period and sold into the market, the market price of our common stock could decline significantly.

We are currently an “emerging growth company.” As a result of the reduced disclosure requirements applicable to emerging growth companies, our common stock may be less attractive to investors.

We are currently an “emerging growth company,” as defined in the JOBS Act. For so long as we remain an emerging growth company, we are permitted and intend to rely on some of the exemptions from certain reporting requirements that are applicable to other public companies that are not emerging growth companies. These exemptions include but are not limited to not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, not being required to comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a non-binding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved.

We cannot predict whether investors will find our common stock less attractive because we will rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and the price of our common stock may be more volatile.

We have broad discretion as to the use of proceeds from this offering and may not use the proceeds effectively.

Our management will retain broad discretion as to the allocation of the proceeds and may spend these proceeds in ways in which you may not agree. The failure of our management to apply these funds effectively could result in unfavorable returns and uncertainty about our prospects, each of which could cause the price of our common stock to decline.

Because we do not expect to pay dividends in the foreseeable future, you must rely on price appreciation of our common stock for return on your investment.

We intend to retain most, if not all, of our available funds and earnings to fund the development and growth of our business. As a result, we do not expect to pay any cash dividends in the foreseeable future. Therefore, you should not rely on an investment in our common stock as a source for any future dividend income.

Our board of directors has significant discretion as to whether to distribute dividends. Even if our board of directors decides to declare and pay dividends, the timing, amount and form of future dividends, if any, will

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depend on, among other things, our future results of operations and cash flow, our capital requirements and surplus, the amount of distributions, if any, received by us from our subsidiaries, our financial condition, contractual restrictions and other factors deemed relevant by our board of directors. Accordingly, the return on your investment in our common stock will likely depend entirely upon any future price appreciation of our common stock. There is no guarantee that our common stock will appreciate in value or even maintain the price at which you purchased our common stock. You may not realize a return on your investment in our common stock and you may even lose your entire investment in our common stock. See “Dividend Policy.”

If securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our business, the market price for our common stock and trading volume could decline.

The trading market for our common stock will depend in part on the research and reports that securities or industry analysts publish about us or our business. If research analysts do not establish and maintain adequate research coverage or if one or more of the analysts who covers us downgrades our common stock or publishes inaccurate or unfavorable research about our business, the market price for our common stock would likely decline. If one or more of these analysts cease coverage of our company or fail to publish reports on us regularly, we could lose visibility in the financial markets, which, in turn, could cause the market price or trading volume for our common stock to decline significantly.

As the public offering price is substantially higher than our net tangible book value per share of our common stock, you will incur immediate and substantial dilution.

If you purchase common stock in this offering, you will pay more for your common stock than the amount paid by existing shareholders for their common stock on a per share basis. As a result, you will experience immediate and substantial dilution of $         per share of common stock (assuming no exercise of outstanding options to acquire shares of common stock and no exercise of the underwriters’ option to purchase additional shares of common stock), representing the difference between our pro forma net tangible book value per share of common stock as of December 31, 2016, after giving effect to this offering and the initial public offering price of $        per share, the midpoint of the price range set forth on the cover of this prospectus. In addition, you will experience further dilution upon the issuance of shares to holders of our convertible loan agreements and to Hanmi and certain of our executive officers upon the completion of this offering pursuant to contractual obligations. All of the shares issuable upon the exercise of currently outstanding options or convertible loan agreements will be issued at a purchase price on a per share basis that is less than the public offering price per share of common stock in this offering.

Anti-takeover provisions in our charter documents may discourage our acquisition by a third party, which could limit our shareholders’ opportunity to sell their shares at a premium.

Our amended and restated certificate of incorporation and bylaws include provisions that could limit the ability of others to acquire control of our company, could modify our structure or could cause us to engage in change-of-control transactions. These provisions could have the effect of depriving our shareholders of an opportunity to sell their shares at a premium over prevailing market prices by discouraging third parties from seeking to obtain control in a tender offer or similar transaction.

We will incur increased costs as a result of operating as a public company, and our management will be required to devote substantial time to new compliance initiatives and corporate governance practices.

As a public company, we will incur significant legal, accounting and other expenses that we did not incur as a private company. The Sarbanes-Oxley Act of 2002, the Dodd-Frank Wall Street Reform and Consumer Protection Act, the listing requirements of the NASDAQ Stock Market and other applicable securities rules and regulations impose various requirements on public companies, including establishment and maintenance of effective disclosure and financial controls and corporate governance practices. Our management and other

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personnel will need to devote a substantial amount of time to these compliance initiatives. Moreover, these rules and regulations will increase our legal and financial compliance costs and will make some activities more time-consuming and costly. For example, we expect that these rules and regulations may make it more difficult and more expensive for us to obtain director and officer liability insurance, which in turn could make it more difficult for us to attract and retain qualified members of our board of directors.

We are evaluating these rules and regulations, and cannot predict or estimate the amount of additional costs we may incur or the timing of such costs. These rules and regulations are often subject to varying interpretations, in many cases due to their lack of specificity, and, as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies. This could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices.

Pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, or Section 404, we will first be required to furnish a report by our management on our internal control over financial reporting for the year ending December 31, 2017. However, while we remain an emerging growth company, we will not be required to include an attestation report on internal control over financial reporting issued by our independent registered public accounting firm. To achieve compliance with Section 404 within the prescribed period, we will be engaged in a process to document and evaluate our internal control over financial reporting, which is both costly and challenging. In this regard, we will need to continue to dedicate internal resources, potentially engage outside consultants and adopt a detailed work plan to assess and document the adequacy of internal control over financial reporting, continue steps to improve control processes as appropriate, validate through testing that controls are functioning as documented and implement a continuous reporting and improvement process for internal control over financial reporting. Despite our efforts, there is a risk that we will not be able to conclude, within the prescribed timeframe or at all, that our internal control over financial reporting is effective as required by Section 404. If we identify one or more material weaknesses, it could result in an adverse reaction in the financial markets due to a loss of confidence in the reliability of our financial statements.

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This prospectus contains certain forward-looking statements that involve risks and uncertainties. These forward-looking statements reflect our current views with respect to, among other things, future events and our financial performance. These statements are often, but not always, made through the use of words or phrases such as “may,” “might,” “should,” “could,” “predict,” “potential,” “believe,” “expect,” “continue,” “will,” “anticipate,” “seek,” “estimate,” “intend,” “plan,” “projection,” “would,” “annualized” and “outlook,” or the negative version of those words or other comparable words or phrases of a future or forward-looking nature. These forward-looking statements are not historical facts, and are based on current expectations, estimates and projections about our industry, management’s beliefs and certain assumptions made by management, many of which, by their nature, are inherently uncertain and beyond our control. Accordingly, we caution you that any such forward-looking statements are not guarantees of future performance and are subject to risks, assumptions, estimates and uncertainties that are difficult to predict. Although we believe that the expectations reflected in these forward-looking statements are reasonable as of the date made, actual results may prove to be materially different from the results expressed or implied by the forward-looking statements.

A number of important factors could cause our actual results to differ materially from those indicated in these forward-looking statements, including those factors identified in “Risk Factors” or “Management’s Discussion and Analysis of Financial Condition and Results of Operations” or the following:

• our plans to develop and commercialize our product candidates;

• our ongoing and planned clinical trials;

• economic, political, regulatory and other risks associated with our international operations;

• the timing of and our ability to obtain and maintain regulatory approvals for our product candidates;

• our estimates regarding expenses, future revenue, capital requirements and needs for additional financing;

• our ability to identify additional products or product candidates with significant commercial potential that are consistent with our commercial objectives;

• the rate and degree of market acceptance and clinical utility of our products;

• our commercialization, marketing and manufacturing capabilities and strategy;

• significant competition in our industry;

• costs of litigation and the failure to successfully defend lawsuits and other claims against us;

• our ability to receive research funding and achieve anticipated milestones under our collaborations;

• our intellectual property position;

• our ability to maintain licenses of key technology and intellectual property on commercially reasonable terms;

• costs of compliance and our failure to comply with new and existing governmental regulations including, but not limited to, tax regulations;

• loss or retirement of key members of management;

• costs of compliance and our failure to comply with new and existing governmental regulations including, but not limited to, tax regulations;

• our ability to maintain our partnerships with the local governments in New York State and Chongqing Municipality;

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• failure to successfully execute our growth strategy, including any delays in our planned future growth; and

• our failure to maintain effective internal controls.

The foregoing factors should not be considered exhaustive and should be read together with the other cautionary statements included in this prospectus. If one or more events related to these or other risks or uncertainties materialize, or if our underlying assumptions prove to be incorrect, actual results may differ materially from what we anticipate. Accordingly, you should not place undue reliance on any such forward-looking statements. Any forward-looking statement speaks only as of the date on which it is made, and we do not undertake any obligation to update or review any forward-looking statement, whether as a result of new information, future developments or otherwise.

This prospectus also contains estimates, projections and other information concerning our industry, our business and the markets for certain drugs, including data regarding the estimated size of those markets, their projected growth rates and the incidence of certain medical conditions. Information that is based on estimates, forecasts, projections or similar methodologies is inherently subject to uncertainties and actual events or circumstances may differ materially from events and circumstances reflected in this information. Unless otherwise expressly stated, we obtained these industry, business, market and other data from reports, research surveys, studies and similar data prepared by third parties, industry, medical and general publications, government data and similar sources. In some cases, we do not expressly refer to the sources from which these data are derived.

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USE OF PROCEEDS

We estimate that our net proceeds from the sale of shares of our common stock in this offering will be approximately $         million, or $         million if the underwriters fully exercise their option to purchase additional shares, assuming an initial public offering price of $         per share, which is the midpoint of the price range set forth on the cover page of this prospectus, and after deducting the underwriting discounts and commissions and estimated offering expenses payable by us.

A $1.00 increase (decrease) in the assumed public offering price of $         per share, which is the midpoint of the price range set forth on the cover page of this prospectus, would increase (decrease) our expected net proceeds from this offering by approximately $         million, assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting the underwriting discounts and commissions and estimated offering expenses payable by us. An increase (decrease) of 1.0 million shares in the number of shares offered by us would increase the net proceeds to us from this offering by approximately $         million, assuming the assumed initial public offering price of $         per share remains the same and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.

The principal purposes of this offering are to increase our financial flexibility, create a public market for our common stock, and to facilitate our access to the public equity markets. We currently expect to use the net proceeds from this offering as follows:

• Approximately $28 million for Phase 3 clinical trials of Oraxol for treatment of metastatic breast cancer;

• Approximately $12 million for additional clinical development and regulatory activities for our Orascovery platform;

• Approximately $20 million for Phase 3 clinical trials of KX-01 ointment for treatment of actinic keratosis;

• Approximately $25 million for clinical and pre-clinical research and development; and

• The remainder for working capital, capital expenditures and general corporate purposes.

We may use a portion of the net proceeds of this offering for the acquisition or licensing, as the case may be, of additional technologies, other assets or businesses, or for other strategic investments or opportunities, although we have no definitive understandings, agreements or commitments to do so as of the date hereof.

Our expected use of the net proceeds from this offering is based upon our present plans and business condition. Based on those current plans and assumptions, we do not expect that the net proceeds from this offering, combined with our current operating capital, will be sufficient to enable us to complete all necessary development or commercially launch our current drug candidates. As of the date of this prospectus, we cannot predict with certainty all of the particular uses for the net proceeds to be received upon the completion of this offering or the amounts that we will actually spend on the uses set forth above. The amounts and timing of our actual use of proceeds will vary depending on numerous factors, including the factors described under the heading “Risk Factors”. As a result, management will retain broad discretion over the allocation of the net proceeds from this offering, and investors will be relying on the judgment of our management regarding the application of the net proceeds.

Pending the use of the net proceeds of this offering, we intend to invest the net proceeds in high-quality, short-term interest-bearing obligations, investment-grade instruments, certificates of deposit or direct or guaranteed obligations of the U.S. government.

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DIVIDEND POLICY

We have never declared or paid cash dividends on our common stock and we do not intend to pay any cash dividends on our common stock for the foreseeable future. We currently intend to retain future earnings, if any, for use in the operation of our business and to fund future growth. Any future determination related to our dividend policy will be made at the discretion of our board of directors in light of conditions then-existing, including factors such as our results of operations, financial condition and requirements, business conditions and covenants under any applicable contractual arrangements.

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CAPITALIZATION

The following table sets forth our cash and cash equivalents and our capitalization as of December 31, 2016:

• on an actual basis;

• on a pro forma basis to give effect to the issuance of                  shares of our common stock, pursuant to (i) the conversion of outstanding convertible notes into shares of our common stock upon the completion of this offering, and (ii) issuance of shares to Hanmi and certain of our executive officers upon the completion of this offering pursuant to contractual obligations; and

• on a pro forma as adjusted basis, giving effect to (i) the pro forma adjustments set forth above; and (ii) the sale and issuance of                  shares of our common stock by us in this offering, based upon the initial public offering price of $         per share, the midpoint of the price range set forth on the cover page of this prospectus, after deducting underwriting discounts and commissions and estimated offering expenses payable by us.

You should read this table in conjunction with the sections entitled “Use of Proceeds,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Description of Capital Stock” and our consolidated financial statements and related notes included elsewhere in this prospectus.

	As of December 31, 2016
	(in thousands, except share and per share data)
	Actual			Pro Forma	Pro Forma as Adjusted(1)
Cash and cash equivalents	$	33,125		$	$
Stockholders’ equity:
Common stock, $0.01 par value; 250,000,000 shares authorized, actual; shares authorized, pro forma and pro forma as adjusted; 40,685,786 shares outstanding, actual;                  shares outstanding, pro forma;                  shares outstanding, pro forma as adjusted	$	42
Undesignated preferred stock, $             par value per share; no shares authorized, issued and outstanding, actual; shares authorized, no shares issued and outstanding, actual, pro forma and pro forma as adjusted
Additional paid-in capital		237,581
Accumulated other comprehensive loss		(1,304	)
Accumulated deficit		(195,106	)
Less: treasury stock, at cost; 1,656,920 shares at December 31, 2016		(7,406	)
Total stockholders’ equity		34,669
Total capitalization	$	34,669		$	$

⁽¹⁾  A $1.00 increase (decrease) in the assumed initial public offering price of $         per share, the midpoint of the price range set forth on the cover of this prospectus, would increase (decrease) each of cash and cash equivalents, additional paid-in capital, total stockholders’ equity and total capitalization by $         million, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. An increase (decrease) of 1.0 million shares in the number of shares offered by us would increase (decrease) each of cash and cash equivalents, additional paid-in capital, total stockholders’ equity and total capitalization by $         million, assuming the assumed initial public offering price of $         per share remains the same and after deducting the estimated underwriting discounts and commissions and

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estimated offering expenses payable by us. The pro forma as adjusted information discussed above is illustrative only and will be adjusted based on the actual public offering price and terms of this offering determined at pricing.

If the underwriters’ option to purchase additional shares is exercised in full, pro forma as adjusted cash and cash equivalents, additional paid-in capital, total stockholders’ equity and total capitalization as of December 31, 2016 would be $         million, $         million, $         million and $         million, respectively.

The table above does not include:

• 9,280,689 shares of common stock issuable upon the exercise of options to purchase our common stock outstanding as of December 31, 2016 at a weighted average exercise price of $6.26 per share;

• 344,000 shares of common stock issuable upon the exercise of warrants outstanding as of December 31, 2016; and

• 1,976,643 shares of common stock reserved for future grant or issuance under our stock option plans as of December 31, 2016.

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DILUTION

If you invest in our common stock in this offering, your interest will be diluted to the extent of the difference between the initial public offering price per share of our common stock in this offering and the pro forma as adjusted net tangible book value per share of our common stock immediately after this offering.

As of December 31, 2016, our historical net tangible book value was approximately $         million, or $         per share of common stock. Historical net tangible book value per share represents our total assets less goodwill, intangible assets and deferred offering costs, less total liabilities, divided by the number of our outstanding shares of common stock.

As of December 31, 2016, our pro forma net tangible book value was approximately $         million, or $        .         per share of common stock. Our pro forma net tangible book value per share represents the amount of our total tangible assets reduced by the amount of our total liabilities and divided by the total number of shares of our common stock outstanding as of December 31, 2016, assuming                  upon the closing of this offering.

After giving further effect to (i) the sale of              shares of our common stock in this offering, at the initial public offering price of $         per share, after deducting underwriting discounts and commissions and estimated offering expenses payable by us and (ii) the issuance of shares to holders of our convertible loan agreements and to Hanmi and certain of our executive officers upon the completion of this offering pursuant to contractual obligations, our pro forma as adjusted net tangible book value as of December 31, 2016 would have been approximately $        , or $         per share. This represents an immediate increase in pro forma as adjusted net tangible book value of $         per share to our existing stockholders and an immediate dilution of $         per share to investors purchasing shares in this offering.

The following table illustrates this dilution:

Assumed initial public offering price per share		$
Historical net tangible book value per share as of December 31, 2016	$
Pro forma decrease attributable to issuance of common stock pursuant to contractual obligations
Pro forma net tangible book value per share as of December 31, 2016
Increase in pro forma net tangible book value per share attributable to new investors purchasing shares in this offering
Pro forma, as adjusted net tangible book value per share after this offering
Dilution per share to investors in this offering		$

A $1.00 increase or decrease in the assumed initial public offering price of $         per share would increase or decrease our pro forma net tangible book value by approximately $        , our pro forma net tangible book value per share after this offering by approximately $         and dilution per share to new investors by approximately $        , assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same.

If the underwriters exercise their option to purchase additional shares of our common stock in full, the pro forma as adjusted net tangible book value per share after this offering would be $         per share, and the dilution in pro forma net tangible book value per share to new investors in this offering would be $         per share.

The following table summarizes on an as adjusted basis as of December 31, 2016, the difference between the number of shares of common stock purchased from us, the total consideration paid and the average price per share paid by existing stockholders and by new investors, assuming an initial public offering price of $         per

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share, the midpoint of the price range set forth on the cover page of this prospectus, and before deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us:

	Shares Purchased				Total Consideration(1)				Average Price per Share
	Number	Percent			Amount	Percent
Existing stockholders				%	$			%	$
New investors									$
Total			100	%	$		100	%

⁽¹⁾ A $1.00 increase (decrease) in the assumed initial public offering price of $         per share, the midpoint of the price range set forth on the cover of this prospectus, would increase (decrease) the total consideration paid to us by new investors and total consideration paid to us by all stockholders by $         million, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. An increase (decrease) of 1.0 million shares in the number of shares offered by us would increase (decrease) the total consideration paid to us by new investors and total consideration paid to us by all stockholders by $         million, assuming the assumed initial public offering price of $         per share remains the same and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.

If the underwriters exercise their option to purchase additional shares in full, our existing stockholders would own     % and our new investors would own     % of the total number of shares of our common stock outstanding after our initial public offering.

The foregoing discussion and tables assume no exercise of any stock options or warrants outstanding as of December 31, 2016. To the extent that these options and warrants are exercised, new investors will experience further dilution. As of December 31, 2016, options to purchase 9,280,689 shares of common stock were outstanding at a weighted average exercise price of $6.26 per share and warrants to purchase 344,000 shares of common stock were outstanding.

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SELECTED HISTORICAL FINANCIAL INFORMATION AND OTHER DATA

The following selected statements of operations and comprehensive loss data and the cash flow data for the years ended December 31, 2015 and 2016 and the balance sheet data as of December 31, 2015 and 2016 are derived from our audited consolidated financial statements included elsewhere in this prospectus. You should read this data together with our consolidated financial statements and related notes appearing elsewhere in this prospectus and the information under the captions “Capitalization” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Our historical results are not necessarily indicative of our future results. Our consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States, or U.S. GAAP.

	Year Ended December 31,
	2015			2016
	(In thousands, except share and per share data)
Statements of Operations and Comprehensive Loss Data:
Revenue:
Product sales	$	12,816		$	19,394
License fees and consulting revenue		314			392
Grant revenue		814			765
Total revenue		13,944			20,551
Costs and operating expenses:
Cost of product sales		13,153			19,718
Research and development expenses		24,463			60,624
Selling, general, and administrative expenses		27,036			25,956
Total costs and operating expenses		64,652			106,298
Loss from operations		(50,708	)		(85,747	)
Interest expense		1			1,891
Unrealized loss on derivative liability		—			533
Income tax benefit		(54	)		(265	)
Net loss		(50,655	)		(87,906	)
Less: net loss attributable to non-controlling interests		(55	)		(191	)
Net loss attributable to Athenex, Inc.	$	(50,600	)	$	(87,715	)
Net loss per share attributable to Athenex, Inc. common stockholders, basic and diluted(1)	$	(1.50	)	$	(2.19	)
Weighted-average shares used in computing net loss per share attributable to Athenex, Inc. common stockholders, basic and diluted(1)		33,765,751			40,120,908
Pro forma net loss per share attributable to Athenex, Inc. common stockholders, basic and diluted(1)	$			$
Pro forma weighted-average shares used in computing net loss per share attributable to Athenex, Inc. common stockholders, basic and diluted(1)
Comprehensive loss	$	(50,906	)	$	(88,796	)

⁽¹⁾ See Note 17 to our audited consolidated financial statements appearing elsewhere in this prospectus for a description of the method used to calculate basic and diluted net loss per share attributable to Athenex, Inc. common stockholders and pro forma basic and diluted net loss per share attributable to Athenex, Inc. common stockholders.

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	December 31,				Pro Forma December 31, 2016
	2015		2016
	(in thousands)
Selected Balance sheet data:
Cash and cash equivalents	$	43,495	$	33,125
Marketable securities—current		12,271		8,628
Goodwill		37,996		37,552
Working capital*		47,578		23,904
Total assets		120,431		105,890
Long-term debt		3,650		41,807
Total liabilities		22,387		71,221
Non-controlling interests		484		862
Total stockholders’ equity	$	98,044	$	34,669

* Working capital: total current assets—total current liabilities

	Year Ended December 31,
	2015			2016
	(in thousands)
Selected Cash flow data:
Net cash used in operating activities	$	(33,756	)	$	(47,870	)
Net cash (used in) provided by investing activities		(16,909	)		2,659
Net cash provided by financing activities		76,302			35,272
Net effect of foreign exchange rate changes		337			(431	)
Net increase (decrease) in cash and cash equivalents		25,974			(10,370	)
Cash and cash equivalents at beginning of period		17,521			43,495
Cash and cash equivalents at end of period	$	43,495		$	33,125

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

You should read the following discussion and analysis of our financial condition and results of operations together with “Our Selected Consolidated Financial Data,” our consolidated financial statements and the related notes and the related notes appearing elsewhere in this prospectus. Some of the information contained in this discussion and analysis or set forth elsewhere in this prospectus, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties. You should read the “Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements” sections of this prospectus for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis. The terms “Company,” “Athenex,” “we,” “our” or “us” as used herein refer to Athenex, Inc. and its consolidated subsidiaries unless otherwise stated or indicated by context.

Overview

We are a global biopharmaceutical company dedicated to the discovery, development and commercialization of novel therapies for the treatment of cancer. Our mission is to improve the lives of cancer patients by creating more effective, safer and tolerable treatments. We have generated our clinical product candidates through our Orascovery and Src Kinase Inhibition research platforms, which are based on our understanding of human absorption biology and novel approaches to inhibiting kinase activity, respectively. We believe that our ability to overcome the challenges of oral delivery of chemotherapy and limitations associated with IV delivery, via our P-gp inhibitor, offers significant potential benefits to patient outcomes by allowing patients to stay on therapy longer and extending the potential opportunities to combine with other agents, including targeted and immunotherapies that would otherwise be too toxic in combination with IV chemotherapy. We have assembled a leadership team and have established global operations in the U.S. and China across the pharmaceutical value chain to execute our mission to become a global leader in bringing innovative cancer treatments to the market and improve health outcomes.

Basis of Presentation

Our financial data presented herein as of and for the years ended December 31, 2015 and 2016 have been derived from our audited consolidated financial statements, which were prepared in accordance with U.S. GAAP, and should be read in conjunction with those statements which are included elsewhere in this prospectus.

We acquired three businesses during the periods included in our consolidated financial statements within this prospectus. These acquisitions were: (1) in September 2014, we acquired QuaDPharma, LLC, or QuaDPharma, which provides cGMP manufacturing, packaging and laboratory services to support our research and development and also to third parties; (2) in June 2015, we acquired Polymed Therapeutics, Inc. and Chongqing Taihao Pharmaceutical Co Ltd, collectively Polymed. Polymed markets and sells API and medical devices throughout the world. Through its cGMP facility in Chongqing, China, Polymed manufactures API and conducts research and development of novel drugs and therapies; and (3) in July 2015, we acquired Comprehensive Drug Enterprises Limited, or CDE, which primarily performs research and development activities related to the development of transmucosal drug delivery and also in support of our Oncology Innovation Platform.

We have three segments operating in North America and Asia: our Oncology Innovation Platform, our Commercial Platform and our Global Supply Chain Platform. Our Oncology Innovation Platform include two core research and development centers, one in Hong Kong, China and one in the U.S.

Factors Affecting our Results of Operations

Since inception, we have devoted substantially all of our resources to research and development of our lead product candidates under our Orascovery and Src Kinase Inhibition platforms. We have incurred significant net

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losses since inception. As of December 31, 2016, we had an accumulated deficit of approximately $195.1 million. Our recurring losses from operations and negative cash flows from operations have raised substantial doubt regarding our ability to continue as a going concern, and as a result, our independent registered public accounting firm has noted this in the opinion they issued on our consolidated financial statements for the year ended December 31, 2016. As a result of the acquisitions of QuaDPharma in 2014 and Polymed in 2015, we started to generate revenue from those businesses. Product sales totaled $12.8 million and $19.4 million for the years ended December 31, 2015 and 2016, respectively.

We believe that revenue generated from our Global Supply Chain Platform will continue to grow at a steady pace in the years ahead. We expect that our Commercial Platform will start generating revenue in 2017. However, due to both unforeseeable factors such as global political and economic changes and foreseeable factors such as market competition, revenue generated from these segments might not be sufficient to meet their operating costs. Therefore, we will continue to require substantial additional capital beyond the expected proceeds from this offering to continue our clinical development and potential commercialization activities. The amount and timing of our future funding requirements will depend on many factors, including the pace and results of our clinical development efforts. We cannot assure you that we will be profitable or generate positive cash flow from operating activities in the next three years, or at all.

Research and Development Expenses

We believe our ability to successfully develop innovative oncology drug candidates through our Oncology Innovation Platforms will be the primary factor affecting our long-term competitiveness, as well as our future growth and development. All of the drug candidates of our Oncology Innovation Platform are still in the development stage. Creating innovative oncology drugs requires a significant investment of resources over a prolonged period of time. As a result of this commitment, our pipeline of drug candidates has been steadily advancing and expanding, with six clinical stage drug candidates in different regulatory approval stages in various countries as of December 31, 2016.

Our research and development expenses since inception have primarily included:

• Employee compensation related expenses for research and development personnel, including salaries, benefits and equity compensation expense;

• Expenses incurred for payments to contract research organizations, investigators and clinical trial sites that conduct our clinical studies;

• Costs of acquiring, developing, and manufacturing clinical study materials;

• Facilities, depreciation, and other expenses, which include office leases and other overhead expenses; and

• Costs associated with pre-clinical activities and regulatory operations.

Research and development expenses incurred totaled $24.5 million and $60.6 million for the years ended December 31, 2015 and 2016, respectively. These figures represent 37.8% and 57.0% of our total costs and operating expenses for the respective period.

We have not historically tracked or recorded research and development expenses on a project-by-project basis primarily because we use our employee and infrastructure resources across multiple research and development projects and it is not practical for us to allocate such costs on a project-by-project basis. Due to the numerous risks and uncertainties associated with our research and development activities, we cannot determine with certainty the duration and completion costs of the current and future preclinical studies and clinical trials. We expect our research and development expenses to increase for the foreseeable future as we continue the development of our drug candidates.

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We have historically been able to fund the research and development expenses for our Oncology Innovation Platform via a range of sources, including through private equity and debt financings and to a lesser extent through the profits of our Global Supply Chain Platform, and through grant funding in the U.S., Hong Kong and China. We intend to continue making significant investments in research and development to bring our existing oncology drug products to the market.

We expect that the net proceeds to us from this offering will also be an important source of funds for our research and development.

Ability to Commercialize Our Drug Candidates

Our ability to generate revenue from our drug candidates depends on our ability to successfully complete clinical trials and obtain regulatory approvals for them in the U.S., Europe, China and other major markets.

Our major drug candidates supported by our Orascovery platform are being rapidly developed and clinically tested simultaneously in multiple countries, including the U.S. Nonetheless, we cannot be certain if any of our drug candidates will successfully complete clinical trials or receive necessary regulatory approvals. Even if such approvals are granted, we will need to thereafter establish manufacturing infrastructure and engage in extensive marketing prior to generating any revenue from such drugs, and the ultimate commercial success of our drugs will depend on their acceptance by patients, the medical community and third-party payors and their ability to compete effectively with other therapies on the market.

As a first step towards commercialization, we have started to establish our sales, marketing, and distribution infrastructure through our Commercial Platform. We have entered into a number of agreements to sell, market and distribute compound pharmacy 503B and specialty products. Those specialty products being launched in the near future are expected to generate cash that will help subsidize the build-out of the commercialization team in the U.S., the ongoing clinical trials and research and development projects for the Athenex proprietary pipeline. We intend to have our internal marketing and sales force for the launching of our proprietary oncology products when they obtain regulatory approval.

Key Components of Results of Operations

Revenue

We derive our consolidated revenue primarily from (i) the sales of API and medical devices by our Global Supply Chain Platform; (ii) licensing and collaboration projects conducted by our Oncology Innovation Platform, which generates revenue in the form of upfront payments, milestone payments and payments received for providing research and development services for our collaboration projects and for other third parties; and (iii) grant awards from government agencies and universities for our continuing research and development efforts.

The following table sets forth the components of our consolidated revenue and the amount as a percentage of total revenue for the periods indicated.

	Year Ended December 31,
	2015					2016
	(in thousands)		%			(in thousands)		%
Product sales	$	12,816		92	%	$	19,394		94	%
Licensing fees and consulting revenue		314		2	%		392		2	%
Grant revenue		814		6	%		765		4	%
Total revenue	$	13,944				$	20,551

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We do not anticipate revenue being generated from sales of our product candidates conducted by our Oncology Innovation Platform until we have obtained regulatory approval. We cannot assure you that we will succeed in achieving regulatory approval for our drug candidates as planned, or at all.

Cost of Product Sales

We manufacture our clinical products in our cGMP facility in New York and APIs at our cGMP facility in China. Cost of product sales primarily includes the cost of raw materials, labor costs, manufacturing overhead expenses, reserves for expected scrap, as well as transportation costs. Cost of product sales also includes depreciation expense for production equipment, changes to our excess and obsolete inventory reserves, and certain direct costs such as shipping costs, net of costs charged to customers.

Research and Development Expenses

Research and development expenses consist of the costs associated with our research and development activities, conducting preclinical studies and clinical trials and activities related to regulatory filings. The following table sets forth the components of our research and development expenses and the amount as a percentage of total research and development expenses for the periods indicated.

	Year Ended December 31,
	2015					2016
	(in thousands)		%			(in thousands)		%
Wages, benefits, and related costs	$	6,660		27	%	$	19,531		32	%
Clinical trial costs		8,617		35	%		14,438		24	%
Preclinical research costs		7,946		33	%		5,449		9	%
Drug licensing costs		—		0	%		17,690		29	%
Other research and development costs		1,240		5	%		3,516		6	%
Total research and development expenses	$	24,463				$	60,624

Our current research and development activities mainly relate to the clinical development of the following programs:

Orascovery platform—Comprised of our in-licensed and novel P-gp inhibitor, HM30181A, that is combined with various chemotherapeutic agents and enables them to be absorbed into the blood when given orally:

• Oraxol, combining HM30181A with an oral dosage form of paclitaxel;

• Oratecan, combining HM30181A with an oral dosage form of irinotecan;

• Oradoxel, combining HM30181A with an oral dosage form of docetaxel; and

• Oratopo, combining HM30181A with an oral dosage form of topotecan.

Src Kinase Inhibition platform—Targets the tyrosine kinase protein in regulating cell growth that leads to blockade of metastasis:

• KX-01 ointment, Src kinase inhibitor that is being topically administered to treat skin cancers and pre-cancers;

• KX-01 oral, Src kinase inhibitor that is being orally administered to treat certain solid and liquid tumors; and

• KX-02, Src kinase inhibitor that is orally administered to treat brain cancer, such as glioblastoma multiforme (GBM).

We expense research and development costs as incurred. We record costs for certain development activities, such as clinical trials, based on an evaluation of the progress to completion of specific tasks using data such as

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patient enrollment or clinical site activations. We do not allocate employee related costs, depreciation, rental and other indirect costs to specific research and development programs because these costs are deployed across multiple product programs under research and development.

We cannot determine with certainty the duration, costs and timing of the current or future preclinical or clinical studies of our drug candidates. The duration, costs, and timing of clinical studies and development of our drug candidates will depend on a variety of factors, including:

• The scope, rate of progress, and costs of our ongoing, as well as, any additional clinical studies and other research and development activities;

• Future clinical study results;

• Uncertainties in clinical study enrollment rates;

• Significant and changing government regulation; and

• The timing and receipt of any regulatory approvals.

A change in the outcome of any of these variables with respect to the development of a drug candidate could mean a significant change in the costs and timing associated with the development of that drug candidate.

Research and development activities are central to our business model. We expect our research and development expenses to continue to increase for the foreseeable future as we continue to support the clinical trials of Oraxol, Oratecan, Oradoxel, Oratopo, KX-01 ointment, KX-01 oral and KX-02, as well as initiate and prepare for additional clinical and preclinical studies. We also expect spending to increase in the research and development for API and specialty products. There are numerous factors associated with the successful commercialization of any of our drug candidates, including future trial design and various regulatory requirements, many of which cannot be determined with accuracy at this time based on our stage of development. Additionally, future commercial and regulatory factors beyond our control will impact our clinical development programs and plans.

Selling, General and Administrative Expenses

Selling, general and administrative, or SG&A, expenses primarily consist of compensation, including salary, employee benefits and stock-based compensation expenses for sales and marketing personnel, and for administrative personnel that support our general operations such as, executive management, legal counsel, financial accounting, information technology, and human resources personnel. SG&A expenses also includes professional fees for legal, patents, consulting, auditing and tax services, as well as other direct and allocated expenses for rent and maintenance of facilities, insurance and other supplies used in the selling, general and administrative activities. We expect to incur additional SG&A expenses in connection with our becoming a public company, which may increase further when we are no longer able to rely on the “emerging growth company” exemption pursuant to the JOBS Act.

Despite the decrease in SG&A expenses in recent periods, we anticipate that our SG&A expenses will increase in future periods to support increases in our research and development and commercialization activities. We expect these increases will likely result in increased headcount, increased share compensation charges, expanded infrastructure and increased costs for insurance. We also anticipate increases to legal, compliance, accounting and investor and public relations expenses associated with being a public company.

Critical Accounting Policies and Significant Judgments and Estimates

Our discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of these

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financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities and the disclosure of contingent assets and liabilities at the date of our financial statements and the reported amounts of revenue and expenses during the periods. We evaluate our estimates and judgments on an ongoing basis, including but not limited to, estimating the useful lives of long-lived assets, assessing the impairment of long-lived assets, stock-based compensation expenses, and the realizability of deferred income tax assets. We base our estimates on historical experience, known trends and events, contractual milestones and other various factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Changes in the accounting estimates are likely to occur from period to period. Actual results could be significantly different from these estimates. We believe that the accounting policies discussed below are critical to understanding our historical and future performance, as these policies relate to the more significant areas involving management’s judgment and estimates.

Revenue Recognition

We recognize product revenue when there is persuasive evidence of an arrangement, the price is fixed or determinable, collectability is reasonably assured, and upon shipment to customers or acceptance by customers.

We recognize revenue related to the license of certain intellectual properties and related consulting services when earned and when realized or realizable. Amounts received in advance are recorded as deferred revenue until earned. Out-license revenue is earned upon the achievement of milestone events by the licensees. Milestone events include execution of license agreements, completion of clinical studies of varying stages in various territories, regulatory approval of drugs in specific jurisdictions, among other events. After the licensees obtain regulatory approval and begin sales, we are entitled to royalties on net sales on most out-license agreements. Currently, all out-license agreements are in the milestone stage; no licensees have yet obtained regulatory approval of the licensed drugs.

Certain of our out-license agreements contain multiple elements and are accounted for in accordance with ASC 605-25 – Revenue Recognition – Multiple-Element Arrangements. We identify the deliverables included within the arrangement and evaluate which deliverables represent separate units of accounting. The consideration received is then allocated among the separate units of accounting based on each unit’s relative selling price. We generally consider non-refundable milestone payments to be achieved as a result of our efforts to be substantive and recognize them as revenue upon achievement of the milestone, assuming all other revenue recognition criteria are met. Revenue related to agreements with multiple elements or milestone payments are not significant in the periods presented.

We receive certain grant award funding to support our continuing research and developing efforts. We consider these grants to be operating revenue as they support our primary operating activities. Revenue is recognized when earned and when realized or realizable. Revenue from grant awards is deemed to be earned when all eligibility criteria are met.

Research and Development Expenses

Research and development expenses represent costs associated with developing our proprietary drug candidates, our collaboration agreements for such drugs, and our ongoing clinical studies.

Clinical trial costs are a significant component of our research and development expenses. We have a history of contracting with third parties that perform various clinical trial activities on our behalf in the ongoing development of our drug candidates. Expenses related to clinical trials are accrued based on our estimates of the actual services performed by the third parties for the respective period. If the contracted amounts are revised or the scope of a contract is revised, we will modify the accruals accordingly on a prospective basis and will do so in the period in which the facts that give rise to the revision become reasonably certain.

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Stock-Based Compensation and Fair Value of our Common Stock

Awards Granted to Employees

We apply FASB Accounting Standard Codification, or ASC, 718, Compensation- Stock Compensation to account for our employee stock-based compensation. In accordance with ASC 718, we determine whether an award should be classified and accounted for as a liability award or equity award. All of our grants of stock-based awards to employees were classified as equity awards and are recognized in the financial statements based on their grant-date fair values. We recognize compensation expense using the straight-line method for all employee equity awards over the requisite service period, which is generally the vesting period of the equity grant. We estimate the grant date fair value of stock options using the Black-Scholes option pricing model.

The valuation model for stock-based compensation expense requires us to make assumptions and judgments about the variables used in the calculation including the expected term (period of time that the options granted are expected to be outstanding), the expected volatility of our common stock, an assumed risk-free interest rate, the dividend rate and the estimated forfeitures of unvested stock options. The following table summarizes the weighted-average variables used to determine the fair value of stock options:

	Year Ended December 31,
	2015			2016
Expected dividend yield		—	%		—	%
Expected stock price volatility		62	%		65	%
Risk-free interest rate		1.56	%		1.29	%
Expected life of options (in years)		5.9			6.0

• Fair Value of Common Stock. As discussed below, the fair value of the shares of our common stock underlying the stock options has historically been determined based on recent third-party sales of our common stock in private equity financing events. Because there has been no public market for our common stock, our board of directors has determined the fair value of our common stock at the time of grant generally by looking to recent transactions including our common stock with third parties, as well as valuations when the grants were contemporaneous. The price of a share of our common stock in the transactions referred to were determined by a number of objective and subjective factors. See below for further discussion.

• Expected Dividend Yield. The expected dividend was assumed to be zero as we have never paid dividends and have no current plans to do so in the foreseeable future.

• Expected Stock Price Volatility. Since there has been no public market for our common stock and lack of company-specific historical volatility, we have determined the stock price volatility for options granted based on an analysis of the historical stock price volatility of a peer group of publicly traded biotechnology and pharmaceutical companies. In evaluating similarity, we considered factors such as industry, business model, stage of life cycle, and size.

• Risk-free Interest Rate. The risk-free interest rate is based on the U.S. Treasury yield in effect at the time of the grant for zero-coupon U.S. Treasury notes with remaining terms similar to the expected term of the options.

• Expected Term. Since there is not sufficient historical exercise data to provide a reasonable basis upon which to estimate expected term, we utilize the simplified method to estimate the life of our stock options. All stock options granted meet the criteria of plain vanilla awards, and therefore, the estimated term is a function of the vesting period and the contractual life of the award.

• Expected Forfeiture Rate. Forfeiture rates are estimated based on historical and future expectations of employee turnover rates and are adjusted to reflect future changes in circumstances and facts, if any. Stock-based compensation expense is recorded net of estimated forfeitures such that expense is

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recorded only for those stock-based awards that are expected to vest. To the extent we revise these estimates in the future, the stock-based payments could be materially impacted in the period of revision, as well as in following periods.

Valuation Approaches

Our board of directors has historically estimated the fair value of our common stock relying on the consummation of transactions with third parties. In addition to relying on the consummation of transactions with third parties, our Board may have considered many objective and subjective factors to determine the common stock fair market value at the valuation date. The following factors, among others, were considered:

• Our business strategy and stage of development;

• Our financial condition and operating results, including our projected results;

• The financial condition and operating results of publicly owned companies with similar lines of business and their historical volatility;

• External market conditions that could affect companies in the life sciences sector;

• The likelihood of a liquidity event such as an initial public offering, a merger, or the sale of our company; and

• Passage of time relative to any stock transactions with third parties.

The dates of our valuations have historically coincided with significant events, such as equity financings, and would therefore not always fall on the same dates as when options have been granted. However, we have historically granted the majority of our equity awards following one or more of such significant events. Therefore, our board of directors has historically used the valuation closest to the grant date of options granted in determining the exercise prices.

We considered multiple types of approaches in the preparation of our valuations as follows:

• Option-Pricing Method Backsolve, or OPM Backsolve. The OPM backsolve method derives the implied equity value for a company from a recent transaction involving the company’s own securities issued on an arm’s length basis.

• Probability-Weighted Expected Return Method. Using the probability-weighted expected return, or PWERM, method, the value of a company’s common stock is estimated based upon the analysis of future values for the company assuming various possible future liquidity events including an initial public offering, or IPO, a sale, or a merger. Share value is based upon the probability-weighted present value of expected future net cash flows, considering each of the possible future events, as well as the rights and preferences of each share class. The PWERM is complex as it requires numerous assumptions relating to the potential future outcomes of equity.

• Hybrid Method. The hybrid method is a hybrid between the PWERM and OPM, estimating the probability-weighted value across multiple scenarios but using OPM to estimate the allocation of value within one or more of those scenarios.

The key subjective factors and assumptions used in our valuations primarily consisted of (1) the implied value of a share of our common stock resulting from transactions consummated with unrelated, third parties, (2) the selection of the appropriate valuation model, (3) the financial forecasts utilized to determine future cash flow and necessary capital requirements, (4) the probability and timing of the various possible liquidity events, and (5) the discount for lack of marketability of our common stock.

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Discussion of Specific Valuation Inputs

Over time, a combination of factors caused changes in the fair value of our common stock. The following summarizes the changes in value since January 1, 2015 and the major factors that caused each change:

July 2014 to March 2015. On June 20, 2014, we held a private placement offering of common stock. We issued 720,000 shares of common stock in exchange for $4.0 million ($5.50 per share) to a third party. Since the last valuation in February 2014, we received an allowance of our IND submission for Oratecan (oral formulation of irinotecan) from the FDA. Based on our valuation and the sale of common stock at arms-length to a third party, our board of directors determined the fair value of our common stock to be $5.50 per share.

April 2015 to June 2015. On April 17, 2015, we held a private placement offering of common stock. We issued 7,160,000 shares of common stock in exchange for $53.7 million ($7.50 per share) to various third parties. In negotiating the arm’s length sale of stock to a third party, we considered the development stage of our drug products, the overall economic condition, recent business acquisitions, and company forecasts. Since the last valuation in June 2014, we acquired the QuaDPharma business for $5.5 million. This acquisition improved our clinical production process, helped control our supply chain, provided a cGMP facility, and contributed to future cash flows through sales to their existing customers. During this period, we also executed our public-private partnership with the State of New York. Our clinical research team successfully completed a Phase I clinical study of KX-01 in the U.S. and we launched Phase I clinical studies of KX-02 and KX-01 Ointment. We also licensed the Orascovery Program (oral absorption platform) in India. In June 2015, we also acquired Polymed for $30.8 million. This acquisition has grown, and we expect it to continue to grow, our business globally, and it has contributed significantly to our forecasted cash flows with the introduction of API sales, and helped control our supply chain. All of these factors were considered in our board’s discounted cash flow, or DCF, valuation and drove the increase in the value of our stock. Based on our valuation and the sale of common stock at arms-length to unrelated third parties, our board of directors determined the fair value of our common stock to be $7.50 per share.

July 2015 to June 2016. In July 2015, we executed a stock-for-stock transaction to purchase a research and development company, CDE, that valued our common stock at $9.00 per share. We negotiated the consideration based on an independent third party’s risk-adjusted projection which was built on CDE’s projected revenue on a standalone basis. We also considered the development stage of the drug products, the overall economic condition and recent business acquisitions. All of these factors were considered and drove the increase in the value of common our stock. This reassessed stock price was used in the acquisition of CDE. Based on the implied valuation of our company in this transaction consummated with a third party, our board of directors determined the fair value of our common stock to be $9.00 per share. After that, there were no significant events impacting the business that would have warranted a significant change to fair value over this period.

July 2016 to December 2016. In September 2016, our board of directors determined the fair value of our common stock to be $11.00 per share. This determination was made by considering a combination of the backsolve valuation technique, which had yielded a fair value of $9.00 per share, and changes in our business. The changes in our business included, among other things: the receipt of an FDA allowance letter in January 2016 that allows us to proceed with our Oradoxel IND clinical study; evaluating data results from ongoing studies, including Oraxol and KX-01 ointment, in the third quarter of 2016; and the execution of a non-exclusive definitive license agreement in September 2016 to market 21 products (8 of which have been approved by the FDA). These changes resulted in the hiring of additional experienced pharmaceutical experts and the establishment of our Commercial Platform in the third quarter of 2016.

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Stock Options Granted

The following table illustrates our stock option grant information since January 1, 2015:

Grant Date	Number of Shares Subject to Options Granted		Option Exercise Price		Estimated Fair Value of Common Stock per Share at Grant Date		Intrinsic Value per Underlying Share at Grant Date
February 5, 2015		162,000	$	5.50	$	5.50	$	—
March 20, 2015		366,000	$	5.50	$	5.50	$	—
May 22, 2015		3,488,000	$	7.50	$	7.50	$	—
June 11, 2015		496,392	$	7.50	$	7.50	$	—
July 26, 2015		304,536	$	9.00	$	9.00	$	—
October 17, 2015		211,400	$	9.00	$	9.00	$	—
February 28, 2016		247,500	$	9.00	$	9.00	$	—
April 18, 2016		125,000	$	9.00	$	9.00	$	—
June 19, 2016		465,800	$	9.00	$	9.00	$	—
July 1, 2016		80,000	$	9.00	$	9.00	$	—
September 18, 2016		22,000	$	11.00	$	11.00	$	—
October 17, 2016		10,000	$	11.00	$	11.00	$	—
December 31, 2016		159,100	$	11.00	$	11.00	$	—

The intrinsic value of all outstanding vested and unvested options as of December 31, 2016 was $44.0 million based on a stock price fair value of $11.00 per share and based on 9,280,689 shares of common stock issuable upon the exercise of options outstanding as of December 31, 2016 with a weighted-average exercise price of $6.26 per share.

Business Acquisitions, Intangible Assets, Goodwill, and Contingent Consideration

We account for acquired businesses using the purchase method of accounting, which requires that the assets acquired and liabilities assumed be recorded at the date of acquisition at their respective estimated fair values. The cost to acquire businesses has been allocated to the underlying net assets of the acquired businesses based on estimates of their respective fair values. Total consideration for the three acquisitions was $5.5 million for QuaDPharma, $30.8 million for Polymed and $14.9 million for CDE. Any excess of the purchase price over the estimated fair values of the net assets acquired is recorded as goodwill. The amount of goodwill recorded was $4.6 million for QuaDPharma, $22.2 million for Polymed and $11.4 million for CDE.

The judgments made in determining the estimated fair value assigned to each class of assets acquired and liabilities assumed, as well as asset lives, can materially impact our results of operations. The fair values of intangible assets are determined using one of three valuation approaches: market, income, or cost. The selection of a particular method depends on the reliability of the available data and the nature of the asset. The market approach values the asset based on available market pricing for comparable assets. The income approach values the asset based on the present value of risk adjusted cash flows projected to be generated by the asset. The cost approach values the asset by determining the current cost of replacing that asset with another asset of equivalent economic utility. Because this process involves management making estimates with respect to future sales volumes, pricing, new product launches, government reform actions, anticipated cost environment and overall market conditions, and because these estimates form the basis for the determination of whether or not an impairment charge should be recorded, these estimates are considered to be critical accounting estimates. Definite-lived intangible assets are amortized over the expected life of the asset. If the carrying value of the indefinite-lived intangible asset exceeds management’s estimate of fair value or the projects have been abandoned, the asset is impaired, and we would record an impairment charge accordingly.

Goodwill is recorded when the purchase price of an acquisition exceeds the fair value of the net tangible and identified intangible assets acquired. Goodwill is allocated to our reporting units based on the relative expected fair value provided by the acquisition. Reporting units may be operating segments as a whole or an operation one level below an operating segment, referred to as a component, or a combination thereof.

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We perform an annual impairment assessment on October 1, or more frequently if indicators of potential impairment exist, to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying value. Impairment test approaches with a weighting of the Discounted Cash Flow (income approach) and Guideline Public Company method (market approach) are utilized. Weighting will most likely be greater for the market approach given the lack of historical results to be able to rely significantly on financial projections. The performance of the goodwill impairment test involves a two-step process. The first step is to estimate the fair value of each reporting unit and compare the fair value to the carrying value. For reporting units in which the step-one impairment assessment concludes that it is more likely than not that the fair value of the reporting unit exceeds the carrying value of the net assets assigned to that reporting unit, goodwill is not considered to be impaired and we do not perform additional analysis. For reporting units in which the step-one impairment assessment concludes that it is more likely than not that the carrying value of the net assets assigned to that reporting unit exceeds the fair value of the reporting unit, we must perform the second step, which is to measure the amount of impairment. We then record the impairment loss equal to the difference between the fair value and the carrying value. None of our reporting units are at risk of failing step one of the impairment test, as the fair value is substantially in excess of the carrying value for each reporting unit.

We record contingent consideration resulting from a business acquisition at its estimated fair value on the acquisition date. Each reporting period thereafter, we revalue these obligations and record increases or decreases in their fair value as an adjustment to contingent consideration recorded within selling, general and administrative expenses within the consolidated statements of operations and comprehensive loss. Changes in the fair value of the contingent consideration obligations can result from adjustments to the discount rates, payment periods, and adjustments in the probability of achieving future development steps, regulatory approvals, market launches, sales targets, and profitability.

Significant judgment is employed in determining the assumptions utilized as of the acquisition date and for each subsequent measurement period. Accordingly, changes in assumptions described above could have a material impact on our consolidated results of operations.

Results of Operations

Year Ended December 31, 2016 Compared to Year Ended December 31, 2015

The following table sets forth a summary of our consolidated results of operations for the years ended December 31, 2016 and 2015, together with the changes in those items in dollars and percentage. This information should be read together with our consolidated financial statements and related notes included elsewhere in this prospectus. Our operating results in any period are not necessarily indicative of the results that may be expected for any future period.

	Year Ended December 31,
	2015			2016			Change
	(in thousands)			(in thousands)			(in thousands)			%
Revenue	$	13,944		$	20,551		$	6,607			47
Cost of product sales		(13,153	)		(19,718	)		(6,565	)		50
Research and development expenses		(24,463	)		(60,624	)		(36,161	)		148
Selling, general, and administrative expenses		(27,036	)		(25,956	)		1,080			(4	)
Interest expense		(1	)		(1,891	)		(1,890	)		NM
Unrealized loss on derivative liability		—			(533	)		(533	)		—
Income tax benefit		54			265			211			391
Net loss		(50,655	)		(87,906	)		(37,251	)		74
Less: net loss attributable to non-controlling interests		(55	)		(191	)		(136	)		247
Net loss attributable to Athenex, Inc.	$	(50,600	)	$	(87,715	)	$	(37,115	)

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Revenue

Our revenue increased by $6.6 million, or 47%, from the year ended December 31, 2015 to the year ended December 31, 2016, primarily due to an increase from sales primarily of API, of $6.5 million, a portion of which increase was due to the inclusion of Polymed in our consolidated financial statements for the full twelve months of activity in 2016 compared to only seven months of activity in 2015.

Cost of Product Sales

Our cost of product sales similarly increased as a result of the June 1, 2015 acquisition of Polymed. Polymed’s cost of product sales in 2016 was $14.2 million compared to the seven-month cost of product sales of $9.2 million included in the consolidated operating results for the year ended December 31, 2015, a $5.0 million, or 54%, increase. Also, cost of product sales at QuaDPharma increased by $1.8 million as a result of increased costs to support the internal production of clinical supplies.

Research and Development Expenses

Our research and development expenses increased by $36.2 million, or 148%, to $60.6 million in the year ended December 31, 2016 from $24.5 million in the year ended December 31, 2015, primarily due to the advancement of our clinical and preclinical pipeline, and included the following:

• $17.7 million increase as a result of the increased costs of drug licensing;

• $12.9 million increase in employee compensation expenses, including wages and benefits, as well as stock-based compensation, primarily attributable to increased headcount during 2016;

• $7.4 million increase in costs of clinical studies, primarily for Oraxol and KX-01 ointment; and

• $0.5 million increase in the office related costs.

The increases in research and development expenses were offset by $2.3 million of decreases in preclinical studies costs related to drugs that entered into clinical study phases.

Selling, General, and Administrative Expenses

Our selling, general and administrative expenses decreased by $1.1 million, or 4%, from $27.0 million in the year ended December 31, 2015 to $26.0 million in the year ended December 31, 2016 primarily due to a decrease of expenses on professional services, and included the following:

• $3.8 million decrease in professional fees, which included a decrease of $2.0 million of accounting, legal, and consulting fees associated with our public-private partnerships, a decrease of $1.1 million of legal fees for certain litigation settlement, and a decrease of $0.7 million of business acquisition related costs; and

• This was partially offset by a $1.2 million increase of employee compensation, including wages and benefits, as well as stock-based compensation, primarily attributable to increased headcount, a $0.8 million increase in office related costs, and a $0.7 million increase in loss on disposal of long-lived assets.

Internal Control over Financial Reporting

In connection with the audit of our consolidated financial statements as of and for the year ended December 31, 2015, we and our independent registered public accounting firm identified three material weaknesses in our internal control over financial reporting. As defined in the standards established by the PCAOB, a “material weakness” is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis.

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The material weaknesses that had been identified related to (1) thoroughness of review and determination of appropriate accounting treatment for complex, non-routine transactions, including consideration of fair value concepts, notably for purchase price allocation and accounting for stock options; (2) the precision of review and application of available information through retrospective review to record accounting estimates accurately based on known, available information; and (3) the precision of review and evaluation of capitalization policies to ensure amounts capitalized as assets relate to items for which an identifiable benefit has been received and will be realizable. The weaknesses described contributed to certain material adjustments that were required in 2015.

We have implemented a number of measures to address these material weaknesses that had been identified in 2015 and remediated such weaknesses as of December 31, 2016. We have hired additional financial and accounting staff with appropriate U.S. GAAP and SEC reporting experience, and we have allocated additional resources to improve financial control functions, to introduce formal business performance review processes, and to prepare and review the consolidated financial statements and related disclosures in accordance with U.S. GAAP and SEC reporting requirements.

We, and our independent registered public accounting firm, were not required to perform an evaluation of our internal control over financial reporting as of December 31, 2016 in accordance with the provisions of the Sarbanes-Oxley Act. Accordingly, we cannot assure you that we have identified all, or that we will not in the future have additional, material weaknesses. Material weaknesses may still exist when we report on the effectiveness of our internal control over financial reporting as required by reporting requirements under Section 404 of the Sarbanes-Oxley Act after the completion of this offering.

Liquidity and Capital Resources

Since our inception, we have incurred net losses and negative cash flows from our operations. Substantially all of our losses have resulted from funding our research and development programs and selling, general and administrative costs associated with our operations. We incurred net losses of $50.7 million and $87.9 million for the years ended December 31, 2015 and 2016, respectively. As of December 31, 2016, we had an accumulated deficit of $195.1 million. Our primary use of cash is to fund research and development costs. Our operating activities used $33.8 million and $47.9 million of cash during the years ended December 2015 and 2016, respectively. As of December 31, 2016, we had cash and cash equivalents of $33.1 million and marketable securities of $8.6 million.

Historically, we have financed our operations principally through proceeds from private placements of equity and debt securities; to a much lesser extent, cash generated from operations, primarily from the collection of accounts receivable resulting from sales by our Global Supply Chain Platform. However, the revenue generated might not be sufficient to meet the demand of their operating costs. Therefore, we will continue to require substantial additional capital beyond the expected proceeds from this offering to continue our research and development and commercialization activities.

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Cash kept in our subsidiaries in China is subject to PRC regulations restricting transfer of funds overseas. Thus, our PRC subsidiaries are restricted in their ability to transfer their net assets to us as cash dividends, loans or advances. As of December 31, 2016, we had cash and cash equivalents of approximately $4.9 million at our Chinese subsidiaries. Although we do not currently require any such dividends, loans or advances from our PRC subsidiaries to fund our operations, should we require additional sources of liquidity in the future, such restrictions may have a material adverse effect on our liquidity and capital resources. The following table shows a summary of our cash flows:

	Year Ended December 31,
	2015			2016
	(in thousands)
Net cash (used in) operating activities	$	(33,756	)	$	(47,870	)
Net cash (used in) provided by investing activities		(16,909	)		2,659
Net cash provided by financing activities		76,302			35,272
Net effect of foreign exchange rate changes		337			(431	)
Net increase (decrease) in cash and cash equivalents	$	25,974		$	(10,370	)

Net Cash (Used in) Operating Activities

The use of cash in all periods presented resulted primarily from our net losses adjusted for non-cash charges and changes in components of working capital. The primary use of our cash in all periods presented was to fund our research and development, regulatory and other clinical trial costs, and related supporting administration. Our prepaid expenses and other current assets, accounts payable and accrued expense balances in all periods presented were affected by the timing of vendor invoicing and payments.

During the year ended December 31, 2016, operating activities used $47.9 million of cash, which resulted principally from our net loss of $87.9 million, adjusted for non-cash charges of $24.7 million. This was partially offset by $0.5 million change in deferred income taxes, and by cash provided from our operating assets and liabilities of $15.8 million. Our net non-cash charges during the year ended December 31, 2016 primarily consisted of $2.0 million depreciation and amortization expense, $19.5 million of stock-based compensation expense, and $1.0 million of loss on disposal of assets and impairment charges.

During the year ended December 31, 2015, our operating activities used $33.8 million of cash, which resulted principally from our net loss of $50.7 million, adjusted for non-cash charges of $16.9 million and offset by $0.3 million change in deferred income taxes, and by cash provided from our operating assets and liabilities of $0.2 million. Our net non-cash charges during the year ended December 31, 2015 primarily consisted of $0.9 million of depreciation and amortization expense, $15.5 million of stock-based compensation expense, and a $0.5 million increase from changes in fair value of contingent consideration.

Net Cash (Used in) Investing Activities

Net cash from investing activities was $2.7 million for the year ended December 31, 2016, compared to $16.9 million cash used in investing activities for the year ended December 31, 2015. The difference in cash from investing activities was primarily due to a net increase of $8.7 million in cash received from sales of marketable securities and a decrease in acquisition-related net cash payments of $9.4 million.

Net Cash Provided by Financing Activities

Net cash provided by financing activities was $35.3 million for the year ended December 31, 2016 compared to $76.3 million cash provided by financing activities for the year ended December 31, 2015. The decrease was primarily due to fewer sales of securities in the year ended December 31, 2016 compared to the year ended December 31, 2015.

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Indebtedness

We had $3.7 million and $41.8 million of debt as of December 31, 2015 and 2016, respectively. This consisted of three seller promissory notes that were negotiated as part of the Polymed acquisition, a mortgage under CDE, and convertible loan agreements entered into in 2016.

The Polymed promissory notes have a 36 month maturity beginning on July 1, 2015 and ending on June 1, 2018 with a 6% stated interest rate. The outstanding principal on the Polymed promissory notes was $2.7 million and $1.6 million as of December 31, 2015 and 2016, respectively.

In connection with the acquisition of CDE, we assumed a mortgage liability associated with the manufacturing plant asset in the PRC. The mortgage payments extend through July 30, 2017. The remaining mortgage principal payment of $0.8 million is due in 2017.

In September and October 2016 and January, February, and April 2017, we executed convertible loan financing agreements with existing and new investors, approximately $38.0 million of which were entered into prior to December 31, 2016 and an additional $30.0 million of which were issued thereafter. The loans will automatically and mandatorily be converted into a number of shares of common stock equal to the outstanding amount of the convertible loans divided by the discount prices (which is variable based on the actual date of the event). The loans issued have a maturity date of October 1, 2018, except for the April 2017 loans, which have a maturity date of April 20, 2019. The stated interest rate on the loans is 10% per annum. If the convertible loans have not been converted into common stock prior to the maturity date, we must pay full interest from the date of the loan advancement to the date of repayment. The outstanding convertible loans will be converted into              shares of our common stock upon the completion of this offering, assuming an initial public offering price of $             per share, the midpoint of the price range set forth on the cover of this prospectus.

Additionally in March 2017, in connection with an amendment to a licensing agreement, we issued a $7.0 million convertible bond to Hanmi in lieu of an upfront payment. At the election of Hanmi, the convertible bond will be converted into a number of shares of common stock equal to the outstanding amount of the convertible bond divided by the discount price (which is variable based on the date of conversion) at certain specified dates. If Hanmi has not elected to convert the convertible bond to common stock prior to October 1, 2018, Hanmi may elect to convert the convertible bond to: (i) common stock equal to the outstanding amount of the convertible bond divided by the discount price, or (ii) cash equal to $7.0 million plus interest at 10% per annum accruing from March 7, 2017 to October 1, 2018.

Servicing our convertible notes may require a significant amount of cash, and we may not have sufficient cash flow or the ability to raise the funds necessary to satisfy our obligations under such notes, and our future debt may contain limitations on our ability to pay cash upon conversion or repurchase of such notes.

Capital Expenditures

Our liquidity position and capital requirements are subject to a number of factors. For example, our cash inflow and outflow may be impacted by the following:

• Our ability to generate revenue;

• Fluctuations in working capital.

Our primary short term capital needs, which are subject to change, include expenditures related to:

• Continuous support of the development and research of our proprietary drug products;

• Build out of our new API plant in China and improvements in our existing manufacturing capacity and efficiency;

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• New research and product development efforts; and

• Support of our commercialization efforts related to our current and future products.

Although we believe the foregoing items reflect our most likely uses of cash in the short term, we cannot predict with certainty all of our short-term cash uses or the timing or amounts of cash used. If cash generated from operations is insufficient to satisfy our working capital and capital expenditure requirements, we may be required to sell additional equity or debt securities or obtain credit financing. This capital may not be available on satisfactory terms, if at all. Furthermore, any additional equity financing may be dilutive to our stockholders, and debt financing, if available, may include restrictive covenants.

In 2015, we entered into two public-private partnerships. New York State is investing in a 315,000 square foot, ISO Class 5 high potency oral and sterile injectable pharmaceutical manufacturing facility, which will be built in Dunkirk, New York. We have agreed to utilize this facility to manufacture our proprietary products upon approval of the drugs and completion of the facility. The estimated cost of the facility will be approximately $200 million, and we will be able to occupy the space on concessionary terms. In Chongqing, China, funded by the Banan District government, a GMP API and a GMP pharmaceutical manufacturing plant will be built, which we will occupy on concessionary terms. We plan to utilize these plants to manufacture API and the finished drugs in which these API will be used. We do not have significant construction period risks. New York State and the Banan District government will fund a majority of the construction costs and hold ownership of the manufacturing and office facilities.

Future Capital Requirements

Our independent registered public accounting firm included an explanatory paragraph in its report on our consolidated financial statements as of and for the year ended December 31, 2016, noting the existence of substantial doubt about our ability to continue as a going concern. This uncertainty arose from management’s review of our results of operations and financial condition and its conclusion that, based on our operating plans, we did not have sufficient existing working capital to sustain operations for a period of one year from the issuance of our consolidated financial statements as of and for the year ended December 31, 2016. We believe that we will be able to obtain additional working capital through equity financings or other arrangements, including this offering, to fund our current operating plans through at least the next 12 months. To the extent that we raise additional capital through future equity financings, the ownership interest of our stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our existing common stockholders. If we raise additional funds through the issuance of debt securities, these securities could contain covenants that would restrict our operations. There can be no assurance that such additional financing, if available, can be obtained on terms acceptable to us. If we are unable to obtain such additional financing, we would need to reevaluate our future operating plans.

Contractual Obligations

A summary of our contractual obligations as of December 31, 2016 is as follows:

	Payments Due by Period
	Less than 1 year		1 to 3 years		3 to 5 years		More than 5 years		Total Amounts Committed
	(in thousands)
Operating leases	$	801	$	2,674	$	3,043	$	5,959	$	12,477
Long-term debt		766		—		—		—		766
Long-term debt—related parties		1,123		496		—		—		1,619
Convertible bonds		—		38,000		—		—		38,000
Licensing fees		12,988		—		—		—		12,988
	$	15,678	$	41,170	$	3,043	$	5,959	$	65,850

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The operating leases include (1) the rental of our global headquarters in the Conventus Center for Collaborative Medicine in Buffalo, NY and (2) the rental of our research and development facility in the IC Development Centre in Hong Kong and (3) the rental of the Commercial Platform headquarters in Chicago, IL. Of the total amounts committed, $9.7 million are committed for the rental of our Buffalo, NY global headquarters, $0.5 million are committed for our Hong Kong research and development facility, and $2.3 million are committed for our Commercial Platform headquarters.

Off Balance Sheet Arrangements

We do not maintain any off balance sheet partnerships, arrangements, or other relationships with unconsolidated entities or others, often referred to as structured finance or special purpose entities, which are established for the purpose of facilitating off balance sheet arrangements or other contractually narrow or limited purposes.

Quantitative and Qualitative Disclosures about Market Risk

Foreign Currency Exchange Risk

A significant portion of our business is located outside the United States and, as a result, we generate revenue and incur expenses denominated in currencies other that the U.S. dollar, a majority of which is denominated in Renminbi. In 2015 and 2016, approximately 13% and 7%, respectively, of our sales, excluding intercompany sales, were denominated in foreign currencies. As a result, our revenue can be significantly impacted by fluctuations in foreign currency exchange rates. We expect that foreign currencies will represent a lower percentage of our sales in the future due to the anticipated growth of our U.S. business. Our international selling, marketing, and administrative costs related to these sales are largely denominated in the same foreign currencies, which somewhat mitigates our foreign currency exchange risk rate exposure.

Interest Rate Risk

We are exposed to market risks in the ordinary course of our business. Our cash and cash equivalents include cash in readily available checking and money market accounts. These securities are not dependent on interest rate fluctuations that may cause the principal amount of these assets to fluctuate.

Our primary exposure to market risk relates to fluctuations in the interest rates which are affected by changes in the general level of PRC and U.S. interest rates. Given the short-term nature of our cash equivalents, we believe that a sudden change in market interest rates would not be expected to have a material impact on our financial condition and/or results of operation. While we believe our cash and cash equivalents do not contain excessive risk, we cannot provide assurance that in the future investments will not subject to adverse changes in market value.

Credit Risk

We had cash and cash equivalents of $43.5 million and $33.1 million and marketable securities of $14.1 million and $8.6 million at December 31, 2015 and 2016, respectively. Substantially all of our bank deposits are in major financial institutions, which we believe are of high credit quality. The primary objectives of our investment activities are to preserve principle, provide liquidity and maximize income without significant increasing risk.

We make periodic assessments of the recoverability of trade and other receivables and amounts due from related parties. Our historical experience in collection of receivables falls within the recorded allowances, and we believe that we have made adequate provision for uncollectible receivables.

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Inflation

Inflationary factors, such as increases in our cost of product sales and SG&A expenses, may adversely affect our operating results. Although we do not believe that inflation has had a material impact on our financial position or results of operations to date, a high rate of inflation in the future may have an adverse effect on our ability to maintain and increase our net income and SG&A expenses as a percentage of our revenue if the selling prices of our products do not increase as much or more than these increased costs.

Jumpstart Our Business Startups Act of 2012 (JOBS Act)

In April 2012, the JOBS Act was enacted. Section 107 of the JOBS Act provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. Thus, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have irrevocably elected not to avail ourselves of this extended transition period and, as a result, we will adopt new or revised accounting standards on the relevant dates on which adoption of such standards is required for other public companies.

We are in the process of evaluating the benefits of relying on other exemptions and reduced reporting requirements under the JOBS Act. Subject to certain conditions, as an emerging growth company, we may rely on certain of these exemptions, including without limitation, (i) providing an auditor’s attestation report on our system of internal controls over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act and (ii) complying with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements, known as the auditor discussion and analysis. We will remain an emerging growth company until the earlier of (a) the last day of the fiscal year in which we have total annual gross revenues of $1 billion or more; (b) the last day of the fiscal year following the fifth anniversary of the date of the completion of this offering; (c) the date on which we have issued more than $1 billion in nonconvertible debt during the previous three years; or (d) the date on which we are deemed to be a large accelerated filer under the rules of the Securities and Exchange Commission.

Recent Accounting Pronouncements

Recent Accounting Pronouncements Not Yet Adopted

In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update, or ASU, No. 2014-09, “Revenue from Contracts with Customers (Topic 606)”, which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The ASU will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. The new standard is effective for the Company on January 1, 2018 with early adoption permitted only for annual reporting periods beginning after December 15, 2016. The standard permits the use of either the retrospective or cumulative effect transition method. The Company’s evaluation of the effects of ASU 2014-09 and the selection of a transition method is ongoing and not yet complete. The Company anticipates that the standard may impact the accounting related to its out-license agreements, however, such agreements are not currently significant to the consolidated financial statements.

In July 2015, the FASB issued ASU No. 2015-11, “Inventory (Topic 330): Simplifying the Measurement of Inventory.” This ASU requires inventory to be measured at the lower of cost or net realizable value. The provisions of this ASU are effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. The amendment is required to be applied prospectively, and early adoption is permitted. The Company does not expect its pending adoption of ASU 2015-11 to have a material impact on its consolidated financial statements.

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In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842)” which requires that lessees distinguish between finance and operating leases and recognize the assets and liabilities that arise from the leases on the company’s balance sheet. This ASU is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, and is required to be applied on a modified retrospective basis. The Company is evaluating the effect of this standard on its consolidated financial statements.

In March 2016, the FASB issued ASU No. 2016-09, “Compensation—Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting” which simplifies the accounting for share-based payment award transactions including: income tax consequences, classification of awards as either equity or liabilities and classification on the statement of cash flows. ASU 2016-09 is effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. Early adoption is permitted. The adoption of this standard is not expected to have a material impact on the Company’s consolidated financial statements.

In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments,” which modifies the measurement of expected credit losses of certain financial instruments. ASU 2016-13 is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The Company is evaluating the effect of this standard on its consolidated financial statements.

In November 2016, the FASB issued ASU 2016-18, “Statement of Cash Flows (Topic 230): Restricted Cash. The primary purpose of this ASU is to reduce the diversity in practice that exists in the classification and presentation of changes in restricted cash on the statement of cash flows. This ASU will require that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or cash equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. This ASU is effective for fiscal years beginning after December 15, 2017. This ASU is required to be applied retrospectively. Early adoption is permitted, including adoption in an interim period. The Company is evaluating the effect of this standard on its consolidated financial statements.

In January 2017, the FASB issued ASU 2017-04, “Intangibles—Goodwill and Other (Topic 350) Simplifying the Test for Goodwill Impairment.” The primary purpose of the ASU is to simplify the subsequent measurement of goodwill by eliminating Step 2 from the goodwill impairment test. The ASU also applies the same test of goodwill to all reporting units, now including those with a zero or negative carrying amount of net assets. This ASU is required to be adopted on a prospective basis and is effective for any goodwill impairment tests in fiscal years beginning after December 15, 2019, although early adoption is permitted. The Company is evaluating the effect of this standard on its consolidated financial statements.

Recently Adopted Accounting Pronouncements

In August 2014, the FASB issued ASU No. 2014-15, “Presentation of Financial Statements—Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern” which requires management to assess if there is substantial doubt about an entity’s ability to continue as a going concern and to provide related footnote disclosures in certain circumstances. In connection with each annual and interim period, management must assess if there is substantial doubt about an entity’s ability to continue as a going concern within one year after the financial statement issuance date. Disclosures are required if conditions give rise to substantial doubt. The amendment is effective for the first annual period ending after December 15, 2016 with early adoption permitted for annual or interim reporting periods for which the financial statements have not previously been issued. The Company adopted the guidance for the year ended December 31, 2016. The adoption resulted in expanded disclosure of the principal conditions that raise substantial doubt, management’s evaluation of those conditions, and management’s plans to mitigate these conditions.

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In August 2016, the FASB issued ASU No. 2016-15, “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments,” which addresses the classification of certain cash transactions on the statement of cash flows. ASU 2016-15 is effective for fiscal years beginning after December 15, 2018, and interim periods within fiscal years beginning after December 15, 2019. The Company early adopted ASU 2016-15 as of January 1, 2016 and applied its provisions retrospectively through the earliest period presented, which did not have a significant impact on its consolidated financial statements.

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INDUSTRY BACKGROUND

Cancer is a broad group of diseases in which cells divide and grow in an uncontrolled fashion, forming malignancies that can invade other parts of the body. In normal tissues, the rates of new cell growth and cell death are tightly regulated and kept in balance. In cancerous tissues, however, this balance is disrupted as a result of mutations, causing unregulated cell growth that leads to tumor formation and growth. While tumors can grow at different paces, the dividing cells will nevertheless accumulate and the normal organization of the tissue will become disrupted. Cancers can subsequently spread throughout the body by processes known as invasion and metastasis. Once cancer spreads to sites beyond the primary tumor, it becomes less curable.

Cancer is the second leading cause of death in high-income countries (following cardiovascular diseases) and the third leading cause of death in low- and middle-income countries (following cardiovascular diseases and infectious and parasitic diseases). The most common risk factors for cancer include aging, family history, alcohol and tobacco use, sun and radiation exposure, poor diet and lack of physical activity. In 2012, there were an estimated 14.1 million new cases and 8.2 million cancer-related deaths worldwide. With a growing and aging global population, the annual incidence is expected to grow to 21.7 million by 2030.

Cancer statistics in the United States

An estimated 1.7 million new cases of cancer are expected to be diagnosed and 0.6 million people will die from cancer in the U.S. in 2016, according to the National Cancer Institute. Prostate and breast cancer are the leading cancer types in the U.S. representing 21% and 29% of total new cancer cases in men and women, respectively. The economic burden of cancer remains high for both cancer patients and society as a whole. The Agency for Healthcare Research and Quality estimates that the direct medical costs for cancer totaled $88.7 billion in 2011, of which 50% were for hospital outpatient or doctor office visits, 35% for inpatient hospital stays and 11% for prescription drugs. The cost of cancer care has grown quickly due in part to high prices on novel therapeutics creating an increased focus on development of cost effective treatment regimens. According to the IMS Institute for Healthcare Informatics, 60% of the increase in U.S. oncology costs from 2010–2015 can be attributed to new therapies launched since 2010. Though the annualized mean cost of care varies greatly between cancer types, the cost of care is highest in the last year of life.

Cancer statistics in China

China represents a significant opportunity, forecasted to be the second largest pharmaceutical market in the world in 2017, including traditional and modern medications. According to the China Pharmaceuticals & Healthcare Report published in July 2016, the Chinese pharmaceutical market was forecasted to grow strongly from $109 billion in 2015, and is expected to grow at a compound annual growth rate, or CAGR, of 7.7% over the next five years reaching $158 billion by 2020.

China provides an opportunity to access largely untapped clinical trial pools and develop drugs for a population for whom global standard therapies are not available. Because of China’s large population size, representing approximately one-fifth of the world population and, according to data from the World Health Organization and Globocan, in 2012 China accounted for approximately 22% of global new cancer cases. The most common cancers in China include lung, stomach, liver and esophageal cancer and account for over half of all types of cancer diagnosed.

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The following table illustrates the estimated number of incident cases for the top cancer sites:

2012 incidences by cancer types in China and worldwide (millions)

Source: World Health Organization International Agency for Research on Cancer, Estimated Cancer Incidence, Mortality and Prevalence Worldwide in 2012

Currently available cancer treatments include chemotherapy, surgery and radiation

The most common treatments for cancer include surgery and radiation therapy which remove, kill or shrink cancer cells in a specific area and chemotherapy which works systemically to remove cancer at a specific anatomic location in the body. Newer methods include targeted therapy, which targets specific biological molecules in the human body that play a role in the spread of cancer, and immunotherapy, which uses the patient’s own immune system to help fight cancer. Cancer is often treated with some combination of these therapies.

Chemotherapy was first used as an effective treatment for cancer in the 1940s and is still a key first-line treatment option of cancer patients. Chemotherapy can be administered as monotherapy or in combination with either another chemotherapy drug or targeted therapies. Key uses of chemotherapy include use as a first line agent to reduce tumor size before surgery or radiation therapy, and to destroy cancer cells that remain after a surgical procedure or radiation therapy. The Company is currently running trials of its chemotherapeutic products both as monotherapy and in combination with targeted treatments.

Innovative branded chemotherapy, such as Abraxane and Onivyde, has demonstrated an ability to contribute to significant growth rates within their respective chemotherapeutic categories. According to QuintilesIMS reported sales data, the worldwide product sales of branded and generic paclitaxel products including, Abraxane and Taxol was $1.6 billion in 2012 and $2.0 billion in 2015, representing a CAGR of 8.5%. The worldwide product sales of Irinotecan, docetaxel and topotecan (branded and generic) are estimated to be $427 million, $1.1 billion and $57 million in 2015, respectively. Together, the worldwide product sales of paclitaxel, irinotecan, docetaxel and topotecan (branded and generic) was estimated to be $3.9 billion in 2012 and $3.6 billion in 2015.

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China World China% of world All types 3. 3.0707 14.07 22% Lung 0.650.65 0.40 1.83 36% Breast 0.190.650.65 0.19 0.06 1.67 11% Colon 0.25 0.25 0.22 1.36 19% Gastric 0.41 0.41 0.95 43% Liver 0.400.4000.40. 0.78 51% Cervix 0.060.061 0.53 12% Esophagus 0.22 0.46 49%

A key limitation to traditional intravenous chemotherapy drugs is that they have a fairly narrow range for dose safety and effectiveness. Insufficient dosing of a drug will not treat the cancer well and excessive dosing may cause life-threatening side effects. Chemotherapy is commonly given in regular intervals or cycles where doses are separated over time allowing the patient to recover from side effects. A meta-analysis of clinical studies found that breast cancer patients taking more frequent doses of paclitaxel may have better outcomes than patients taking less frequent doses. Consistent frequent intravenous dosing has limitations in patient tolerability over a sustained period of time. We believe that making paclitaxel or other cytotoxic drugs more tolerable will increase the dosage patients can take over time and, thereby, increase the efficacy of the drug.

U.S. market share of spending by formulation and oncology segment

Common cancer treatments include surgery, radiation, chemotherapy, immunotherapy, targeted therapy and hormone therapy. The diagrams above illustrate, for each of cytotoxic chemotherapies, targeted therapies and hormonal therapies, the percentage of such therapies administered orally, by injection or intravenously and by other methods. Traditional cytotoxic chemotherapies use cell-killing toxic drugs to stop or slow the growth of cancer cells. Targeted therapies, such as small-molecule drugs and monoclonal antibodies, are manufactured drugs and antibodies that attempt to stop the growth of cancers by preventing cancer cells from growing, dividing and spreading. Hormonal therapies generally fall into two groups, those that block the body’s ability to produce hormones and those that interfere with how hormones behave in the body, in each case to stop or slow the growth of cancers that rely on hormones to grow.

Our Orascovery product candidates will target the oral segment of the cytotoxic chemotherapies market. We believe changes in the U.S. reimbursement landscape to a more outcomes and performance-based payment model will incentivize physicians to choose more cost effective oral chemotherapy and will reduce incentives for prescribing infusible / injectable treatments. Our Src Kinase Inhibitor product candidates will target the targeted therapies market.

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Key Chemotherapy Indications

We are developing many of our drug candidates against multiple indications, which in some cases are common to one or more of our drug candidates. The current treatment landscape and market potential of the primary cancer types on which our Orascovery Platform is focused are discussed below.

Gastric Cancer

Gastric cancer occurs when malignant cells form in the lining of the stomach. There were an estimated 951,000 new cases of gastric cancer and 723,000 gastric cancer related deaths worldwide in 2012, according to the American Cancer Society. CA Cancer Journal estimates that, in 2015, there were approximately 25,000 and 680,000 new gastric cancer cases in the U.S. and China, respectively. According to EvaluatePharma reported sales and consensus forecast data, the worldwide product sales of gastric cancer treatments was approximately $1.0 billion in 2015 and is expected remain nearly constant through 2022, in the absence of the introduction of new novel therapies.

Breast Cancer

Breast cancer is an uncontrolled growth of breast cells that starts in the tissues of the breast and can spread to nearby lymph nodes, the liver, lungs, bone and brain. Breast cancer is the most commonly diagnosed cancer among women in majority of countries worldwide. Based on tumor size, extent of spread and patient preference, treatment usually involves surgery to remove the tumor and surrounding tissue or a complete mastectomy, which involves the removal of the entire breast. In addition, chemotherapy, radiation therapy, hormone therapy and targeted therapy may be used after surgery.

In 2012, there were an estimated 1.7 million new cases of breast cancer and 521,900 breast cancer deaths in women worldwide, according to the American Cancer Society. CA Cancer Journal estimates that, in 2015, there were approximately 234,000 and 272,000 new breast cancer cases in the U.S. and China, respectively. According to EvaluatePharma reported sales and consensus forecast data, the worldwide product sales of breast cancer treatments was approximately $13.8 billion in 2015, and is expected to grow to $25.5 billion in 2022, representing a CAGR of 9.1%.

Lung Cancer

Lung cancer is cancer that starts in the lungs and can spread to other parts of the body. Tobacco use is the most important risk factor for lung cancer. Lung cancer rates have been decreasing in several Western countries where the tobacco epidemic began and peaked earlier, such as the U.S., the United Kingdom and Denmark. On the other hand, in countries where the epidemic was established more recently and smoking has just began to increase, such as China and India, lung cancer rates are likely to increase for the next few decades.

Treatment of lung cancer is based on the type and stage of cancer. Lung cancer can be classified as small cell or non-small cell. For early stage non-small cell lung cancers, the treatment of choice is usually surgery but chemotherapy, sometimes in combination with radiation therapy, may be used as well. For more advanced-stage non-small cell lung cancers, the main treatment is usually chemotherapy, targeted drugs, or some combination of the two. For small cell lung cancers, chemotherapy as monotherapy or in combination with radiation is the primary treatment.

In 2012, there were an estimated 1.8 million new cases of lung cancer and 1.6 million lung cancer related deaths worldwide, according to the American Cancer Society. CA Cancer Journal estimates that, in 2015, there were approximately 221,000 and 733,000 new lung cancer cases in the U.S. and China, respectively. According to EvaluatePharma reported sales and consensus forecast data, the worldwide product sales of lung cancer treatments was approximately $7.7 billion in 2015, and is expected to grow to $25.3 billion in 2022, representing a CAGR of 18.5%.

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Colorectal Cancer

Colorectal cancer or bowel cancer starts in the inner wall of the colon or rectum. Early stages of colon cancer are generally treated though surgery and adjuvant therapies. Toward the later stages, a combination of chemotherapy, radiation, and targeted therapies are used. Targeted therapies include drugs which generally act on EGFR and VEGFR to inhibit the growth of new blood vessels. However, tumors with certain genetic mutations, such as mutation in codons 12, 13, or 61 of the KRAS gene, do not benefit from these targeted treatments.

Treatment of rectal cancer involves surgery combined with other therapies such as adjuvant and/or neoadjuvant chemotherapy, radiation therapies and targeted therapies. Advanced stages of rectal cancer are rarely completely treated by removing all the tumors through surgery, given that these treatments merely help to relieve, delay, or prevent symptoms in order to prolong life. Targeted therapies for the treatment of colorectal cancer have become popular over the years with biological therapies, such as Erbitux and Avastin, more commonly used than small molecules treatments, such as Stivarga.

In 2012, there were an estimated 1.4 million new cases of colorectal cancer and 694,000 colorectal cancer related deaths worldwide, according to the American Cancer Society. CA Cancer Journal estimates that, in 2015, there were approximately 132,000 and 376,000 new colorectal cancer cases in the U.S. and China, respectively. According to EvaluatePharma reported sales and consensus forecast data, the worldwide product sales of colorectal cancer treatments was approximately $7.2 billion in 2015 and is expected remain nearly constant through 2022, in the absence of the introduction of new novel therapies.

Actinic Keratosis

AK is characterized by scaly crusty lesions resulting from the intraepidermal proliferation of atypical keratinocyotes caused by prolonged exposure to ultraviolet radiation. Generally, appearance on the skin is most likely to be located on sun exposed areas such as the face, ears, bald scalp, neck, back of hands, forearms, and lips.

AK is a very common condition with an estimated prevalence of over 58 million patients, according to the Skin Cancer Foundation, and an earlier study published by the National Ambulatory Medical Care Survey showed that, between 1990 and 1999, AK was found in approximately 14% of patients visiting dermatologists in the U.S. The condition is more prevalent in individuals with fair skin and in older populations as the cumulative effect of solar radiation becomes greater with age. AK lesions are a concern because, if left untreated, 10-15% will develop into skin cancers. If left untreated they may also bleed, ulcerate, become infected, or grow large and invade the surrounding tissues and metastasize 3% of the time.

Treatment options for AK include destructive therapies, such as surgery cryotherapy and dermabrasion, topical medications, such as topical fluorouracil, imiquimod, ingenol mebutate and diclofenac, chemical peels, and photodynamic therapy. Generally, lesion-directed treatments such as cryotherapy and surgical procedures are the primary approach for isolated lesions. Field-directed therapies, such as topical fluorouracil, imiquimod and ingenol mebutate are especially useful for treating areas with multiple lesions.

One major disadvantage of current dermal agents is a severe reaction of the skin around the treatment area, which is especially undesirable as AK is most likely to be located in highly visible areas such as the face, ears, bald scalp, neck, back of the hands, forearms and lips. Many of these dermal agents, such as topical 5-fluorouracil, are known cytotoxins and damage both precancerous and normal cells. We believe that a favorable side effect profile of KX-01 when applied topically, coupled with similar efficacy will be unique in the dermal AK market. The company believes that KX-01 topical ointment will achieve significant market share of the current AK dermal market as well as expand the market use of dermal agents post-surgery. We completed enrollment of an approximately 160-patient Phase 2a study of KX-01 in 2016 and early data suggested similar efficacy to current agents with a much improved side effect profile during treatment.

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According to QuintilesIMS reported sales data, the worldwide product sales of pharmaceutical products indicated for actinic keratosis including Carac and Diclofenac was $3.5 billion in 2012 and $4.5 in 2015, representing a CAGR of 8.4%. We believe the problematic side effect profiles of existing therapies present a market opportunity.

Glioblastoma

Glioblastoma multiforme, or GBM, is the most common and the most malignant of the glial tumors. GBM is a fast-growing glioma that develops from glial cells that support the health of the nerve cells within the brain. The histological features that distinguish GBM from all other grades are the presence of necrosis, or dead cells, and increase of blood vessels around the tumor. These tumors are always rapidly growing and highly malignant. GBM can arise in the brain “de novo” or evolve from lower-grade astrocytomas or oligodendriogliomas. Hallmark symptoms manifest as the rapidly growing tumors interfere with the normal functions of the brain. Headaches, seizures, memory loss and changes in behavior are common while some patients also experience loss in movement or sensation on one side of the body, language dysfunction or cognitive impairment. Currently, the cause of glioblastoma is unknown and the disease cannot be prevented.

The National Cancer Institute estimates that 23,770 adults will be diagnosed with brain and other nervous system cancer in 2016 and that 16,050 of these diagnoses will result in death. GBM has an incidence of 2 to 3 per 100,000 adults per year and accounts for 52% of all primary brain tumors. GBM most commonly occurs in adults aged 45-70 and disproportionately affects men relative to women. Though the tumors are highly malignant within the brain, they rarely spread elsewhere in the body.

Effective treatment of GBM is a substantial unmet need as many patients die soon after diagnosis even if treated with surgery, which is the current standard of care, followed by radiation and chemotherapy. Patients treated with optimal therapy have a median survival of approximately 12 months, with fewer than 25% of patients surviving up to 2 years and fewer than 10% of patients surviving up to 5 years.

Generally, the first step in treatment of GBM is surgery. The primary objective of surgery is to remove as much of the tumor as possible without injuring the surrounding brain tissue needed for normal neurological function. However, due to the position of GBM tumors in the brain and the tentacle like shape of the cancerous cells that grow into the surrounding tissue, it is generally impossible to remove the entire tumor. After the surgery is completed, radiation therapy to selectively kill the remaining tumor cells that have infiltrated the surrounding normal brain tissue can begin. Concomitant and adjuvant chemotherapy with temozolomide, or TMZ, is the current standard of care. TMZ is generally administered daily during radiation therapy then prescribed for 6 to 12 cycles of 28 days after radiation. The goal of chemotherapy is long-term tumor control; however, this is the case in only about 2% of patients. Survival among patients with GBM remains poor.

According to QuintilesIMS reported sales data, the worldwide product sales of glioblastoma treatments was approximately $702 million in 2015.

Changes in the U.S. oncology reimbursement landscape may benefit our products

Since 2005, physician administered injectable and infused drugs have been reimbursed by Medicare Part B at the Average Sales Price, or ASP, plus 6 percent. In this ‘buy and bill’ environment, physicians purchase drugs at ASP and receive 106% of that price as reimbursement. Many oncology drugs, including all approved versions of paclitaxel, are injectable and physician administered and are therefore subject to this reimbursement paradigm. In an effort to develop new payment and delivery models designed to improve the effectiveness and efficiency of specialty care and to eliminate perverse incentives that may occur under the buy and bill paradigm, CMS has undertaken an initiative to overhaul this existing system as part of its Oncology Care Model, or OCM, demonstration project.

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The OCM model differs from the current paradigm because payment to physicians is tied to an episode of care rather than on a fee for service basis. Under OCM, physicians receive two payments during “episodes” of care. An episode of care starts when a patient begins chemotherapy and lasts for a period of six months, but additional episodes may be initiated if patients require more than six months of chemotherapy. The first is a monthly capitation payment, called Monthly Enhanced Oncology Services payment, of $160 per Medicare beneficiary per month during an episode, intended to cover the costs of managing care. The second payment is a performance-based incentive tied to OCM episodes of care. These performance payments are awarded to physician practices based on key performance indicators in relation to benchmarks for the episode of care provided by CMS. If the physicians’ expenditures are below the target price for the episodes of care, they have an opportunity to receive a bonus. The size of the bonus is tied in part to how well the provider performs on key quality measures. Since launching in July 1, 2016, OCM has selected nearly 200 physician group practices and 17 health insurance companies to participate in the OCM pilot program.

The OCM is designed to change reimbursement of participating healthcare providers from being tied to dispensing or using oncology products within the physician’s office and replace it with reimbursement for episodes of care. This shift in physician reimbursement is expected to remove incentives to use more expensive oncology products delivered in the office and instead promote delivering the most efficacious and cost-effective therapy. We believe that our orally administered product candidates, if they receive regulatory approval, offer an opportunity to reduce costs and provide superior treatment to patients and therefore believe that OCM may facilitate adoption of our products by physicians whose reimbursement will be less influenced by the price of the drugs they prescribe.

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BUSINESS

Overview

We are a global biopharmaceutical company dedicated to the discovery, development and commercialization of novel therapies for the treatment of cancer. Our mission is to improve the lives of cancer patients by creating more effective, safer and tolerable treatments. We have generated our clinical product candidates through our Orascovery and Src Kinase Inhibition research platforms, which are based on our understanding of human absorption biology and novel approaches to inhibiting kinase activity, respectively. We believe that our ability to overcome the challenges of oral delivery of chemotherapy and limitations associated with IV delivery, via our P-gp inhibitor, offers significant potential benefits to patient outcomes by allowing patients to stay on therapy longer and extending the potential opportunities to combine with other agents, including targeted and immunotherapies that would otherwise be too toxic in combination with IV chemotherapy. We have assembled a leadership team and have established global operations in the U.S. and China across the pharmaceutical value chain to execute our mission to become a global leader in bringing innovative cancer treatments to the market and improve health outcomes.

Cancer is a major health problem worldwide. The global market for cancer treatments reached $107 billion in 2015 and is expected to reach $150 billion in 2020. Common treatments for cancer include surgery, radiation therapy, chemotherapy, and such newer methods as targeted therapy; however, chemotherapy remains one of the key treatment options for cancer patients and is traditionally administrated intravenously. A major part of cancer treatment consists of IV chemotherapy. The limitations of IV chemotherapy involve repeated painful IV line insertions, potential anaphylactic reactions, expensive hospital visits, toxic side effects and poor quality of life for cancer patients. To address this unmet medical need, development of oral chemotherapy that is more effective and more tolerable, can be taken easily orally at home, avoiding weekly IV infusions and hospital visits (e.g. paclitaxel) is urgently needed. Oral administration of many IV chemotherapy drugs has been unsuccessful because human intestinal cells have a P-gp pump that pumps out chemotherapy drugs (e.g. paclitaxel, doxetaxel, irinotecan etc.) before they can be absorbed. Many attempts at new drug development of P-gp inhibitors failed clinically because of lack of clinical efficacy or significant toxicities.

We believe that oral administration can overcome key limitations and challenges around IV administration of certain cytotoxic chemotherapies, and our Orascovery platform will establish a new paradigm in the use of oral anti-cancer drugs for cancer treatments. Our Orascovery platform is based on the novel P-glycoprotein, or P-gp, pump inhibitor molecule HM30181A, which we in-licensed in 2011 from Hanmi, a major Korean pharmaceutical company focusing on research and development. The P-gp pump is a plasma membrane protein on the cells of the gut which forms a localized drug transport system and prevents oral absorption at therapeutic levels of many well-known, widely used P-gp substrate cancer chemotherapeutic drugs such as paclitaxel, irinotecan and docetaxel, limiting their current delivery to IV. These chemotherapy agents are widely used to treat multiple types of cancer. A cancer patient’s inability to tolerate IV chemotherapies has limited the effectiveness of IV anti-cancer therapies. Co-administration of HM30181A with oral paclitaxel facilitates the oral absorption of paclitaxel by blocking P-gp in intestinal cells and enables oral dosing at therapeutic blood levels which have not been successfully and safely achieved to date without the use of HM30181A. We have learned through clinical studies that this technology allows for certain active chemotherapeutic agents to be absorbed into the blood orally as compared to IV, and may enable some patients to tolerate many cycles of treatment. Oraxol, our leading Orascovery drug candidate is composed of HM30181A, co-administered with an oral dosage form of paclitaxel. We have three other major clinical product candidates in this platform, Oratecan, Oradoxel and Oratopo, which include HM30181A co-administered with an oral formulation of the widely used IV-administered chemotherapeutic agents, irinotecan, docetaxel and topotecan.

Oral administration can overcome key limitations and challenges around IV administration of certain cytotoxic chemotherapies, such as dosing, tolerability and efficacy, and we believe the Orascovery approach will establish a new paradigm in the use of oral anti-cancer drugs for cancer treatments in at least three ways. First, with the use of

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HM30181A, clinicians may be able to consistently deliver oral doses of certain chemotherapeutic drugs over a greater number of cycles and duration of time. Second, we believe active drug exposure of chemotherapeutic agents in the patient over time is a critical element in determining efficacy and we can achieve greater tolerability with administration of HM30181A in combination with chemotherapeutic drugs as compared to the current IV standards of care. Third, in light of better tolerability of standard chemotherapies delivered orally, combination with immuno-oncology and targeted anti-cancer treatments can be potentially optimized compared to current treatment paradigms.

We are rapidly advancing our lead Orascovery drug candidate, Oraxol. In 2015, we started enrolling patients in a Phase 3 Oraxol study which combines the dosing of our 15 milligram tablet of HM30181A paired with the dosing of our oral formulation of paclitaxel in a head to head comparison to IV formulation of paclitaxel. In October 2016, we entered into a clinical study collaboration with Eli Lilly and Company to evaluate Oraxol in combination with Lilly’s approved monoclonal antibody Cyramza (ramucirumab) to treat gastric, gastric-esophageal and esophageal cancer. One of the milestones we expect to reach in 2017 for Oraxol is our first 90 patient interim analysis from our Phase 3 study in metastatic breast cancer.

We have also developed novel small molecule compounds through our Src Kinase Inhibition platform. The Src Kinase inhibition platform refers to novel small molecule compounds that have differentiated multiple-mechanisms of actions including: (1) the inhibition of the activity of Src Kinase and (2) the inhibition of tubulin polymerization. We believe the combination of the two mechanisms of action provides a broader range of anti-cancer activity compared to either mechanism of action alone. Our three key clinical product candidates in this platform are KX-01 ointments for actinic keratosis, or AK, pre-cancerous lesions and psoriasis; KX-01 oral for solid and liquid tumors and potential skin cancer indications and pre-cancerous lesions and KX-02 for glioblastoma multiforme, or GBM.

We completed enrollment of an approximately 160-patient Phase 2a study of KX-01 ointment for treatment of AK across 16 sites in 2016 and we have received allowance from the FDA to conduct a Phase 3 study, which we expect to commence in the second half of 2017. AK is a common disease, with a prevalence of approximately 58 million patients in the United States. If left untreated, 10-15% of AK lesions will develop into skin cancers. Our Phase 1 clinical study and preliminary data from our Phase 2 clinical study demonstrated a complete response rate of up to 43%, with no severe local skin reactions reported with the dosing regimen studied. Currently available treatments are limited by severe local skin reactions such as vesicultation, postulation, erosion and ulceration, with low patient compliance. We believe physicians and patients have avoided topical treatments because of the pronounced side effects of the current treatments such as ingenol mebutate, imiquimod, fluorouracil, and that an ointment product with good clinical activity and a favorable side effect profile could capture substantial new market share for treatment of this condition.

In addition to our existing portfolio of clinical candidates, our research and development teams are evaluating additional applications of Orascovery, and developing new platforms based on our knowledge of absorption biology. For example, we are exploring a CYP and P-gp dual inhibitor technology to generate new product candidates.

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The following pipeline chart sets forth certain information concerning our key innovative drug product candidates:

(1) Also excluding Taiwan, Singapore, Vietnam, Australia, New Zealand and Africa

(2) Collaboration with Eli Lilly and Company, manufacturer of ramucirumab

(3) Excluding Taiwan

(4) Also excluding Taiwan, Macau, Hong Kong, Singapore and Malaysia

(5) Also excluding Taiwan, Hong Kong, Singapore, Malaysia, Thailand, the Philippines, Indonesia and Vietnam

(6) Also excluding Taiwan, Hong Kong and Singapore

To date, we and our partners have conducted, or are conducting, clinical trials in the U.S., South Korea, New Zealand, Taiwan, Argentina, Chile, Colombia, Ecuador, Guatemala, Honduras, the Dominican Republic, Peru, and China.

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Program	Drug Candidate			Indication		Major Territories Owned		Pre- clinical	Phase 1	Phase 2	Phase 3
Orascovery (P-gp + cytotoxic)		Oraxol			Breast cancer		U.S., EU, China, India
		Oraxol with ramucirumab			Gastric cancer		U.S., EU, China, India
		Oratecan			Gastric cancer		U.S., EU, China, India
		Oradoxel			Solid tumors		U.S., EU, China, India
Src Kinase Inhibition		Oratopo			Solid tumors		U.S., EU, China, India
		KX-01 Ointment			Solid tumors		U.S., EU, China, India
					Solid tumors		U.S., EU, China, India
		KX-01 Oral			Actinic Keratosis		World, except China
					Skin cancers		World
		KX-02 Oral			AML		World, except China
					Liquid tumors		World, except China
		ATNX-04	(CYP / P-gp)		Ovarian cancer		World, except China
					Glioblastoma		World, except China
Dual Inhibition					Multiple tumors		World

In advance of the launch of our proprietary product candidates in the U.S., our commercial team intends to market oncology and oncology symptom-related products, to fund our infrastructure build-out. We believe it is important to minimize supply chain disruptions for high potency oncology active pharmaceutical ingredients. We have thus internalized key components of the supply chain that we believe are integral to minimizing the associated risks. We have organized our business model into three segments: Oncology Innovation Platform, Commercial Platform and Global Supply Chain Platform—with operations in both the U.S. and China. Our global operations across the three segments are shown below:

Our Global Supply Chain Platform manufactures API for use internally in our research and development and clinical studies, and for sale to pharmaceutical customers globally. Our Commercial Platform currently markets the APIs produced by our Global Supply Chain Platform, including 14 products in the specialty and generic market segment in the U.S. and three products under Section 503B of the FDCA through our compound pharmacy facility.

Based in Buffalo, New York, we were formed in 2003 and have been funded from inception by over $250 million in private financings and public-private partnerships with an estimated aggregate value of $375 million.

Our leadership team was carefully assembled to capture the global commercial market opportunities in novel drug development. Our executive officers are seasoned leaders with complementary skill sets across global pharmaceutical research and development, operations, supply chain and manufacturing, capital markets and mergers and acquisitions. We believe this characteristic is unique for a U.S.-based company and we believe we will be able to utilize this strength to create long term value for cancer patients, our employees and our shareholders. Our team is excited about the prospects of creating new paradigms in the treatment of cancer in developed markets and also driving our product candidates to emerging markets where patient access to treatments has historically been limited.

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Our Strengths

Transformative, oncology-focused and highly synergistic pipeline with late stage product candidates.

We believe we have a robust clinical pipeline. We have seven major clinical stage drug candidates, four of which are based on a proprietary Orascovery oral absorption technology, using our novel, highly-selective P-gp inhibitor in combination with widely-used cytotoxic agents enabling oral administration of currently injectable only drugs. The remaining three are novel proprietary Src Kinase inhibitors that have multiple mechanisms of action.

We believe our extensive pipeline can create three impactful synergies:

• Drug synergy: We believe that the potentially better clinical response and tolerability of Oraxol versus injectable paclitaxel opens the possibility for greater use of chemo and immuno-oncology therapies. There are also potential synergies between our pipeline products and existing anti-cancer products for potential best-in-combination or first-in-combination with immuno-oncology therapies.

• Platform development and regulatory synergy: Approval of the first drug in each of our research and development platforms may serve as validation and facilitate approvals of other pipeline drug candidates using similar technology.

• Commercial synergy: We believe clinical and commercial success of our initial products may facilitate a shift in the oncology market from injectable formulations to oral. Once physicians gain experience and confidence in our oral formulations, adopting future products using our oral technologies should require less market conditioning.

Proprietary research and development platforms capable of producing future drug candidates.

Since 2013 alone, our research and development platform has enabled us to file six U.S. investigational new drug applications, or INDs. In addition to the current clinical pipeline, our team is working both on new applications of our existing technologies and on innovating new platform technologies. We believe that our Orascovery platform can be applied to other existing drug therapies to achieve better PK, clinical response and tolerability profiles. Additionally, we have applied our research knowledge and experience of human oral absorption functions and have identified late stage novel molecule candidates which could represent additional future platform technologies. Our research scientists have also developed proprietary systems to identify and screen new molecules, including target binding sites, leading to a more efficient and effective innovation process. We believe these systems and platforms will likely lead to additional clinical candidates.

Unique business model structured to capture value through commercialization and minimize supply chain risk.

We have a business model positioned to capture value by creating opportunities through multiple levers for growth. We are internalizing our commercial infrastructure and supply chain through a variety of organic methods, acquisitions, and partnerships which we believe will enable us to capture greater shareholder value as well as minimize supply chain risk for our proprietary oncology product pipeline. We have built a commercial sales and marketing infrastructure in the U.S. and intend to continue to further build out this segment. We expect this segment to start selling existing in-licensed therapeutically related oncology products in 2017 as a means of funding our commercial infrastructure. Through acquisitions, we own elements of a high potency oncology supply chain, which we believe are important to control in order to minimize risk of disruption. By utilizing capital efficient public-private partnerships in the U.S. and China, we expect to have built cGMP manufacturing facilities in both geographies. We expect to continue to further build out this model using a variety of different methods, including organic growth, strategic acquisitions and collaborations.

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A biopharmaceutical company with a near-term focus on the U.S. and China oncology markets.

We have crafted our business model in order to capture the market opportunities in two of the largest pharmaceutical markets in the world. The U.S. represents the largest pharmaceutical market in the world. China has identified biotechnology as one of its strategic industries of focus. In addition, there are several unique aspects to the two markets whereby most biopharmaceutical companies are not well positioned to capture both U.S. and China markets. We have research and product development teams in both countries allowing us to leverage our innovation platform resources, including development and regulatory expertise, to maximize opportunities in both countries. We intend to serve as a technology bridge between these unique markets. We also expect to identify new technology opportunities through acquisitions, licensing or partnering in either market and position ourselves as a gateway to the other market.

Management team with industry-leading expertise and proven track record in leading global drug discovery, development and commercialization.

Our experienced senior management team members have held senior executive roles at multinational pharmaceutical companies and many led the development and regulatory approvals of pharmaceutical products in markets around the globe. Our research and development team members played a key role in the clinical development of numerous significant drugs, including Herceptin, Rituxan, Xeloda, Pegasys, PEG-Intron, Rebetol, IV Temodol, Requip, Suboxone, Subutex and Northera. The leadership of our commercial team has launched more than 50 novel and generic drugs and drug products in multiple markets around the world. A number of our executive officers have significant experience in corporate governance matters, public capital markets transactions, licensing and partnerships, and mergers and acquisitions. We believe this unique combination of executive skill sets has the potential to create substantial long term value for investors.

Our Mission and Strategy

We have a comprehensive and experienced leadership team who have come together under one organization to achieve our mission. Our mission is to improve the lives of cancer patients by creating more effective, safer and tolerable treatments. To achieve our mission, we intend to execute the following strategies:

Rapidly advance our clinical product candidates.

We intend to pursue the fastest feasible pathways to approval of our existing novel oral absorption technology. We are currently enrolling patients in a Phase 3 clinical trial of Oraxol, the program pairing the novel absorption enhancing tablet with the oral capsule formulation of paclitaxel. We plan to submit an NDA to the regulatory authorities in both New Zealand and Taiwan in the next 12-18 months. We believe that if we demonstrate the safety and effectiveness of this technology with Oraxol, the other drug candidates paired with this technology will face a more efficient development process. In addition, we expect complete primary endpoint data from this Phase 2a study of KX-01 ointment in the first half of 2017. If the data from this study confirms our previously completed proof of concept study data, we intend to launch a Phase 3 of KX-01 ointment registration study in 2017. We anticipate the development timeframe for our KX-02 drug candidate for GBM to be accelerated once we commence our partnered clinical program in China. Our licensing partner in China submitted a CTA for KX-02 to the CFDA in 2016. We anticipate fast enrollment in China based on its large patient population, which would accelerate the overall global development timeframe.

Leverage our global research and development operations to continue development of an oncology-focused product pipeline.

We have research and development operations in both the U.S. and China that are focused on both advancing our existing product pipeline and on developing additional novel clinical product candidates. We have developed a core competency in oral absorption technology and apply that skill to develop new methods of drug discovery. We believe that we can create substantial long term value by pursuing a robust, ongoing research and development program.

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Build a proprietary commercial platform and selectively leverage collaborative relationships to achieve global drug sales, marketing and distribution.

We have begun building our U.S. commercial operation in preparation for future FDA approvals of our proprietary product candidates. We believe that our experienced product commercialization team can build an infrastructure that leverages both our global facilities and collaborative relationships to achieve global distribution of any FDA approved products in a timely and cost-effective manner.

Continue to build-out our supply chain and cGMP manufacturing capabilities.

We believe internalization of our supply chain is uniquely suited to execute in both the U.S. and China, two of the world’s largest pharmaceutical markets. We intend to utilize cGMP manufacturing facilities from our public/private partnerships in both the China and U.S. markets as a mechanism to access both important markets and minimize supply disruptions. We intend to manufacture certain of our proprietary drugs and our partnered drugs commercialized around the world. Additionally, we expect that the expansion of our existing cGMP high potency API facilities will provide us with more flexibility, and control over high potency APIs as our drugs start to become commercialized. Our goal is to continue expanding this infrastructure and to leverage it to maintain future financial flexibility by optimizing our financial commitments and capital expenditures, which we believe will create value for shareholders.

Selectively pursue strategic M&A or licensing opportunities to complement our existing operations.

We have historically pursued acquisitions and in-licensing opportunities, and will continue to opportunistically target opportunities that will complement our existing portfolio and operations to create value for shareholders and support our business strategy and mission.

Our Orascovery Platform

We are developing a series of orally administered chemotherapeutic agents using our proprietary P-gp pump inhibitor delivery system. The technology enables the oral administration of many cancer agents, which currently are only given by IV due to poor oral absorption. Oral administration of certain cytotoxic chemotherapies can potentially overcome several key challenges in IV administration of those molecules. We believe that our Orascovery platform overcomes these challenges by allowing more frequent dosing over longer periods of time, which we believe will lead to better tolerability and allow for higher total dosage and longer time exposure to the chemotherapeutic agent. Further, we believe additional agents like immuno-oncology and targeted therapy can be better optimized with longer administration of oral chemotherapy agents.

Chemotherapeutic agents such as paclitaxel, irinotecan, docetaxel and topotecan are clinically proven and widely used but have historically been limited to IV administration. The combined worldwide revenue of marketed formulations of these agents is estimated to be $1.9 billion in 2015 and is expected to grow at a CAGR of 9.6% to reach $3.6 billion by 2022. We believe our pipeline products, which leverage our proprietary delivery system that enables oral administration of these chemotherapeutic agents, will substantially expand the use of these chemotherapeutic agents. Additionally, we believe that there is a substantial opportunity for our products to be used in combination with targeted therapies. Furthermore, as shown by Abraxane, novel technology applied to a traditional chemotherapy agent may achieve pricing premiums if data demonstrates superior efficacy and tolerability as compared to current standards of care. We believe our pipeline products will be able to capture a large untapped market and achieve significantly larger market potential than the revenue generated by existing formulations, due to (1) increasing adoption of oral therapy due to patient preference, (2) the potential for improved response rates through greater exposure (based on our predictive model), (3) the potential for improved tolerability (based on our predictive model), and (4) the possibility to expand the market through combination therapies with immune-oncology therapy and oral targeted treatments, of which 39% are already oral.

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The table below shows our planned and ongoing clinical trials for our major Orascovery drug candidates.

PK and MTD denote pharmacokinetics and maximum tolerated dose, respectively.

HM30181A—Our Novel P-gp Pump Inhibitor

Overview

The novel P-gp inhibition by HM30181A forms the cornerstone of our Orascovery platform, and enables the administration of oral dosing formats of paclitaxel (Oraxol), irinotecan (Oratecan), docetaxel (Oradoxel), and topotecan (Oratopo) each of which is currently under clinical development. The feature that distinguishes HM30181A from other small molecule P-gp inhibitors is this novel compound is specific to P-gp, does not interfere significantly with the activity of other related transporters, and does not significantly inhibit cytochrome 3A4, an enzyme that is important in the metabolism of commonly used drugs. HM30181A is minimally absorbed following oral administration. This localizes P-gp inhibitory activity in the gastrointestinal tract, limiting the potential for interaction at additional systemic sites where P-gp is expressed. Inhibition of gastrointestinal P-gp significantly improves the absorption of chemotherapy agents to achieve systemic exposure profiles which enhance the efficacy and may reduce toxicity of these established chemotherapeutic agents. Based on its pharmacological profile and low systemic absorption, HM30181A is not expected to cause drug-to-drug interactions other than enhancement of oral absorption of medications which are P-gp substrates.

Background—Chemotherapy Treatments

IV paclitaxel is used widely for the treatment of breast, ovarian, and lung cancer. Due to its poor solubility, paclitaxel is usually dissolved in ethanol and polyethoxylated castor oil, which is a major cause of IV hypersensitivity reactions. As a result, premedication with steroids and antihistamines is required to minimize these adverse reactions. Additional common toxicities associated with IV administration of paclitaxel include neuropathy, neutropenia, and alopecia. These side effects limit dose intensification and often require reduction in dosing.

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As a single agent or in combination, IV paclitaxel is administered at a variety of doses and regimens that are approved for therapeutic use for various indications, including 135 and 175 mg/m² administered as both 3- and 24- hour infusions once every 3 weeks. Over the past fifteen years, there has been great interest in dose dense therapy with paclitaxel, switching from the conventional every three-week regimen to administering the drug once weekly. Dose dense treatment with paclitaxel has various advantages that can lead to an increase in the overall exposure, as measured by AUC, over a treatment cycle, while balancing the adverse event profile normally observed, such as neutropenia. This concept is consistent with the hypothesis of maintaining sufficient drug concentrations above a threshold target value for an extended duration.

Based on various clinical trials conducted across multiple tumor types, the weekly regimen of paclitaxel can lead to an increase in response rate, progression free survival, and overall survival. For example, in a clinical trial investigating different dosing schedules of paclitaxel for the treatment of breast cancer in the adjuvant setting, dose-dense paclitaxel given as 80 mg/m² weekly led to an improvement in disease-free and overall survival, with a 5-year survival rate of 81.5% versus 76.9%. In addition, weekly paclitaxel (80 mg/m²) has a benefit in response rate (42% vs. 29%), time to tumor progression (TTP) (9 vs. 5 months), and median overall survival (24 vs. 12 months) over conventional 175 mg/m² every three weeks.

A recent analysis compiling data from 29 clinical trials of paclitaxel given as monotherapy investigated the relationship between paclitaxel dose and dosing regimen versus safety and efficacy. This average weekly dose from the every 3-week regimen (175—210 mg/m²) of paclitaxel produced a response rate of 30%, while the weekly regimen of 80 mg/m² showed a response rate of 37%. In another analysis, a trend towards reduced grade 3 neuropathy with weekly paclitaxel was observed. Together, several clinical trials along with analyses, which evaluated efficacy and safety for dose-dense paclitaxel, suggested a trend of larger therapeutic window and a better safety-efficacy profile for weekly paclitaxel.

Irinotecan is a potent anticancer drug that is marketed under the trade name, Camptosar. Irinotecan is mainly administered to patients with metastatic colorectal cancer (mCRC), but also in glioblastoma, lung, ovarian, cervical, upper gastrointestinal cancer, and pancreatic cancer. The active metabolite of Irinotecan, SN-38, is a type 1 DNA topoisomerase inhibitor with potent antitumor activity and wide antitumor spectrum. We believe that oral administration of irinotecan will more efficiently generate, SN-38, resulting in the potential for better clinical response with reduced toxicity. Oratecan is intended for oral administration for the treatment of irinotecan-responsive cancers.

Docetaxel is a potent anticancer drug within the class of antimicrotubule agents that is marketed under the trade name Taxotere. Docetaxel is mainly administered to patients with breast, lung, prostate, gastric, and head and neck cancers. Docetaxel has potent activity with a wide antitumor spectrum. As a single-agent therapy, docetaxel is administered by IV infusion over 1 hour at a dose of 60-100 mg/m² for breast cancer and 75 mg/m² for non-small cell lung cancer given once every 3 weeks. Docetaxel is also used in combination with doxorubicin and cyclophosphamide (adjuvant treatment of breast cancer), cisplatin (lung), topical fluorouracil (head and neck and gastric), and prednisone (prostate). Docetaxel causes dose-limiting toxicities that are more common at higher doses. One significant dose-limiting toxicity is fluid retention that we believe is associated (at least in part) with the IV formulation that contains polysorbate 80, a nonionic and emulsifier frequently used in food and cosmetics. Hypersensitivity reactions may also be attributable to IV administration of polysorbate 80. We believe that oral administration of docetaxel with HM30181A will provide therapeutic exposures of the drug, and result in the potential for better clinical response with reduced toxicity.

Topotecan is a potent anticancer drug under the class of camptothecins that is marketed under the trade name, Hycamtin. Topotecan is mainly administered to patients with lung, ovarian, and cervical cancer. Clinical activity has been shown in combination with the taxanes, docetaxel and paclitaxel, for the treatment of a variety of tumors, including lung cancer. Topotecan causes dose-limiting toxicities. These side effects mainly include neutropenia, late onset diarrhea and nausea and vomiting.

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Mechanism of Action of HM30181A

P-glycoprotein plays an important physiologic role as a transporter protein at multiple barrier sites, including the gastrointestinal tract and the blood brain barrier. The demonstrated role of P-gp in limiting intestinal absorption of multiple cancer chemotherapies highlighted the potential utility of a small molecule P-gp inhibitor for enabling oral administration of P-gp substrate drugs otherwise restricted to IV dosing. HM30181A was originally identified by Hanmi as a highly selective and potent P-gp inhibitor, capable of elevating the oral bioavailability of paclitaxel from less than 5% (in the absence of HM30181A) to 41% in rats. Unlike previously developed small molecule P-gp inhibitors, HM30181A is designed to not be systemically absorbed in the gastrointestinal tract following oral administration, with only small amounts detectable in the plasma even after relatively high doses. This unique property made HM30181A a good candidate for co-administration with P-gp substrate drugs, such as paclitaxel, which normally exhibit poor oral bioavailability and are therefore limited to IV routes of dosing.

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Pre-clinical and Clinical Development of HM30181A

In vitro Activity

HM30181A was first discovered as a novel P-gp inhibitor in 2006. A subsequent published study demonstrated selective activity against P-gp, with low nanomolar inhibitory activity reported (IC₅₀=0.6 nM in an in vitro assay of P-gp function, where the lower the number the higher the potency) and more potent than cyclosporin A, tariquidar and elacridar, which are previously tested P-gp inhibitors, as shown in the first figure below. In similar assays, HM30181A did not inhibit the transporter proteins MRP1, MRP2, or MRP3 at the concentrations evaluated and only marginally inhibited BCRP transporter activity (IC50 = 3,717 nM, as shown in the second figure below).

Inhibition concentration against Pgp transporter

Compound	IC50 (nM)
Cyclosporin A	123.1
Tariquidar	44.4
Elacridar	4.9
HM30181A	0.6

Inhibition concentration against transporters

Transporter	IC50 (nM)
MRP1	> 5,000
MRP2	> 5,000
MRP3	> 5,000
BCRP	2,960
HM30181A	0.6

In vivo Activity

In preclinical studies, HM30181A demonstrated poor absorption from the gastrointestinal tract following oral administration in rats and dogs. The low systemic exposure to HM30181A may at least partially account for the good tolerability observed thus far in pre-clinical toxicology studies. In a single dose rat study, no mortality was noted and there were no test article-related clinical signs or body weight changes, and no gross necropsy findings 15 days after treatment with single oral doses of HM30181A as high as 2000 mg/kg. Likewise, the highest dose evaluated (200 mg/kg) was well tolerated in repeat dose studies in both rats and dogs (once daily up to 13 weeks), with no dose-related mortality.

Multiple pre-clinical studies have evaluated the in vivo pharmacologic effect of HM30181A, generally in the context of a co-administered P-gp substrate, such a paclitaxel. In each case, co-administration of HM30181A significantly enhanced systemic exposure of the co-administered substrate. In murine models of human cancer, oral co-administration of HM30181A with oral paclitaxel or docetaxel confers anti-tumor activity comparable to the IV dosing route.

Clinical Development

HM30181A belongs to a new class of P-gp inhibitor that has high potency, specificity and local action at the intestine cells. Oraxol consists of two drug products, a paclitaxel capsule and a HM30181A tablet. The 15 mg HM30181A tablet has an established room temperature shelf life of 36 months. The 30 mg paclitaxel liquid-

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filled, hard gelatin capsule has an established room temperature shelf life of 18 months. Oratecan consists of two drug products, a irinotecan tablet and a HM30181A tablet. The irinotecan 20 mg tablet has an established room temperature shelf life of at least 18 months.

Phase 1 clinical trials showed HM30181A has a good clinical safety profile and was not significantly absorbed systemically in humans. It has been given in amounts of up to 900 mg as a single dose, and up to 360 mg/day for 5 days, without major toxicities. The clinical dose we use currently in our Phase 3 clinical trial is 15 mg/day.

In three separate PK studies of HM30181A conducted in healthy subjects, a total of 81 individuals received single oral doses of HM30181A tablets in single doses of up to 900 mg and 30 individuals received multiple doses of HM30181A tablets ranging from 60 to 360 mg per day for 5 days. HM30181A was well-tolerated, with mostly mild GI side effects at high doses. At the current clinical dose of 15 mg given once daily for up to 5 days, the C_max in systemic circulation is low.

Our Orascovery Product Candidates

Oraxol (HM30181A tablet + Oral Paclitaxel)

Overview of Clinical Findings

Oraxol has been administered to more than 150 patients through December 31, 2016 across multiple clinical studies in advanced malignances and gastric cancer. There were four completed Phase 1 and 2 clinical studies. No MTD was reached. Overall, Oraxol has been well-tolerated by cancer patients. Studies have indicated that anti-cancer activity of paclitaxel may be related to blood exposure in the patient. Oraxol administration results in similar blood concentration of paclitaxel over time as achieved with IV paclitaxel. We believe oral dosing of paclitaxel can provide a longer drug exposure over a target drug concentration than intravenous paclitaxel, which may translate to better clinical response. We have observed anti-cancer activity in a Phase 1/2 study of patients in gastric cancer with Oraxol monotherapy, where the overall survival in the study for 43 subjects was 10.7 months, which compared favorably to historical data for ramucirumab, the only FDA approved drug for second line treatment of gastric cancer. A randomized, placebo controlled Phase 3 clinical study of ramucirumab reported 5.2 months of overall survival.

Completed Clinical Studies

HM-OXL-101 Phase 1 MTD Study

The Phase 1 MTD study was conducted by Hanmi in South Korea in 24 subjects with advanced solid cancer, with a “3+3” design in which cycles were 28 days and dosing with HM30181A tablets and an oral liquid formulation of paclitaxel was given on Days 1, 8, and 15 of each cycle for three cycles. Premedication was not required prior to treatment with Oraxol. Paclitaxel doses evaluated ranged from 60 to 420 mg/m². HM30181A doses were half of paclitaxel doses (30 to 210 mg/m²). The MTD was not reached in this study and dose escalation was stopped after 420 mg/m² because the drug exposure at doses above 300 mg/m² reached a plateau.

HM-OXL-201 Phase 2 Gastric Cancer Study

The Phase 1/2 gastric cancer study was conducted by Hanmi in South Korea. HM-OXL-201 was an open-label Phase 2, single-arm clinical trial of Oraxol for second line treatment of advanced gastric cancer patients. This trial included dosing Oraxol at 150 mg/m² per day, for 2 consecutive days per week, for 3 weeks out of a 4-week cycle. A total of 46 subjects enrolled in this study. Oraxol was well tolerated by gastric cancer patients. The results of the Phase 2 portion of this clinical trial showed treatment with Oraxol resulted in a median overall survival of 10.7 months.

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ORAX-01-13-US Phase 1 MTD Study

This Phase 1 MTD study was conducted by us in the U.S. and is clinically complete. The objective of this study was to demonstrate the MTD of Oraxol. Study ORAX-01-13-US was a standard “3+3” Phase 1b study to determine the MTD of Oraxol in subjects with advanced malignancies. Oraxol dosing was 270 mg (approximately 150 mg/m²) per day starting at the 2 days of treatment per week for 3 weeks out of a 4 week cycle. Subjects in subsequent cohorts received 3, 4 or 5 days of treatment per week for 3 weeks out of a 4 week cycle. Premedication was not required prior to Oraxol treatment. A total of 33 subjects were enrolled in this study, including 9 subjects in an expansion cohort at the highest weekly dose tested (5 days per week of dosing). The MTD was not reached in this study, showing daily oral dosing of Oraxol was well tolerated.

ORAX-01-14-NZ Phase 1 Bioavailability Study

This Phase 1 bioavailability study was conducted by us in conjunction with ZenRX Limited, or ZenRx, in New Zealand and is clinically complete. The objective of this study was to determine the absolute bioavailability of Oraxol, and to compare the extent of absorption of Oraxol to that of IV paclitaxel. This study showed that Oraxol can achieve blood paclitaxel concentrations over time that are comparable in total exposure to IV paclitaxel.

The following figure shows the mean plasma concentrations of paclitaxel following intravenous administration of 80 mg/m², as compared to oral administrations of 274 mg/m² orally dosed daily for two days:

In this study the aggregate Oraxol AUC was 7,052 ng*hr/mL for the 274 mg/m² dosing regimen (N=2) versus IV Taxol AUC of 6,628 ng*hr/mL (N=2). Oraxol dose escalation above 274 mg/m² did not further increase exposure (N=2). Based on this, we chose a dose regimen of 15 mg HM30181A + 205 mg/m² of Oraxol daily over three consecutive days each week for future study, that we believe will produce similar exposure to paclitaxel as 80 mg/m² IV Taxol given weekly. In addition, this 3 day dosing regimen provides a longer time above the target plasma concentration and could lead to better anti-cancer efficacy.

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Overview of Safety Observations in the four completed Oraxol Studies

The MTD for Oraxol was not reached in these studies. Oraxol was well tolerated by cancer patients even when given without premedication for hypersensitivity type reactions, in contrast to the premedication requirement for IV paclitaxel. No hypersensitivity type reactions were observed. No new toxicity, apart from those typically observed with paclitaxel, was observed. Infusion related reactions, including hypersensitivity type reactions, have not been observed. Additionally, severe toxicities associated with IV administration of paclitaxel, including neuropathy, neutropenia and alopecia, are expected to be at a lower incidence and grade for Oraxol.

In our Oraxol clinical studies to date, the serious adverse effects observed include severe neutropenia, febrile neutropenia, sepsis, septic shock, altered state of consciousness, hyopkalemia and cardiac arrest, dehydration, pneumonia, tracheal obstruction, death, nausea, vomiting, diarrhea, fatigue, abdominal and breast pain, anorexia, acute gastroenteritis atrioventricular block, bacteremia, cerebral hemorrhage, constipation, disease progression, hematuria, liver dysfunction, neoplasm, pain, pancytopenia, pyrexia, syncope, urinary tract infection and urinary tract obstruction and death.

Current and Planned Clinical Studies

Phase 1 Bioequivalence Study

The Phase 1 AUC bioequivalence study is being conducted by us in conjunction with ZenRx in New Zealand and is currently ongoing. The study of approximately 40 patients was designed to compare the area under the curve of Oraxol at the estimated clinical dose to that of IV paclitaxel. We are evaluating the bioavailability, safety and tolerability of the bioequivalence of Oraxol Phase 3 dosing regimen of 15 mg HM30181A + 205 mg/m² of Oraxol daily over three consecutive days each week. The following chart shows interim PK results from the first 6 completed patients, indicating that this dosing regimen could achieve similar exposure to weekly AUC to 80 mg/m² of IV paclitaxel:

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Phase 1 MTD Study of Oraxol in Combination with Ramucirumab

We are conducting a Phase 1 MTD study of Oraxol in combination with ramucirumab in patients with advanced gastric cancer in the U.S. and Asia, through a clinical trial collaboration with Lilly. We are commencing a study of up to 18 patients in a dose escalation study of Oraxol in combination with a fixed dose of ramucirumab to determine the MTD. In a published Lilly-sponsored Phase 3 study comparing ramucirumab in combination with IV paclitaxel to IV paclitaxel alone, the single agent IV paclitaxel arm of the study showed a median overall survival of 7.4 months as compared to 9.6 months with IV paclitaxel in combination with ramucirumab. In a Phase 1/2 study for end stage gastric cancer, single agent Oraxol dosing at 150 mg/m² for two consecutive days each week, three weeks on, one week off, resulted in a median overall survival of 10.7 months. The objective of this study is to define the MTD of daily Oraxol dosing, starting at 200 mg/m² for 3 days in a week, three weeks on, one week off, in combination with ramucirumab, which will be dosed every other week.

The following list shows overall survival rates from the randomized, Phase 3 studies for Lilly’s FDA approved drug, ramucirumab, approved in combination with IV paclitaxel for second line treatment of advanced gastric cancer:

Phase 3 clinical study of ramucirumab vs placebo (n=355)	5.2 months ramucirumab 3.8 months placebo
Phase 3 trial of ramucirumab plus IV paclitaxel vs IV paclitaxel (n=665)	9.6 months ramucirumab + IV paclitaxel 7.4 months IV paclitaxel

Phase 3 Study for Treatment of Metastatic Breast Cancer

Our Phase 3 study of Oraxol for the treatment of metastatic breast cancer is an open-label, randomized, multicenter study in approximately 360 adult female subjects. The study contains a screening period, a treatment period of 18-21 weeks, and a treatment extension period up to a total of 48 weeks. The study is currently being conducted in 8 countries in Central and South America and will have up to 50 sites participating. Subjects will be randomized to either Oraxol or IV paclitaxel in a 2:1 ratio. The study is designed with two interim analyses which will be conducted after 90 and 180 evaluable subjects have been treated. Tumor assessments will be performed utilizing RECIST v1.1 guidelines by a blinded central radiologist group in the U.S. The blinded U.S. radiology group will measure tumor response rates with scans at week 10, 16 and week 19.

Our Oraxol dosing regimen consists of 3 days consecutive dosing, each week, of: a 15 mg tablet HM30181A one hour before dosing an oral formulation of paclitaxel of 205 mg/m². There are no weeks off from the Oraxol arm. The comparator IV paclitaxel arm is the labeled dosing regimen of 175 mg/m² paclitaxel IV one week out of three.

The chart below shows the simulated comparison of one cycle of the labeled dose of IV Taxol of 175 mg/m² and Oraxol dosed daily at 205 mg/m² for three consecutive days per week over a similar three week period. While the expected aggregate Oraxol AUC over the cycle is similar to IV Taxol at 15,240 as compared to 15,000, the expected time exposure of Oraxol in the patient’s blood at a therapeutic level is projected to be longer. For Oraxol, the time above 40 ng/mL is forecasted to equal 108 hours per three week cycle as compared to 54 hours for IV Taxol. We believe time exposure of the active pharmaceutical ingredient in the patient’s blood is an important consideration in determining efficacy. In addition, the lower C_max with Oraxol is believed to be associated with better long term tolerability of Oraxol.

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Simulated PK comparison of Oraxol 205 mg/m² QDx3 per week for 3 weeks vs. IV Taxol 175 mg/m² one week out of three weeks cycle:

In summary, we believe Oraxol’s longer paclitaxel exposure over time and lower C_max (based on our predictive model) as compared to the labeled dose of IV paclitaxel could translate into superior clinical response and improved tolerability.

Oratecan (HM30181A Tablet + Oral Irinotecan)

Completed Clinical Studies

Hanmi conducted three Oratecan Phase 1 studies, two as monotherapy (HM-OTE-101, HM-OTE-102), and one in combination with capecitabine (HM-OTE-103), in a total of 54 Korean patients with advanced solid tumors. The tumor types in these clinical trials were mostly gastric and colorectal cancers. MTD for Oraetecan as monotherapy was defined as 100 mg/m² per 3 week cycle, either given as once daily for 5 consecutive days for 1 week (20 mg/day), or 2 weeks (10 mg/day), of a 3 week cycle. Anti-cancer activity was observed in these studies.

HM-OTE-101 Phase 1 MTD Oratecan Study

Oratecan was administered to 20 patients with advanced solid tumors on Days 1 to 5 during a 21-day cycle. Irinotecan daily doses ranged from 5 to 30 mg/m², and HM30181A doses were 60 mg. MTD was identified at 20 mg/m² per day for 5 days of a 3 week cycle. Adverse events were typical of events seen with IV irinotecan. Common adverse events included nausea (90%), diarrhea (65%), and vomiting (55%). Four subjects had dose-limiting toxicity (DLT) events (diarrhea, neutropenia, nausea/vomiting, and AST elevation). At the MTD, the SN-38 C_max on Days 1 and 5 were 9 and 12 ng/mL. Estimated SN-38 cycle exposure (AUC) was 373 ng*hr/mL. In this study Oratecan montherapyin patients with advanced solid tumors resulted in a disease control rate of 44%.

HM-OTE-102 Phase 1 MTD Oratecan Study

Oratecan was given once daily for 5 consecutive days each week for 2 weeks during a 21-day cycle to 13 subjects with advanced solid tumors. Irinotecan doses ranged from 5 to 20 mg/m². MTD was identified at 10 mg/m² per day. Adverse events were similar to those observed following IV irinotecan and included diarrhea, nausea, and anorexia. Five subjects had a dose limiting toxicity, or DLT, in Cycle 1. At the MTD, the resulting SN-38 C_max on Days 1 and 12 were 5 and 4 ng/mL. Estimated cycle exposure (AUC) for SN-38 was 423 ng*hr/mL.

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The following table shows the rate of control of the disease following administration of Oratecan once daily for five days for two out of every three weeks.

	Disease control rate (DCR)*
Dose Level	N	# of DCR (%)
HM30181A tablet 60 mg + irinotecan HCl tablet 5 mg/m2	3	3 (100%)
HM30181A tablet 60 mg + irinotecan HCl tablet 10 mg/m2	5	3 (60.0%)
HM30181A tablet 60 mg + irinotecan HCl tablet 15 mg/m2	1	1 (100%)
HM30181A tablet 60 mg + irinotecan HCl tablet 20 mg/m2	2	1 (50.0%)
Total	11	8 (72.7%)

* DCR determined by the total number of subjects with complete response, partial response or stable disease, divided by the number of subjects at each dose level.

HM-OTE-103 Phase 1 MTD Study of Oratecan in Combination with Capecitabine

This study was to determine the MTD of Oratecan in combination with capecitabine. Oratecan was administered to 21 subjects on Days 1 to 5 during a 21-day cycle. Irinotecan doses ranged from 10 to 20 mg/m² per day, with HM30181A (15 mg) in combination with capecitabine at 800-1000 mg/m² for 14 days. The MTD of Oratecan, in combination with capecitabine at the 1000 mg/m² dose was identified at 15 mg/m² per day. Adverse drug reactions in the study included diarrhea, nausea, anorexia, and vomiting. At the MTD of 15 mg/m², the SN-38 C_max on Days 1 and 5 were 5 and 8 ng/mL. Estimated SN-38 cycle exposure (AUC) was 390 ng-hr/mL. In this study of combination of Oratecan with capecitabine in patients with a variety of solid tumors (mostly GI cancers), 10 out of 18 (56%) patients had either stable disease or a partial response.

Overview of Safety Observations in completed Oratecan Studies

In our Oratecan clinical studies to date, the serious adverse effects observed include diarrhea, rash, gastrointestinal hemorrhage, anorexia, vomiting, nausea, enteritis, increased bilirubin, leukopenia, pulmonary embolism, asthenia, neutropenia, increased alanine aminotransferase, increased aspartate aminotransferase and acute kidney injury.

Current and Planned Clinical Development

ORTE-01-14-US Phase 1 MTD Study

The Phase 1 MTD study is being conducted by us and is currently ongoing. This study is to determine the MTD of Oratecan, when given once every 3 weeks, in subjects with advanced malignancies. In previous studies, Oratecan was given once daily for 5 days every 3 weeks and achieved total cycle SN-38 exposure, as measured by AUC, similar to IV administration of irinotecan. This once every 3-week dosing strategy is being evaluated in order to assess if we can further increase SN-38 exposure while avoiding toxicity.

Phase 1 Bioavailability Study

We are currently planning a Phase 1 bioavailability study of Oratecan to be conducted in conjunction with ZenRx in New Zealand. The objective is to determine the absolute bioavailability of Oratecan and to compare the extent of absorption of Oratecan to that of IV irinotecan based on levels of SN-38 This study will allow us to determine the exposure of SN-38 following Oratecan administration that will be equivalent to the SN-38 levels observed with the IV route of administration.

Oradoxel (HM30181A Tablet + Oral Docetaxel)

Preclinical Activity and Evaluation

The effectiveness of HM30181A to inhibit the P-gp pump’s ability to transport docetaxel out of cells was first demonstrated in vitro by an increase in the potency of docetaxel by 1,788-fold in a uterine sarcoma cell line.

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In rat oral PK studies, the plasma concentrations of docetaxel versus time, shown below, demonstrates a significant increase upon co-administration of HM30181A with docetaxel. In this experiment, docetaxel is formulated in the proposed clinical formulation. The chart and table below show the plasma levels when docetaxel was dosed in oral formulations in the absence of HM30181A and in the presence of HM30181A. This data shows a large increase in the plasma levels of docetaxel when HM30181A was also dosed orally in all three oral dosing formulations tested. Oradoxel was tested in preclinical human prostate cancer murine model as shown in the table below. Overall, Oradoxel was more active than docetaxel given orally without a P-gp inhibitor and was similar to the efficacy of IV docetaxel administration. At a dose of 25 mg/kg docetaxel with HM30181A a percent of tumor control of 4.8% was achieved which is comparable to the standard 10 mg/kg IV dosing regimen of docetaxel (2.9%). Without P-gp pump inhibition by HM30181A, oral administration of docetaxel demonstrated less inhibition of tumor growth, with a percent of control of 50.5%, consistent with reduced absorption of oral docetaxel when dosed without HM30181A.

Docetaxel +/- HM30181A in Prostate Cancer Murine Model

Treatment	Mean (±SD) Tumor Weight on Day 21 Post Treatment	T/C (%)a
Control	0.348 ± 0.047	—
Docetaxel (10 mg/kg, IV)	0.01 ± 0	2.87
Docetaxel (25 mg/kg. Oral) plus HM30181A	0.017 ± 0.003	4.78
Docetaxel (25 mg/kg Oral)	0.176 ±0.035	50.53

Current and Planned Clinical Studies

Based on the preclinical mouse efficacy data and rat and dog toxicology data, we expect that oral administration of docetaxel together with HM30181A will be efficacious and well tolerated in the clinic. We believe it may minimize the dose-limiting toxicities associated with docetaxel therapy, such as fluid retention, and allow increasing dosing to obtain superior efficacy.

The U.S. FDA allowed our IND in the first quarter of 2016 and, most recently, we gained regulatory allowance for a clinical trial in New Zealand. The U.S. study will be a Phase 1 dose escalation trial for Oradoxel in patients with various solid tumors with a starting dose of 35 mg/m² given once every 3 weeks. In New Zealand, a Phase 1 study will be conducted to identify the absolute bioavailability of Oradoxel in solid tumor patients.

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Oratopo (HM30181A Tablet + Oral Topotecan)

Preclinical Activity and Evaluation

In rat oral PK studies, the plasma concentrations of topotecan versus time, shown below, demonstrates a significant increase upon co-administration with HM30181A. This effect is evident when topotecan is formulated in saline or the marketed product, Hycamtin. In preclinical murine models with human tumor transplants, including ovarian cancer, oral topotecan in combination with HM30181A was more active than oral topotecan alone following administration at a dose of topotecan 1 mg/kg once daily for five days per week, as illustrated in the lower chart below.

Topotecan +/- HM30181A in Ovarian Cancer Murine Model

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Current and Planned Clinical Studies

IND enabling studies have been conducted. To date, dose-range finding studies along with GLP toxicology and toxicokinetic studies following single and multiple daily doses are being conducted with oral Topotecan in combination with HM30181A. These studies have been recently completed to establish the maximum tolerated dose for the 5-day regimen to support our proposed clinical dosing regimen. We recently completed cGMP manufacturing of oral irinotecan formulation. We filed an IND application for oral topotecan in combination with HM30181A in February 2017 and it was allowed in March 2017.

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Our Src Kinase Inhibition Platform

The table below shows our planned and ongoing clinical trials for our major Kinase inhibition drug candidates.

PK and MTD denote pharmacokinetics and maximum tolerated dose, respectively.

KX-01

Mechanism of Action

KX-01 is a novel small molecule, which we discovered and developed, which demonstrates at least two MOAs relevant to the control of cancer and hyper-proliferative disorders: Src tyrosine kinase inhibition (non-ATP competitive) and tubulin polymerization inhibition. Src plays a demonstrated role in regulating multiple aspects of tumor development, growth, and metastases, and its inhibition limits such tumor activity. Interfering with tubulin polymerization activity is a clinically validated mechanism for treating cancer. For both targets KX-01 binds at a novel binding site. Taken together, these two MOAs provide for a potent means of treating cancer and other hyper-proliferative disorders.

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The first MOA defined for KX-01 is Src tyrosine kinase inhibition. We have demonstrated the correlation of KX-01 inhibition of Src auto-phosphorylation (a measure of Src activity) and cell growth during the proliferation phase of tumor cells in both c-Src^527F/NIH-3T3, a cell line derived from fibroblasts with enhanced Src activity, and HT29, a cell line derived from colon cancer cells. Through in vitro tests, KX-01 is shown to induce caspase 3 cleavage and PARP cleavage, which are both markers for cell death/apoptosis, as well as p53 induction, which is a protein involved in tumor suppression. Unlike most known Src inhibitors, KX-01 is unique in that it is not an ATP competitive inhibitor of Src but rather it is believed to be a substrate competitive inhibitor, which means high specificity for the intended binding target. A computational model for how KX-01 is predicted to bind in the peptide substrate site of Src is depicted in the figure below, as noted in a NMR/paramagnetic probe study conducted and published by Wyeth LLC.

The second MOA defined for KX-01 is inhibition of tubulin polymerization, a step essential for cell growth. We have demonstrated the ability of KX-01 to inhibit tubulin polymerization in vivo within tumors in a mouse xenograft, and showed synergistic activity with paclitaxel to cause tubulin fragmentation, a process to interrupt cell growth.

The two MOAs of KX-01 are intended to control cell growth and proliferation of cancer cell types as well as cell types involved in hyper-proliferative diseases. Specifically, KX-01 has been shown to have potent activity in controlling cell growth in keratinocytes, or skin cells (with IC₅₀ = 32 nM). This activity demonstrates the potential of these compounds to control hyper-proliferative diseases of the skin, examples being actinic keratosis and psoriasis.

The following table shows the broad spectrum activity against many cancer types. GI50 represents the concentration of KX-01 to be used to inhibit 50% of tumor cell growth. The lower the numerical value of GI50 the higher the potency of KX-01.

Human Tumor Cell Line	KX-01 GI50 (nM)		Human Leukemia Cell Line	KX-01 GI50 (nM)
HT29 (Colon)		25	K562 (CML)	13
SKOV-3 (Ovarian)		10	K562R (Gleevec resistant CML)	0.64
PC3-MM2 (Prostate)		9	MOLT-4 (ALL)	13
L3.6pl (Pancreas)		25	CCRF-HSB-2 (ALL)	12
MDA-MB-231 (Breast)		20	Jurkat (Adult T Cell Leukemia)	10
A549 (Lung)		9	Ba/F3 + WT BCR-Abl	85
HuH7 (Liver)		9	Ba/F3 + E225K (Gleevec Resistant)	80
769-P (Kidney)		45	Ba/F3 + T315l (Gleevec & Dasatinib Resistant)	35
SNU-1 (Gastric)		6	KG-1 (AML)	16
			RPMI8226 (Multiple Myeloma)	40
			RL (non-Hodgkin’s lymphoma)	19

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Research Background

Topical formulation development studies carried out by our licensing partner, PharmaEssentia, in Taiwan resulted in a suitable clinical formulation. KX-01 topical formulations are initially being tested by PharmaEssentia in psoriasis clinical trials in Taiwan.

In parallel, we are evaluating a topical KX-01 ointment in the clinic for AK in the U.S. The most common cause of AK is exposure to ultraviolet radiation from the sun or tanning beds. This exposure can lead to oncogenic changes, such as inactivation of p53, and consequential hyper-proliferation of mutated keratinocytes. If left untreated 10-15% of AKs can progress to skin cancer. KX-01 inhibits the proliferation of keratinocytes and up-regulates p53 so its utility in clinically treating AK was of interest. Clinical trials with a KX-01 topical ointment for treating AK have produced encouraging early results. KX-01 ointment 1% has a room temperature shelf life of at least 6 months.

KX-01 Ointment for Topical Indications

Completed Clinical Study

Phase 1 Study

The Phase 1 study of KX-01 ointment for treatment of AK was conducted by us in the U.S. and is clinically complete. This is a four cohort, PK and safety study of 3 days or 5 days, with treatment of 25 cm² or 100 cm² applied to the forearm. The results for the Phase 1 studies showed that with 1% KX-01 ointment being applied for 5 consecutive days in on a 25 cm² area of the forearm; 50% (4 of 8 subjects) had complete response (100% clearance). This was achieved with very good local and systemic tolerability. We believe that the high clearance rate with low skin toxicity compares well to existing treatments on the market.

Clinical data thus far indicate that KX-01 ointment produces a complete response without severe adverse skin reactions in some patients, as shown in the images below:

Skin reaction from KX-01 ointment in a subject who had a 100% response

Current and Planned Clinical Development

Phase 2a Study

We completed enrollment in 2016 of an approximately 160-patient Phase 2a clinical study in the U.S. of KX-01 ointment for treatment of AK on the face and scalp. This is an open label, two sequential cohort study of approximately 80 patients each with treatment of KX-01 ointment 1% for either 5 days or 3 days. The primary objective is to evaluate the complete response rate, which is defined as 100% clearance of such patient’s AK at Day 57 after treatment. Additionally, we seek to further investigate the findings from the Phase 1 proof of concept study indicating that KX-01 ointment has a favorable side effect profile. We completed a face-to-face meeting with the FDA and the FDA has allowed a Phase 3 study of KX-01 for treatment of AK, which we expect to commence in the second half of 2017.

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Initial data from patients in the study shows that the KX-01 dosing regimen used in this study is devoid of severe LSRs. There were no Grade 4 LSRs reported thus far.

Maximal Local Skin Reactions for Study KX-01-AK-002 Phase 2a Trial: Percentage of subjects with most severe LSRs as assessed by study investigators (Grade 4)

Local Skin Responses	Grade		KX-01-AK-002a N=67 (%)
Erythema		4		0
Flaking/Scaling		4		0
Crusting		4		0
Swelling		4		0
Vesiculation/Pustulation		4		0
Erosion/Ulceration		4		0

^(a)  Ongoing preliminary data.

Cross-table tabulation of Complete Clearance Rate:

	KX-01% Days(a)
Face		15/35	(43%)
Scalp		9/32	(28%)

^(a)  Ongoing preliminary data.

Skin reaction example from KX-01 ointment in a subject who had a 100% response

Day 1	Day 8	Day 57

As demonstrated above in the pictures, the patient in our Phase 2 study who experienced a 100% response experienced no severe skin reaction. Since skin toxicity is likely to be a significant consideration of clinicians and patients, especially on the face and scalp, we believe that the market is likely to expand for topical treatments options for this pre-cancerous skin condition. To the extent that skin toxicity has been limiting the market, we believe that KX-01 ointment may significantly expand the market as a result of a low skin toxicity.

KX-01 Oral

Completed Clinical Studies

KX-01 oral capsules are available in strengths of 20 mg and 80 mg and have a room temperature shelf life of 48 months. KX-01 oral has been evaluated in several early dose finding studies against both solid and liquid tumors. Initial clinical results indicate activity against both solid and liquid tumors in patients. We are planning further probing studies to focus our evaluation in certain of those indications where activity was observed.

Phase 1 and Phase 2a US Study—Complete

A Phase 1 clinical trial in solid tumor patients identified the MTD for continuous twice daily oral dosing at 40 mg/dose, with a favorable PK profile, and indications of activity. In this trial, 44 patients were enrolled in 9 dose cohorts.

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The drug was well tolerated and the dose limiting toxicities were mainly elevated levels of aspartate transaminase, or AST, and alanine transaminase, or ALT, which were readily reversible. 11 patients had stable disease for at least 4 months, including patients with ovarian, carcinoid, papillary thyroid, prostate, pancreas and head and neck cancer. An ovarian cancer patient had stable disease for 16 months and a KX-01 oral induced a large decrease in the ovarian cancer CA-125 biomarker, which correlates well with clinical response. As shown in the table below, this patient had failed nine prior drug, and drug combination therapies, thereby showing a clear benefit from KX-01 oral treatment.

Therapy	Duration (months)
Carboplatin, Paclitaxel		5
Gemcitabine, Carboplatin		2
Gemcitabine, Taxotere		2
Doxil		1
Cisplatin, Cyclophosphamide, Epirubicin		4
Tamoxifen		2
Topotecan		3
Abraxane, Avastin		4
Folfox, Avastin		1
KX-01 oral		16

A subsequent Phase 2a clinical study in men with bone-metastatic castration-resistant prostate cancer using the twice daily 40 mg/dose was conducted. 31 patients were dosed with KX-01 oral at 40 mg/dose twice daily until disease progression or unacceptable toxicity. The primary endpoint was 24-week progression-free survival (PFS). The designated clinical endpoints were not met with KX-01 oral at this dose.

A Phase 1b clinical study in elderly AML patients was conducted using once daily dosing. The doses tested were 40, 80, 120, 140 and 160 mg of KX-01. 24 patients were recruited with a median age of 76 years (range 63 to 86 years). Most had been previously treated for their disease, generally with decitabine or azacitidine. The MTD is estimated to be 105 mg of KX-01 oral daily.

Overview of Safety Observations in completed KX-01 Oral Studies

In our KX-01 Oral clinical studies to date, the serious adverse effects observed include allergic reaction, bacteremia, fatigue, rash, syncope, tremor, dermatitis, neutropenic fever, hyponatremia, failure to thrive, lower extremity edema, mucositis, neutropenia, pancytopenia, thrombocytopenia, seizure and motor vehicle accident, embolic stroke, pneumonitis, fever, acute kidney injury, lung infection and increased blood platelet, albumin and bilirubin levels, abdominal pain, arm pain, pyrexia, rigors, tachypenia, oxygen desaturation, pneumonia, anemia, elevated ALT and AST, dehydration and leukopenia.

Current and Planned Clinical Development

Our licensing collaborator, Hanmi Pharmaceuticals is completing a Phase 1b clinical trial in South Korea, combining escalating continuous once daily doses of KX-01 with a standard Taxol IV treatment of 80 mg/m² once weekly for 3 out of 4 weeks. This study is clinically completed and awaiting a study report.

Phase 1 Probing Studies in Hong Kong and Taiwan—Planned

We are planning probing studies in Asia in 2017 to evaluate KX-01 oral treatment in ovarian and liquid tumors for cancer indications where previous activities were observed.

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KX-02

Research Background

KX-02 is a closely related structural analog of KX-01 and demonstrates a similar dual MOA of inhibition of Src activity and microtubule polymerization. KX-02 was designed to readily cross the blood-brain-barrier, or BBB. The KX-02 levels in the mouse brain meet or exceed that in the plasma at the same time points after oral dosing, demonstrating that KX-02 readily crosses the BBB. We believe that this ability to cross the BBB provides a rationale for investigating brain cancers and metastases in the brain as potential therapeutic applications for what is traditionally considered an unmet medical need.

Preclinical evaluation and activity

In Vivo Activity

Based on pre-clinical data demonstrating activity against a number of brain cancer cell lines and demonstrated BBB penetration, KX-02 was tested orally in a mouse GBM tumor model, wherein the mice with a fully competent immune system are implanted with mouse GBM tumor cells into the brain in order to simulate a human patient. When compared with TMZ, the current standard of treatment, in one particular study KX-02 produced long term survival mice, as compared to TMZ, which extended survival but did not result in any long term survivors. Across multiple experiments, an average of approximately 30% long term survival mice were produced when dosed with KX-02 at 30 mg/kg once daily, as shown in the figure below.

To visualize tumor growth in situ, animals treated with KX-02 were compared to those that had been treated with placebo alone using MRI. The KX-02 treated mice that eventually survived long term did not have tumors whereas the placebo mice have large tumors at the time points evaluated.

The potential role of an adaptive immune response in the responses of the mice treated with KX-02 was demonstrated in three ways. First, when the same mouse study was repeated with mice lacking an adaptive

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immune system no cures were obtained. Second, when mice that had been cured by KX-02 were re-challenged with mouse GBM cells they failed to develop tumors, whereas untreated mice readily show tumor growth. Third, a larger infiltration of lymphocytes into brain tumor tissues was seen in mice treated with KX-02 as compared to those treated with a placebo, and these lymphocytes stained as CD3 and CD8 immune cells. Accordingly, KX-02 also appears to facilitate the immune system’s recognition of brain tumor tissues as foreign cells, in addition to its Src and tubulin-targeted activities. In our KX-02 clinical studies to date, the only serious adverse effects observed were thromboembolic events.

Current and Planned Clinical Studies

Phase 1 Study

We are currently enrolling a Phase 1 study in the U.S. of KX-02 for treatment of solid tumors in order to determine the MTD, PK, and safety profile. This trial is currently in the dose escalating phase.

In 2012, we out-licensed KX-02 to Xiangxue Pharmaceuticals for development and marketing in greater China and clinical trials are currently being planned. As part of that collaboration, Xiangxue recently submitted an IND to the CFDA for subsequent clinical trials in China. We anticipate the development timeframe for our KX-02 drug candidate for glioblastoma to be accelerated once we commence our partnered clinical program in China.

Intranasal Granisetron (GNS)

The development of supportive therapy is complementary to our oncology drug platform. Chemotherapy-induced nausea and vomiting, commonly referred to as chemotherapy-induced nausea and vomiting, or CINV, which is a common side effect of cytotoxic chemotherapy treatments. Granisetron is a 5-hydroxytryptamine 3, or 5-HT3, receptor antagonist, a class of anti-emetic drugs that are commonly used in the prevention of CINV. Our subsidiary, Comprehensive Drug Enterprises, has developed intranasal formulations of granisetron for further evaluation in the clinic.

Current Therapies and Limitations

Currently, granisetron is dosed in IV, oral and patch forms to treat CINV. We believe these dosing regimens have disadvantages including time to effectiveness, and lack of ability to control the symptoms effectively at home.

Current and Planned Clinical Studies

We believe intranasal delivery will possess a number of advantages for the patient. These advantages include a rapid delivery of therapeutic drug levels for quick relief of CINV as well as the ability to self-dose outside of the hospital and IV settings while experiencing CINV whereupon oral administration would be difficult. The intranasal route of administration of GNS leads to more rapid achievement of systemic concentrations of the drug compared to the oral route.

A Phase 1 parallel-group study of GNS was conducted in Taiwan to assess the PK, safety, and tolerability of GNS. A total of 50 healthy subjects, 25 male and 25 female, were divided into the following treatment groups: 1 mg Kytril administered IV over 30 seconds to 10 patients, 1 mg Kytril tablets administered orally to 10 patients, and either 0.5, 1, or 2 mg of intranasal GNS was administered to 10 patients. The results showed that the drug concentrations were dose proportional following intranasal delivery of GNS and the side effects were acceptable.

We are presently evaluating the market opportunity in various geographies for the development of an intranasal route of delivery in order to determine the next path clinically for this drug candidate.

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Our Research and Development

We are an innovative oncology company with drug discovery, drug formulation, clinical development, and API/drug product manufacturing facilities in both the U.S. and China. The U.S. drug discovery, clinical development, and formulation research facilities are largely concentrated in Buffalo, New York and Cranford, New Jersey. The range of capabilities at these facilities includes medicinal chemistry, biochemistry, cell biology, formulation, chemical manufacturing and control, quality control, pharmacokinetics/pharmacodynamics (PK/PD), data management, as well as pharmacovigilance, clinical development and regulatory expertise functions. Animal efficacy, PK/PD, and toxicology studies are carried out at various contract research organizations, or CROs, around the world in order to eliminate the need for an in-house animal facility.

In China, our research and development center in Hong Kong is closely integrated with our research and development center in Buffalo. This center concentrates on drug formulation development and evaluation. When we acquired Comprehensive Drug Enterprises, or CDE, in 2015, we added scale to our formulation and research personnel in Hong Kong. The clinical oral formulation of docetaxel is an example of a discovery emanating from our Hong Kong research and development center. Higher strength paclitaxel powder tablet formulations, to be introduced into our future clinical evaluations of the Oraxol drug product, are a second example of the formulation development work being successfully carried out at the Hong Kong research and development center.

Our proprietary Dual (CYP/P-gp) Inhibitor Program

We are developing a proprietary class of “dual” absorption enhancers that inhibit both the P-gp transporter and the CYP enzymes within the gastrointestinal tract. There are many barriers that limit the oral absorption of drugs in humans. The P-gp transporter is a major barrier to absorption of active chemotherapy drugs. However, certain other drugs with P-gp liabilities may also have liabilities for other barriers such as metabolizing enzymes, primarily the cytochrome P450, or CYP, class of enzymes. These CYPs limit oral absorption of certain drugs by metabolizing drugs within the gastrointestinal tract before they can be absorbed. This class of dual absorption enhancers has shown potential to significantly improve the oral bioavailability of certain other drugs in laboratory tests, and may expand the application of our oral absorption platform to drugs where the CYP barrier to oral absorption is also important. These dual absorption enhancers may lead to better performing next-generation oral medicines in our pipeline of clinical products.

The development of these dual absorption enhancers is at the preclinical stage. Proof of concept, providing increased oral bioavailability in preclinical species, has been obtained with several absorption enhancers and candidate drugs. Currently additional filters such as patentability/freedom to operate, physical-chemical characterization, pre-formulation studies, manufacturing analysis and preliminary toxicity testing are being applied to our first group of lead candidates for clinical development. In 2017, we expect to identify our lead molecule for a future IND enabling study.

Commercial Platform

We believe the value creation potential is higher for biopharmaceutical companies able to commercialize their proprietary products as compared to companies who have a partner to commercialize. The infrastructure investment and build-out of a commercial team prior to regulatory approval is typically costly and requires years of investment. In 2016, we launched a commercial platform in the U.S. to begin building out this infrastructure in advance of our launch of proprietary products. As part of our capital efficient strategy, we anticipate that our commercial team will market and sell a variety of in-licensed pharmaceutical products, which are therapeutically related to our proprietary portfolio, to cover the cost and expense of the infrastructure investment.

Using our resources to commercialize products in oncology may create more value for investors than marketing product rights pre-commercialization. We believe commercialization risks can be offset by establishing oncology manufacturing operations (API, Manufacturing, etc.) and commercial operations (Multi-source Oncology, Pharmacy, Hospitals, etc.).

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Our Commercial Operations

Target Audiences: U.S. Oncology Market

The U.S. Oncology market is highly complex with Gatekeepers, Influencers and Prescribers influencing sales of oncology products. Launching a commercial operation in preparation for a proprietary drug approval is risky, difficult and expensive. Any commercial oncology organization must be able to market to Gatekeepers, Influencers and Prescribers in the oncology market at launch. Gatekeepers include hospitals (including pharmacies and therapeutics committees), buying groups, oncology managed care organizations, specialty distributors and pharmacists. Influencers in the oncology market include Key Opinion Leader physicians, regional cancer centers (as defined by the National Cancer Institute) and the U.S. government. Prescribers include oncologists and dermatologists.

Key hurdles in establishing Commercial Operations in the oncology market include the unpredictability of timing for U.S. FDA approval and the limited time to establish market relationships post approval, competition with companies with broader oncology offerings, identifying key influencers in the local oncology market and the unpredictability of timing with U.S. FDA approval. Another hurdle is recruiting key senior business leaders since they are responsible for recruiting a successful Oncology Sales and Marketing team. For all these reasons, establishing commercial operations in the oncology market is risky and expensive.

In order to manage the risks and capture post commercial oncology economics, we plan to launch two oncology product lines in 2017—Multisource Oncology products and 503B Compounded Oncology Products. We intend to support these two product lines with a sales and marketing organization to target Gatekeepers. Our National Accounts organization will target Gatekeepers and the U.S. Government for these two oncology product lines. Regional Cancer Centers will also be targeted for Multisource Oncology and Compound Pharmacy products.

503B Compound Pharmacy Products

We plan to directly manufacture our own products in our 503B Compound Pharmacy. We expect to use our internal cGMP operations, and selected contract manufacturers to make both sterile to sterile products and products from sterile bulk API. We plan to source certain of our API from our own internal supply chain to make products from sterile API bulk. We also plan to buy API from other sources. For sterile to sterile products, we expect to source the sterile vials and bags from national suppliers. This second oncology business is expected to further expand our offering to the U.S. oncology market.

U.S. Specialty Pharmaceuticals

Our U.S. Specialty Pharmaceuticals business sources products through licensing agreements with various partners, who we collectively refer to as our Global Partner network. The company has unique commercial expertise in multisource oncology products and has developed a number of Global Partners that develop and manufacture multisource products for the U.S. market. This Global Partner network supplies the products the company markets in the U.S. Specialty Pharmaceutical business. The company is launching a commercial oncology business in the U.S. by launching multisource oncology and therapeutically related products supplied by our Global Partner network. We anticipate structuring collaborations whereby we split the profits with the Global Partners and market the products to Gatekeepers and Influencers in the U.S. oncology market. This will help the company prepare to launch proprietary oncology products into the U.S. market.

As of March 31, 2017, we have the non-exclusive commercial rights to market and sell 14 FDA approved products and 20 products pending FDA approval.

Gland Agreement

In August 2016, we entered into two binding term sheets with Gland Pharma Limited, or Gland, pursuant to which we expect to enter into a definitive agreement for a non-exclusive license to market 21 of Gland’s

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products. Gland has obtained FDA approval for 8 of such products and has filed an abbreviated new drug application, or ANDA, in the U.S. for the remaining 13 products. For each of the licensed products we will pay a license fee to Gland. The maximum amount of such licenses is $7.3 million, of which $1.15 million is contingent on regulatory approval for 13 products for which Gland has filed ANDAs. We will pay a portion of such $1.15 million upon regulatory approval of each of these 13 licensed drugs. Additionally, during the terms of the agreements we have a profit sharing arrangement pursuant to which we will pay to Gland between 20% and 60% of the net profits from sales of each of the licensed products, depending on the product. The initial term of each of the of the Gland license agreements is five years from the launch of each product licensed pursuant to the agreement, subject to automatic renewal for additional two year terms, unless terminated by either party upon provision to the other party at least 90 days’ notice in advance of a renewal date.

In February 2017, we entered into an additional binding term sheet with Gland, pursuant to which we expect to enter into a definitive agreement for a non-exclusive license to market an additional 6 of Gland’s products. Gland has obtained FDA approval for 4 of such products and has filed an ANDA in North America for the remaining 2 products. For each of the licensed products we will pay a license fee to Gland. The maximum amount of such licenses is $3.15 million, of which $312,500 is contingent on regulatory approval for 2 products for which Gland has filed ANDAs. We will pay a portion of such $312,500 upon regulatory approval of each of these 2 licensed drugs. Additionally, during the term of the agreement we have a profit sharing arrangement pursuant to which we will pay to Gland between 25% and 40% of the net profits from sales of each of the licensed products, depending on the product. The initial term the Gland license agreement is five years from the launch of each product licensed pursuant to the agreement, subject to automatic renewal for additional two year terms, unless terminated by either party upon provision to the other party at least 90 days’ notice in advance of a renewal date.

SunGen Agreement

In September 2016, we entered into a joint venture agreement with SunGen Pharma LLC, or SunGen, which we refer to as the SunGen Agreement, to create a joint venture to develop and commercialize certain specialty pharmaceuticals. We and SunGen have agreed to negotiate in good faith a limited liability company operating agreement to govern the joint venture, which we agreed will be owned 51% by SunGen and 49% by us.

Initially, SunGen has committed the sales and marketing rights for two specialty pharmaceuticals—terbutaline drug products and injectable lincomycin, as well as other related lincomycin products which are in the development stage to the joint venture. We have agreed to pay any manufacturing costs of terbutaline, our portion of the development and manufacturing costs of lincomycin, $375,000, and marketing and sales expenses for both. We have agreed to equal profit sharing of all profits of the joint venture, except for any profits arising from sales of terbutaline injectable products, which shall be allocated 75% to SunGen and 25% to us.

In November 2016, we signed an addendum to the agreement to add Desmopressin Acetate Injection to the existing SunGen joint venture agreement. Through the joint venture, we and SunGen have agreed to pay to a third party an aggregate of $200,000 for the rights to the product. We and SunGen will each pay $40,000 upfront, with an additional $60,000 payable by each of us upon FDA approval of the product. In addition we and SunGen have each agreed to pay 25% of the one-time ANDA filing fee of $70,480, and 4% each of the annual FDA facility fees. The term of the addendum is ten years from the date of ANDA approval by the FDA, and renews automatically for one year periods, unless terminated in writing six months prior to the end of the term or automatic extension. 50% of the profits from the sale of Desmopressin Acetate under this addendum will be payable to the third party, with the remaining 50% paid to the joint venture between us and SunGen.

The term of the SunGen Agreement shall continue for 99 years, unless the parties mutually agree to terminate it earlier. The agreement also contains customary termination rights for either party in the event of a breach of the agreement by the other party.

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Pemetrexed, Supply Agreement Term Sheet

In December 2016, we entered into a binding term sheet with Nang-Kuang Pharmaceutical Co., LTD and CANDA NK-2, LLC, two affiliated pharmaceutical suppliers, pursuant to which we will enter into a definitive agreement for exclusive distribution of a generic injectable oncology product for the U.S. market. The generic product is not currently marketed in the U.S. pending the outcome of an ongoing challenge to the validity of patent protection of the branded product currently on the market. The ANDA for this product has been filed by the suppliers with the FDA and is awaiting approval. Upon signing of the term sheet, we were obligated to make a prepayment for a total of $12.0 million, of which $3.0 million was paid in January and February 2017, with the remaining $9.0 million due on May 1, 2017.

Under the agreement, we will make two additional product transfer payments, one equal to a premium between 10% and 20% over the cost incurred by the suppliers to produce and ship the product after confirmation of each purchase order of the product and, after receiving such product, we will make the other payment quarterly to the suppliers of between 40% and 60% of the earnings from sales, less certain expenses, of the product.

The initial term of the definitive agreement will begin on the signing date and continue through ten years after the date of our first commercial sale of the product, subject to automatic renewals of successive two-year terms, unless terminated by either party with six months’ notice prior to the expiration of the initial term or any renewal term. The agreement will also contain customary termination rights for either party in the event of a material breach of the agreement by the other party or bankruptcy or insolvency. In addition, we will be able to terminate the agreement with 30 days’ notice to the suppliers if the net profits from sales of the product, less certain expenses, equals zero or less and the parties cannot agree on reductions to the actual cost of the products.

Amphastar Agreement

In February 2017, we entered into a definitive agreement with Amphastar Pharmaceuticals, Inc., or Amphastar, to acquire 14 ANDAs and inventory for certain APIs. The agreement requires payments of up to $6.4 million, of which $1.0 million was paid upon execution of the agreement, $1.0 million is due within thirty days following May 1, 2017, $3.0 million is due within thirty days of receiving FDA approval of site transfer to sell Prochlorperazine Edisylate Injection USP, and $1.4 million is due within thirty days of receiving FDA approval of site transfer of a second product. If the conditions relating to the third and fourth payments described above are not met by December 31, 2017, we shall make such payments within 30 days of December 31, 2017 regardless of whether such conditions are ever met. In addition to the payments described above, we have agreed to pay Amphastar a royalty fee equal to 2% of our net sales relating to the 14 ANDAs and API inventory transferred to us by Amphstar for a period of 10 years from the execution of the agreement.

Summary of Commercial Strategy & Source of Supply Chain

Product line	Proprietary Oral / Dermal	Multisource / Specialty	503B Products	API
Launch date	To be determined	2017	2017	Ongoing
Commercialization regions	U.S., EU, China	U.S.	U.S.	U.S., EU, China
Manufacturing sites	Clarence, NY, Dunkirk, NY, Chongqing, China	Partner network, Dunkirk, NY, Chongqing, China	Clarence, NY, Dunkirk, NY	Chongqing, China

Global Supply Chain Platform

We believe it is important to minimize potential disruptions associated with a high potency oncology pharmaceutical supply chain. Therefore, we have begun the process of internalizing key components of the

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supply chain we believe are integral to minimizing these risks and retaining value for shareholders. For example, the World Health Organization lists paclitaxel as an essential medicine. Paclitaxel is derived from the bark of the Pacific yew tree and harvestable trees for the starting biomass are globally limited in supply. While current supply of the starting biomass for paclitaxel may be sufficient to meet global paclitaxel API demand, we believe future shortages are possible if we are successful in the commercialization of one of our lead drug candidates, Oraxol. We believe this increased demand could lead to shortages of paclitaxel API potentially leading to market and supply disruptions.

Our research group evaluated the purity and potency of some of the largest global suppliers of paclitaxel API. In 2015, we acquired one of these suppliers, Polymed Therapeutics Inc., or Polymed, and Chongqing Taihao Pharmaceutical Co. Ltd., or Taihao. Taihao is a cGMP manufacturer of high potency oncology API based in Chongqing, China and Polymed is the U.S. marketing entity for Taihao’s API in North America and Europe. Historical production and sales of API by this subsidiary were to third parties. We anticipate a greater share of Taihao’s manufacturing capacity will be used for our internal needs in the future and, therefore, sales to third parties may decrease. Historically, Polymed sold certain of these API products internationally to mostly large multi-national pharmaceutical companies. For the years ended December 31, 2015 and 2016, 29% and 38%, respectively, of our total revenue came from Intas Pharmaceuticals and 17% and 24%, respectively, came from Ebewe Pharmaceuticals. We have not entered into any agreements with any of our customers, and no other customer accounted for sales representing more than 10% of our consolidated total revenue for the years ended December 31, 2015 and 2016.

In 2014 we sought to obtain better control over our manufacturing of high potency oncology drugs used in global clinical studies, and in the third quarter of 2014 acquired QuaDPharma, one of our suppliers based in Clarence, New York. The number of our clinical studies has grown since the close of the acquisition. We are currently standardizing and leveraging the acquired cGMP systems and operating procedures in anticipation of developing multi-cGMP large scale manufacturing plants in both the U.S. and China. Our Commercial Platform has also initiated an assessment for a transition and potential expansion of these facilities to produce FDA shortage products.

Facilities, Manufacturing and Quality Assurance

Our facilities are located in the U.S., China and Hong Kong, and we own and lease a variety of manufacturing, research and development, distribution, packaging, laboratory, office and warehouse space. Our GMP operating facilities are inspected by the FDA, and we believe that all of our facilities are being operated in material compliance with the FDA’s cGMP regulations where applicable.

Our material facilities in Buffalo, New York, Dunkirk, New York and Chongqing, China have been, and are being, paid for through public-private partnerships, and will be available for our exclusive use at below-market rates, for the foreseeable future. These material facilities are described further in the descriptions of our public-private partnerships below.

New York State Partnership

In May 2015, we entered into an agreement with Fort Schuyler Management Corporation, or FSMC, a not-for-profit corporation owned by the State of New York, for a medical technology research, development, innovation, and commercialization alliance. Under the agreement, FSMC will pay up to $25 million for the construction of our North American headquarters and formulation lab and equipment in Buffalo, New York. We moved into the North American Headquarters in October 2015 and will lease from FSMC for a 10-year term, with an option to extend the term for an additional 10 years. For the first three years of the lease, we will pay rent to FSMC equal to 35% of FSMC’s operating costs for the space and thereafter will pay 100% of FSMC’s operating costs for the space for the remainder of the term. Under the agreement, we are obligated to spend $100 million in the Buffalo area over the initial 10-year term of the lease, and an additional $100 million during the

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second 10-year term, if we elect to extend the lease. We also committed to hiring 250 permanent employees within the first 5 years in the Buffalo area.

Under the same May 2015 agreement, FSMC also agreed to fund the costs of construction of a new manufacturing facility in Dunkirk, New York. Under the current arrangement, we will select and hire contractors for the project and oversee the development of the facility. Empire State Development, the parent entity of FSMC, is responsible for the costs of construction and all equipment for the facility, up to an aggregate of $200 million, and ESD, not us, will own the facility and equipment. We are entitled to lease the facility and all equipment at a rate of $1.00 per year for an initial 10-year term, and for the same rate if we elect to extend the lease for an additional 10-year term. We are responsible for all operating costs and expenses for the facility. In exchange, we have committed to spending $1.5 billion on operational expenses in our first 10-year term in the facility, and an additional $1.5 billion on operational expenses if we elect to extend the lease for a second 10-year term. We also committed to hiring 450 employees within the first 5 years at our Dunkirk facility.

China Partnership

In October 2015, we entered into an agreement with Chongqing Maliu Riverside Development & Investment Co., Ltd., or CQ, which is wholly owned by the Finance Bureau of Banan district of Chongqing, and is authorized to be responsible for investments, financing, infrastructure construction, operations and management in the Chongqing Maliu Riverside Development Zone. Our agreement with CQ provides for the construction of both a formulation plant and an API plant in the PRC. After entering into the agreement, and pursuant to its terms, we established a PRC-based subsidiary that is responsible for the operations of both facilities in July 2016. CQ is now responsible for construction of both facilities according to U.S. GMP standards. Although the agreement contemplates completion by the end of 2016, we estimate the construction of the new API plant will be completed by the end of 2017 and that we will begin utilizing the facility in 2018. The land and buildings will be owned by CQ, and we will lease the facilities, rent-free, for the first 10-year term, with an option to extend the lease for an additional 10-year term, during which, if we are profitable, we will pay a monthly rent of 5 RMB per square meter of space occupied. We are responsible for the costs of all equipment for the facilities, and we have committed to occupying and beginning to use the facilities within six months of the completion of construction. We have also committed to achieving certain operational, revenue and tax generation milestones within certain time periods once we commence operations.

Our goal is to use our public-private partnerships as a capital efficient method for large scale cGMP manufacturing within our supply chain and to facilitate market access in China. We believe our current facilities will be adequate and suitable for our operations for the foreseeable future.

To date, we have utilized a combination of acquisitions and public-private partnerships to internalize certain key components of our manufacturing and supply chain. We expect to continue to use a combination of collaborations and acquisitions to continue to build out elements of our supply chain where needed as a mechanism to minimize execution risk and retain value for our shareholders.

Segment and Geographic Information

For financial reporting purposes, we present three distinct financial reporting segments based on criteria established by U.S. GAAP: (1) Oncology Innovation Platform, for the discovery and development of cancer supportive therapies, (2) Commercial Platform, the manufacturing of clinical and commercial pharmaceutical products, and (3) Global Supply Chain Platform, the manufacturing and marketing of API and medical devices. For a description of our revenues and long-lived assets by geographic location and more information on our reporting segments, please see Note 2 of the Notes to our consolidated financial statements included elsewhere in this prospectus.

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Intellectual Property

We strive to protect and enhance the proprietary technologies, inventions, products and product candidates, methods of manufacture, methods of using our products and product candidates, and improvements thereof that are commercially important to our business. We protect our proprietary intellectual property position by, among other things, filing patent applications in the U.S. and in jurisdictions outside of the U.S. covering our proprietary technologies, inventions, products and product candidates, methods, and improvements that are important to the development and implementation of our business. We also rely on trade secrets, know-how, continuing innovation, and licensing opportunities to develop, strengthen and maintain our proprietary intellectual property position. As of March 31, 2017, we own more than 100 granted patents and more than 40 pending patent applications worldwide. In addition, we have in-licensed patents and patent applications relating to our Orascovery platform technology from Hanmi. In our Orascovery platform, the lead compound is covered as composition-of-matter in granted patents in the U.S. and other territories, such as China and Europe. These patents will expire in October 2023 or 2024, excluding any potential patent term adjustments and/or patent term extensions that may be available. The lead compounds in our Src Kinase Inhibition platform are covered as composition-of-matter in granted patents in the US and other territories, including China and Europe. These patents will begin to expire in December 2025, excluding any potential patent term adjustments and/or patent term extensions that may be available.

The term of individual patents depends upon the laws of the countries in which they are obtained. In most countries in which we file, the patent term is 20 years from the earliest date of filing of a non-provisional patent application. In the U.S., the term of a patent may be lengthened by patent term adjustment to compensate the patentee for administrative delays by the USPTO in examining and granting the patent, or may be shortened if the patent is terminally disclaimed over an earlier-filed patent. In addition, a patent term may be extended to restore a portion of the term effectively lost as a result of FDA regulatory review. However, the restoration period cannot be longer than five years and cannot extend the remaining term of a patent beyond a total of 14 years from the date of FDA approval, and only one patent applicable to an approved drug may be extended. Similar extensions as compensation for regulatory delays are available in Europe and other jurisdictions. We intend to seek patent term extensions where these are available. However there is no guarantee that the applicable authorities, including the FDA in the U.S., will agree with our assessment of whether such extensions should be granted, and we cannot predict the length of the extensions even if they are granted. The actual protection afforded by a patent varies on a claim-by-claim basis, from country-to-country, and depends upon many factors, including the type of patent, the scope of its coverage, the availability of regulatory-related extensions, the availability of legal remedies in a particular country, and the validity and enforceability of the patent. For a granted patent to remain in force most countries require the payment of annuities or maintenance fees, either yearly or at certain intervals during the term of a patent. If an annuity or maintenance fee is not paid, the patent may lapse irrevocably.

We own 16 granted patents in the U.S. and 99 granted patents in other countries relating to our Src Kinase Inhibition technology. In addition, we own 37 pending applications relating to the Src Kinase Inhibition technology in the U.S. and other countries. These patents and pending patent applications contain composition-of-matter claims to our lead product candidates and their analogs, claims to pharmaceutical compositions comprising such candidates, and claims to methods of making and method of treatment using such candidates. Not accounting for any patent term adjustment, patent term extension or terminal disclaimer, and assuming that all annuity and/or maintenance fees are paid, the patents and, if granted, patent applications, will expire from 2025 to 2038.

In addition, we have one pending patent application in each of the Patent Cooperation Treaty, or PCT, the Gulf Cooperation Council, Jordan and Taiwan. The PCT application can be filed worldwide by entering national stage in various member states by January 21, 2018. These pending patent applications relate to therapeutic combinations of orally administered paclitaxel and a P-gp inhibitor. Not accounting for any patent term adjustment, patent term extension or terminal disclaimer, and assuming that all annuity and/or maintenance fees are paid, the patent applications, if granted, will expire in 2036.

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License and Collaboration Agreements

Hanmi Licensing Agreements

Out-License

In April 2011, we entered into a license agreement with Hanmi, which we refer to as the Hanmi Out-License, pursuant to which we granted to Hanmi an exclusive, sublicensable license to use certain of our intellectual property for development and commercialization of products containing KX-01 in certain territory including South Korea, China, Taiwan, Hong Kong, Singapore, Malaysia, Thailand, the Philippines, Indonesia and Vietnam. We also granted to Hanmi a right of first refusal for any KX-01 related formulation or pharmaceutical that we develop and intend to grant an exclusive license for in the territory covered by the Hanmi Out-License. Hanmi is responsible for all development, manufacturing and commercialization, and the related costs and expenses, of any product candidates resulting from the agreement.

We received an upfront payment of $1.5 million from Hanmi upon effectiveness of the agreement, and we may be entitled to receive an aggregate of $4.0 million in additional development and regulatory milestone payments. We are also eligible to receive tiered royalty payments in the teens on net sales of each product commercialized by Hanmi utilizing the intellectual property subject to the Hanmi Out-License. Such royalties will be reduced as competing generic products gain market share in the applicable country.

The term of the Hanmi Out-License expires on the earlier of (i) expiration of the last of our patent rights licensed under the agreement or (ii) invalidation of our patent rights which are the subject of the agreement, provided that in each case the term will automatically be extended for consecutive one-year periods unless either party gives notice to the other at least 90 days prior to expiration of the patent rights licensed under the agreement or before the then-current annual expiration date of the agreement. Prior to the expiration of the term of the agreement, Hanmi may terminate the agreement in its sole discretion by providing six months’ notice to us. Subject to certain conditions, we may also terminate the agreement if Hanmi fails to comply with certain development timelines set forth in the Hanmi Out-License. The agreement also contains customary termination rights for either party, such as in the event of a breach of the agreement or the initiation of bankruptcy proceedings by the other party.

In September 2012, we entered into a memorandum of understanding with Hanmi, related to the Hanmi Out-License, pursuant to which we agreed to jointly enter into an agreement with a contract manufacturing organization to manufacture KX-01 for our and Hanmi’s needs, and to determine cost-sharing between us and Hanmi for such services. We have subsequently sourced certain clinical supplies from Formex L.L.C., pursuant to this agreement.

In-Licenses

In December 2011 and June 2013 we entered into two separate in-licensing agreements with Hanmi pursuant to which Hanmi granted us licenses to certain patents and know-how with respect to Hanmi’s Orascovery Program to research, discover and develop compounds that enhance or increase the oral absorption of active pharmaceutical ingredients.

The December 2011 agreement, which we refer to as the 2011 Hanmi Agreement, granted us an exclusive, sublicensable license for development and commercialization activities utilizing Hanmi’s patents and know-how related to the Orascovery Program in a certain territory including North America, South America, the European Union, Australia, New Zealand, Russia, Eastern Europe, Taiwan and Hong Kong, and a non-exclusive license to utilize the same intellectual property in manufacturing worldwide for sales inside those territories. The June 2013 agreement, which we refer to as the 2013 Hanmi Agreement, granted us an exclusive, sublicensable license comparable to the 2011 Hanmi Agreement solely for China. The 2011 Hanmi Agreement was amended in November 2012 to add Macau and Singapore to the territory governed by the agreement; in October 2013 to add Malaysia, Thailand, Vietnam, the Philippines and Indonesia; in March 2015 to add India; and again in March 2017 to add Japan.

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Upon effectiveness of the 2011 Hanmi Agreement we made an upfront payment of $250,000 to Hanmi, and we will pay Hanmi tiered royalty payments in the teens based on aggregate net sales of any products using the licensed intellectual property in the territory. Such royalties will be reduced if competing generic products gain market share in the applicable country. Depending on when we receive regulatory approval of a product using the intellectual property licensed from Hanmi in the U.S. or Europe, we may be obligated to pay Hanmi a regulatory bonus worth $24,000,000, to be paid (i) upon the occurrence of a liquidity event, if the regulatory approval has already been received, or (ii) upon receipt of the regulatory approval, if such approval is received after a liquidity event. We will also be required to pay Hanmi an exit bonus, in shares of our common stock, worth $5,000,000 upon the completion of this offering. In connection with the March 2015 amendment to the 2011 Hanmi Agreement, we made an upfront payment of $50,000 to Hanmi. Additionally, in connection with the March 2017 amendment to the 2011 Hanmi Agreement, we issued a $7.0 million convertible bond to Hanmi in lieu of an upfront payment. At the election of Hanmi, the convertible bond will be converted into a number of shares of common stock equal to the outstanding amount of the convertible bond divided by the discount price (which is variable based on the date of conversion) at certain specified dates. If Hanmi has not elected to convert the convertible bond to common stock prior to October 1, 2018, Hanmi may elect to convert the convertible bond to: (i) common stock equal to the outstanding amount of the convertible bond divided by the discount price, or (ii) cash equal to $7.0 million plus interest at 10% per annum accruing from March 7, 2017 to October 1, 2018. Pursuant to the March 2017 amendment to the 2011 Hanmi Agreement, we will be required to make payments to Hanmi worth up to $6.0 million in our common stock or in cash upon the occurrence of certain regulatory and sales milestones.

Upon effectiveness of the 2013 Hanmi Agreement we made an upfront payment of $100,000 to Hanmi, and we will pay Hanmi tiered royalty payments in the teens based on net sales of any products using the licensed intellectual property in China. The royalties shall be reduced if competing generic products gain market share in China. We also granted to Hanmi a one-time right of first negotiation to purchase all of our rights in Oraxol or Oratecan under the agreement during development and prior that, at Hanmi’s discretion, requires us to negotiate in good faith the sale of our rights under such agreement to Hanmi at a purchase price determined by an internationally-recognized investment banking firm with an office in Hong Kong at any time prior to the earlier of (i) our first commercial sale of products using such technology or (ii) receipt by Hanmi of written notice from our company of the sublicense of the rights in an applicable product to a third party.

Under each agreement, we are responsible for all clinical studies and development and commercialization activities, and the related expenses, resulting from the agreements. Each of the 2011 Hanmi Agreement and the 2013 Hanmi Agreement expires on the earlier of (i) expiration of the last of Hanmi’s patent rights licensed under the agreement or (ii) invalidation of Hanmi’s patent rights which are the subject of the agreement, provided that the term will automatically be extended for consecutive one year periods unless either party gives notice to the in each case other at least 90 days prior to expiration of the patent rights licensed under the agreement or before the then-current annual expiration date of the agreement. The patent rights licensed to us under the 2011 and 2013 Hanmi Agreements have expiry dates ranging from in 2023 to 2033, unless the terms of such licensed patents are able to be extended in accordance with applicable laws and regulations.

Hanmi may also terminate the 2011 Hanmi Agreement if (i) we fail to file an IND with the FDA for Oraxol within 6 months of the latest of (x) our receipt from Hanmi of all English translations necessary for the filing of an IND with the FDA, (y) the date we and Hanmi agree that all studies necessary for the filing of an IND with the FDA have been completed, or (z) the date of the final study report for the last of any additional studies that are necessary for the filing of an IND with the FDA, or (ii) we fail to commence clinical studies for Oraxol within twelve months after the date of approval of an IND by the FDA.

The 2013 Hanmi Agreement may be terminated by Hanmi if (i) we fail to file an IND for Oraxol with the CFDA within six months after the latest of (w) completion of all Chinese translations necessary for the filing of an IND with the CFDA, (x) completion of all manufacturing and toxicology studies necessary for the filing of an IND with the CFDA, (y) the date we and Hanmi agree that all studies necessary for the filing of an IND with the

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CFDA have been completed, or (z) the date of the final study report for the last of any additional studies that are necessary for the filing of an IND with the CFDA, or (ii) we fail to commence clinical studies for Oraxol within twelve months after the date of approval of an IND by the CFDA.

Such clinical development milestones in respect of the termination right in both the 2011 Hanmi Agreement and the 2013 Hanmi Agreement may be extended for 12 months if we reasonably request.

Prior to the expiration of the term of each agreement, we may terminate the agreement in our sole discretion, by providing six months notice to Hanmi. Subject to certain conditions. The agreements also contain customary termination rights for either party, such as in the event of a breach of the agreement or the initiation of bankruptcy proceedings by the other party or by mutual agreement.

ZenRx License Agreement

In April 2013, we entered into a license agreement with ZenRx, which we refer to as the ZenRx License, pursuant to which we granted to ZenRx an exclusive, sublicensable license to use certain of our intellectual property to develop and commercialize Oratecan and Oraxol in Australia and New Zealand, and a non-exclusive license to manufacture a certain compound, but only for use in Oratecan and Oraxol. ZenRx is responsible for all development, manufacturing and commercialization, and the related costs and expenses, of any product candidates resulting from the agreement.

We received a $50,000 payment from ZenRx upon effectiveness of the agreement, and we may be entitled to receive up to an aggregate of $1.4 million in additional development, regulatory and sales milestone payments. We will also be eligible to receive tiered royalties in the mid-teens on net sales of each product commercialized by ZenRx utilizing the intellectual property that is the subject of the ZenRx License. Such royalties will be reduced by 40% when competing generic products have 30% of the market share in the applicable country, and will be eliminated entirely when competing generic products have 60% of the market share in the applicable country.

As an incentive to ZenRx to further development and commercialization of Oratecan and Oraxol in the territory, if ZenRx obtains certain regulatory approvals in the territory prior to regulatory approval of those products in either the U.S. or South Korea, we may be required to make payments to ZenRx, at ZenRx’s option, either up to $600,000 in cash or $350,000 in cash plus $250,000 worth of our common stock.

The term of the ZenRx License expires on the earlier of (i) expiration of the last of our patent rights licensed under the agreement or (ii) invalidation of our patent rights which are the subject of the agreement, provided that the term will automatically be extended for consecutive one year periods unless either party gives notice to the other at least 90 days prior to expiration of the patent rights licensed under the agreement or before the then current annual expiration date of the agreement. Prior to the expiration of the term of the agreement, ZenRx may terminate the agreement in its sole discretion, by providing three months notice to us. Subject to certain conditions, we may also terminate the agreement if ZenRx fails to comply with certain development timelines set forth in the ZenRx License. The agreement also contains customary termination rights for either party, such as in the event of a breach of the agreement or the initiation of bankruptcy proceedings by the other party.

PharmaEssentia License Agreements

In December 2011 and December 2013, we entered into two separate out-licensing agreements with PharmaEssentia Corp., or PharmaEssentia, pursuant to which we granted to PharmaEssentia certain licenses to our intellectual property for use in development and commercialization of certain products in specific territories.

The December 2011 agreement, which we refer to as the 2011 PharmaEssentia Agreement, granted an exclusive, sublicensable license to use any pharmaceutical preparation containing KX-01 or KX-02 for use in

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treating psoriasis or other non-malignant skin conditions in a territory that includes China, Taiwan, Macau, Hong Kong, Singapore and Malaysia. In December 2016, we agreed to amend the 2011 PharmaEssentia Agreement such that the field under the license agreement does not include AK for any country in the territory except Taiwan.

We received a $40,000 payment from PharmaEssentia upon effectiveness of the 2011 PharmaEssentia Agreement, and we may be entitled to an aggregate of up to $1.6 million in additional development and regulatory milestone payments, $250,000 of which may be paid in the form of PharmaEssentia stock. PharmaEssentia has discretion to offer to make such payment in the form of its stock, and we have discretion as to whether to accept such payment in the form of its stock. We will also be eligible to receive tiered royalties ranging from the high single-digits to teens on net sales of each product commercialized by PharmaEssentia utilizing the intellectual property that is the subject of the 2011 PharmaEssentia Agreement. Such royalties will be reduced by 40% when competing generic products have 30% of the market share in the applicable country, and will be eliminated entirely when competing generic products have 60% of the market share in the applicable country.

The December 2013 agreement, which we refer to as the 2013 PharmaEssentia Agreement, granted an exclusive, sublicensable license for development and commercialization of Oraxol and Oratecan in Taiwan and Singapore. Under the agreement, PharmaEssentia may also have the right to expand its license to include China, if Hanmi does not exercise its right of first refusal to such a product candidate under the Hanmi Out-License. In December 2016, we agreed to amend the 2013 PharmaEssentia Agreement to also include Vietnam in the territories covered by the license, provided that, if PharmaEssentia has not completed a submission for regulatory approval in Vietnam by 2021, the rights under the license in Vietnam will be returned to us.

We received a $50,000 payment from PharmaEssentia upon effectiveness of the 2013 PharmaEssentia Agreement, and we may be entitled to an aggregate of up to $2.0 million in additional development, regulatory and sales milestone payments, and we may also be obligated to pay PharmaEssentia an aggregate of $1.0 million in incentives if PharmaEssentia achieves certain milestones within designated timeframes. We will also be eligible to receive tiered royalties in the mid-teens on net sales of each product commercialized by PharmaEssentia utilizing the intellectual property that is the subject of the 2013 PharmaEssentia Agreement. Such royalties will be reduced by 40% when competing generic products have 30% of the market share in the applicable country, and will be eliminated entirely when competing generic products have 60% of the market share in the applicable country.

Under each agreement, PharmaEssentia is responsible for all clinical studies and development and commercialization activities, and the related expenses, resulting from the agreements. Each of the 2011 PharmaEssentia Agreement and the 2013 PharmaEssentia Agreement expire on the earlier of (i) expiration of the last of our patent rights licensed under the agreement or (ii) invalidation of our patent rights which are the subject of the agreement, provided that the term will automatically be extended for consecutive one year periods unless either party gives notice to the other at least 90 days prior to expiration of the patent rights licensed under the agreement or before the then current annual expiration date of the agreement.

Prior to the expiration of the term of each agreement, PharmaEssentia may terminate the agreement in its sole discretion, by providing six months notice to us. Subject to certain conditions, we may also terminate the agreement if PharmaEssentia fails to comply with certain development timelines set out in each of the agreements. The agreements also contain customary termination rights for either party, such as in the event of a breach of the agreement or the initiation of bankruptcy proceedings by the other party.

Guangzhou Xiangxue License Agreement

In May 2012, we entered into a license agreement with Guangzhou Xiangxue New Drug Discovery and Development Company Limited, or Xiangxue, which we refer to as the Xiangxue License, pursuant to which we

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granted to Xiangxue an exclusive, sublicensable license to use certain of our intellectual property to develop and commercialize products containing KX-02 in all indications for brain tumors in China, Taiwan, Hong Kong and Singapore. Xiangxue is responsible for all development, manufacturing and commercialization, and the related costs and expenses, of any product candidates resulting from the agreement.

We received a $750,000 payment from Xiangxue upon effectiveness of the agreement, and we may be entitled to receive an aggregate of up to $5.3 million in additional development and regulatory milestone payments. We will also be eligible to receive royalties in the teens on net sales of each product commercialized by Xiangxue utilizing the intellectual property that is the subject of the Xiangxue License. Such royalties will be reduced by 40% when competing generic products have 30% of the market share in the applicable country, and will be eliminated entirely when competing generic products have 60% of the market share in the applicable country.

The term of the Xiangxue License expires on the earlier of (i) expiration of the last of our patent rights licensed under the agreement or (ii) invalidation of our patent rights which are the subject of the agreement, provided that the term will automatically be extended for consecutive one year periods unless either party gives notice to the other at least 90 days prior to expiration of the patent rights licensed under the agreement or before the then current annual expiration date of the agreement. Prior to the expiration of the term of the agreement, Xiangxue may terminate the agreement in its sole discretion, by providing six months notice to us. Subject to certain conditions, we may also terminate the agreement if Xiangxue fails to comply with certain development timelines set forth in the Xiangxue License. The agreement also contains customary termination rights for either party, such as in the event of a breach of the agreement or the initiation of bankruptcy proceedings by the other party.

Eli Lilly and Company Agreement

In October 2016, we entered into a Clinical Trial Collaboration and Supply Agreement with Eli Lilly and Company, which we refer to as the Lilly Agreement, under which we and Lilly will conduct a Phase 1b trial of Oraxol in combination with Lilly’s ramucirumab in patients with gastric, gastro-esophageal and esophageal cancers. Under the terms of the Lilly Agreement we will act as the sponsor of the study and will hold the IND/CTA relating to the study, while all clinical data generated under the study will be jointly owned by us and Lilly. Other than Lilly’s obligation to supply ramucirumab to us, we will be responsible for all other costs associated with the conduct of the study.

The Lilly Agreement will remain in effect until the study contemplated by the agreement has been completed. The agreement also contains customary termination rights for either party, such as in the event of a breach of the agreement by the other party, or in the event a regulatory authority takes any action against or raises any objection to the study.

DLSS Agreement

In August 2016, we entered into an agreement with Dohmen Life Science Services, or DLSS, pursuant to which DLSS will provide a variety of logistics and related services to us, including warehousing and shipment services, order-to-cash services, contract administration services and chargeback processing.

The initial term of the DLSS Agreement is three years following the initial delivery date, and will automatically renew for successive 12-month periods, unless either we or DLSS give notice of intent to terminate at least 90 days in advance of such automatic renewal. We may also have the opportunity to terminate the DLSS Agreement within 30 days of receiving notice of certain price increases by DLSS. The agreement also contains customary termination rights for either party, such as in the event of a breach of the agreement.

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Competition

The biopharmaceutical industry and the oncology subsector are characterized by rapid evolution of technologies, fierce competition and strong defense of intellectual property. Any product candidates that we successfully develop and commercialize will have to compete with existing therapies and new therapies that may become available in the future. While we believe that our product candidates, platforms and scientific expertise in the field of biotechnology and oncology provide us with competitive advantages, a wide variety of institutions, including large biopharmaceutical companies, specialty biotechnology companies, academic research departments and public and private research institutions, are actively developing potentially competitive products and technologies. We face substantial competition from biotechnology and biopharmaceutical companies developing oncology products. These competitors generally fall within the following categories:

Oral administration: Taxol, Abraxane, Cynviloq, Camptosar, Onivyde, Taxotere and Hycamtin;

Src Kinase inhibitors: Picato and Temodar.

Many of our competitors, either alone or with strategic partners, have substantially greater financial, technical and human resources than we do. Accordingly, our competitors may be more successful than us in obtaining approval for treatments and achieving widespread market acceptance, rendering our treatments obsolete or non-competitive. Accelerated merger and acquisition activity in the biotechnology and biopharmaceutical industries may result in even more resources being concentrated among a smaller number of our competitors. These companies also compete with us in recruiting and retaining qualified scientific and management personnel, establishing clinical study sites and patient registration for clinical studies, acquiring technologies complementary to, or necessary for, our programs and for sales in the API business. Smaller or early-stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies. Our commercial opportunity could be substantially limited in the event that our competitors develop and commercialize products that are more effective, safer, less toxic, more convenient or less expensive than our comparable products. In geographies that are critical to our commercial success, competitors may also obtain regulatory approvals before us, resulting in our competitors building a strong market position in advance of our products’ entry. We believe the factors determining the success of our programs will be the efficacy, safety and convenience of our product candidates and our access to supply of API.

Government Regulation and Product Approval

Governmental authorities in the U.S., at the federal, state and local level, and other countries extensively regulate, among other things, the research, development, testing, manufacture, approval, quality control, labeling, packaging, promotion, storage, advertising, distribution, post-approval monitoring, marketing and export and import of products such as those we are developing. Our therapeutic candidates must be approved by the FDA through the NDA process before they may be legally marketed in the U.S. and will be subject to similar requirements in other countries prior to marketing in those countries. The process of obtaining regulatory approvals and the subsequent compliance with applicable federal, state, local and foreign statutes and regulations require the expenditure of substantial time and financial resources.

U.S. Government Regulation

In the U.S., the FDA regulates drugs under the FDCA and its implementing regulations. Failure to comply with the applicable U.S. requirements at any time during the product development or approval process, or after approval, may subject an applicant to administrative or judicial sanctions, any of which could have a material adverse effect on us. These sanctions could include:

• refusal to approve pending applications;

• withdrawal of an approval;

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• imposition of a clinical hold;

• warning or untitled letters;

• seizures or administrative detention of product;

• total or partial suspension of production or distribution; or

• injunctions, fines, restitution, disgorgement, refusal of government contracts, or civil or criminal penalties.

NDA approval processes

The process required by the FDA before a therapeutic product may be marketed in the U.S. generally involves the following:

• completion of extensive nonclinical laboratory tests, animal studies and formulation studies conducted according to GLPs, and other applicable regulations;

• submission to the FDA of an IND, which must be allowed before human clinical trials may begin;

• performance of adequate and well-controlled human clinical trials according to Good Clinical Practices, or GCPs, to establish the safety and efficacy of the product candidate for its intended use;

• submission to the FDA of an NDA or;

• satisfactory completion of an FDA pre-approval inspection of the manufacturing facility or facilities at which the product candidate is produced to assess readiness for commercial manufacturing and conformance to the manufacturing-related elements of the application, to conduct a data integrity audit, and to assess compliance with cGMPs to assure that the facilities, methods and controls are adequate to preserve the product candidate’s identity, strength, quality and purity;

• potential FDA audit of the clinical trial sites that generated the data in support of the NDA; and

• FDA review and approval of the NDA.

Once a pharmaceutical candidate is identified for development, it enters the preclinical or nonclinical testing stage. Nonclinical tests include laboratory evaluations of product chemistry, toxicity and formulation, as well as animal studies. Such studies must generally be conducted in accordance with the FDA’s GLPs. An IND sponsor must submit the results of the nonclinical tests, together with manufacturing information and analytical data, to the FDA as part of the IND. Some nonclinical testing may continue even after the IND is submitted. In addition to including the results of the nonclinical studies, the IND will also include a protocol detailing, among other things, the objectives of the clinical trial, the parameters to be used in monitoring safety and the effectiveness criteria to be evaluated if the first phase lends itself to an efficacy determination. The IND automatically becomes effective 30 days after receipt by the FDA, unless the FDA, within the 30-day time period, places the IND on clinical hold. In such a case, the IND sponsor and the FDA must resolve any outstanding concerns before clinical trials can begin. A clinical hold may occur at any time during the life of an IND and may affect one or more specific studies or all studies conducted under the IND.

The manufacture of investigational drugs for the conduct of human clinical trials is subject to cGMP requirements. Investigational drugs and API imported into the U.S. are also subject to regulation by the FDA relating to their labeling and distribution. Further, the export of investigational drug products outside of the U.S. may be subject to regulatory requirements of the receiving country as well as U.S. export requirements under the FDCA.

All clinical trials must be conducted under the supervision of one or more qualified investigators in accordance with GCP requirements, which include, among other things, the requirements that all research

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subjects provide their informed consent in writing for their participation in any clinical trial. Investigators must also provide certain information to the clinical trial sponsors to allow the sponsors to make certain financial disclosures to the FDA. Clinical trials must be conducted under protocols detailing the objectives of the trial, dosing procedures, research subject selection and exclusion criteria and the safety and effectiveness criteria to be evaluated. Each protocol, and any subsequent material amendment to the protocol, must be submitted to the FDA as part of the IND, and progress reports detailing the status of the clinical trials must be submitted to the FDA annually. Sponsors also must report to the FDA serious and unexpected adverse reactions in a timely manner. Reporting requirements also apply to, among other things, any clinically important increase in the rate of a serious suspected adverse reaction over that listed in the protocol or investigator’s brochure and any findings from other studies or animal or in vitro testing that suggest a significant risk in humans exposed to the product candidate. An institutional review board , or IRB, at each institution participating in the clinical trial must review and approve the protocol before a clinical trial commences at that institution and must also approve the information regarding the trial and the consent form that must be provided to each research subject or the subject’s legal representative, monitor the study until completed and otherwise comply with IRB regulations. There are also requirements governing the reporting of ongoing clinical trials and completed clinical trial results to public registries within a certain timeframe for public dissemination on the National Institutes of Health clinicaltrials.gov website.

Human clinical trials are typically conducted in three sequential phases that may overlap or be combined.

• Phase 1—The product candidate is initially introduced into healthy human subjects and tested for safety, dosage tolerance, absorption, metabolism, distribution and elimination. In the case of some therapeutic candidates for severe or life-threatening diseases, such as cancer, especially when the product candidate may be inherently too toxic to ethically administer to healthy volunteers, the initial human testing is often conducted in patients.

• Phase 2—Clinical trials are performed on a limited patient population intended to identify possible adverse effects and safety risks, to preliminarily evaluate the efficacy of the product for specific targeted diseases and to determine dosage tolerance and optimal dosage.

• Phase 3—Clinical trials are undertaken to further evaluate dosage, clinical efficacy and safety in an expanded patient population at geographically dispersed clinical study sites. These studies are intended to establish the overall risk-benefit ratio of the product and provide an adequate basis for product labeling.

A pivotal study is a clinical study that adequately meets regulatory agency requirements for the evaluation of a product candidate’s efficacy and safety such that it can be used to justify the approval of the product. Generally, pivotal studies are also Phase 3 studies but may be Phase 2 studies, with the agreement of FDA, if the trial design provides a reliable assessment of clinical benefit, particularly in situations where there is an unmet medical need.

In the case of a 505(b)(2) NDA, which is a marketing application in which the sponsor may rely on investigations that were not conducted by or for the applicant and for which the applicant has not obtained a right of reference or use from the person by or for whom the investigations were conducted, some of the above-described studies and nonclinical studies may not be required or may be abbreviated. The applicant may rely upon the FDA’s prior findings of safety and efficacy for a previously approved product or on published scientific literature in support of its application. Bridging studies, including clinical studies, may be needed, however, to demonstrate the applicability of the studies that were previously conducted by other sponsors to the drug that is the subject of the marketing application.

Human clinical trials are inherently uncertain and Phase 1, Phase 2 and Phase 3 testing may not be successfully completed or may not be completed at all. The FDA or the sponsor may suspend a clinical trial at any time for a variety of reasons, including a finding that the research subjects or patients are being exposed to an

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unacceptable health risk. Similarly, an IRB can suspend or terminate approval of a clinical trial at its institution if the clinical trial is not being conducted in accordance with the IRB’s requirements or if the product candidate has been associated with unexpected serious harm to patients.

During the development of a new product candidate, sponsors are given opportunities to meet with the FDA at certain points; specifically, prior to the submission of an IND, at the end of Phase 2 and before an NDA is submitted. Meetings at other times may be requested. These meetings can provide an opportunity for the sponsor to share information about the data gathered to date and for the FDA to provide advice on the next phase of development. Sponsors typically use the meeting at the end of Phase 2 to discuss their Phase 2 clinical results and present their plans for the pivotal Phase 3 clinical trial that they believe will support the approval of the new therapeutic. If a Phase 3 clinical trial is the subject of discussion at the end of Phase 2 meeting with the FDA, a sponsor may be able to request a Special Protocol Assessment, or SPA, the purpose of which is to reach agreement with the FDA on the Phase 3 clinical trial protocol design and analysis that will form the primary basis of an efficacy claim. The agreement will be binding on the FDA and may not be changed by the sponsor or the FDA after the trial begins except with the written agreement of the sponsor and the FDA or if the FDA determines that a substantial scientific issue essential to determining the safety or efficacy of the product candidate was identified after the testing began.

Post-approval trials, sometimes referred to as “Phase 4” clinical trials, may be required after initial marketing approval. These trials are used to gain additional experience from the treatment of patients in the intended therapeutic indication.

Concurrent with clinical trials, sponsors usually complete additional animal safety studies, develop additional information about the chemistry and physical characteristics of the product candidate and finalize a process for manufacturing commercial quantities of the product candidate in accordance with cGMP requirements. The manufacturing process must be capable of consistently producing quality batches of the product candidate and the manufacturer must develop methods for testing the quality, purity and potency of the product candidate. Additionally, for NDA products, appropriate packaging must be selected and tested and stability studies must be conducted to demonstrate that the product candidate does not undergo unacceptable deterioration over its proposed shelf-life.

The results of product development, nonclinical studies and clinical trials, along with descriptions of the manufacturing process, analytical tests and other control mechanisms, proposed labeling and other relevant information are submitted to the FDA as part of an NDA requesting approval to market the product. Under the Prescription Drug User Fee Act, or PDUFA, as amended, each NDA must be accompanied by a significant user fee. The FDA adjusts the PDUFA user fees on an annual basis. PDUFA also imposes an annual product fee for products and an annual establishment fee on facilities used to manufacture prescription drug products. Fee waivers or reductions are available in certain circumstances, such as where a waiver is necessary to protect the public health, where the fee would present a significant barrier to innovation, or where the applicant is a small business submitting its first human therapeutic application for review. Product candidates that are designated as orphan drugs are also not subject to user fees unless the application contains an indication other than an orphan indication.

Within 60 days following submission of the application, the FDA reviews a NDA submitted to determine if it is substantially complete before the agency accepts it for filing. The FDA may refuse to accept any NDA that it deems incomplete or not properly reviewable at the time of submission, and may request additional information. In this event, the NDA must be resubmitted with the additional information. The resubmitted application also is subject to review before the FDA accepts it for filing. Once the submission is accepted for filing, the FDA begins an in-depth substantive review of the NDA. The FDA reviews an NDA, whether the product is safe and effective for its intended use, and in each case, whether the product is being manufactured in accordance with cGMP. The FDA may refer applications for novel products or products that present difficult questions of safety or efficacy to an advisory committee, typically a panel that includes clinicians and other experts, for review, evaluation and a recommendation as to whether the application should be approved and under what conditions. The FDA is not

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bound by the recommendations of an advisory committee, but it considers such recommendations when making decisions.

During the product approval process, the FDA also will determine whether a Risk Evaluation and Mitigation Strategy, or REMS, plan is necessary to assure the safe use of the product. If the FDA concludes that an REMS plan is needed, the sponsor of the NDA must submit a proposed REMS plan prior to approval. The FDA has authority to require an REMS plan under the Food and Drug Administration Amendments Act of 2007 (the “FDAAA”) when necessary to ensure that the benefits of a drug outweigh the risks. In determining whether an REMS plan is necessary, the FDA must consider the size of the population likely to use the drug, the seriousness of the disease or condition to be treated, the expected benefit of the drug, the duration of treatment, the seriousness of known or potential adverse events, and whether the drug is a new molecular entity. A REMS plan may be required to include various elements, such as a medication guide or patient package insert, a communication plan to educate health care providers of the risks, limitations on who may prescribe or dispense the drug, or other measures that the FDA deems necessary to assure the safe use of the drug. In addition, the REMS plan must include a timetable to assess the strategy at 18 months, three years, and seven years after the strategy’s approval.

The FDA may also require an REMS plan for a drug that is already on the market if it determines, based on new safety information, that an REMS plan is necessary to ensure that the product’s benefits outweigh its risks.

Before approving a NDA, the FDA will inspect the facilities at which the product is manufactured. The FDA will not approve the product unless it determines that the manufacturing processes and facilities are in compliance with cGMP requirements and adequate to assure consistent production of the product within required specifications. Additionally, before approving a NDA, the FDA will typically inspect one or more clinical sites to assure that the clinical trials were conducted in compliance with IND trial requirements and GCP requirements. To assure cGMP and GCP compliance, an applicant must incur significant expenditure of time, money and effort in the areas of training, record keeping, production and quality control.

Notwithstanding the submission of relevant data and information, the FDA may ultimately decide that the NDA does not satisfy its regulatory criteria for approval and deny approval. Data obtained from clinical trials are not always conclusive and the FDA may interpret data differently than the applicant. If the agency decides not to approve the NDA in its then present form, the FDA will issue a complete response letter that describes all of the specific deficiencies in the NDA identified by the FDA. The deficiencies identified may be minor, for example, requiring labeling changes, or major, for example, requiring additional clinical trials. Additionally, the complete response letter may include recommended actions that the applicant might take to place the application in a condition for approval. If a complete response letter is issued, the applicant must either resubmit the NDA, addressing all of the deficiencies identified in the letter, withdraw the application, or request an opportunity for a hearing.

Even if a product receives regulatory approval, the approval may be significantly limited to specific indications and dosages or the indications for use may otherwise be limited, which could restrict the commercial value of the product. Further, the FDA may require that certain contraindications, warnings or precautions be included in the product labeling. The FDA may impose restrictions and conditions on product distribution, prescribing, or dispensing in the form of a risk management plan, or otherwise limit the scope of any approval. In addition, the FDA may require post marketing clinical trials, sometimes referred to as “Phase 4” clinical trials, designed to further assess a drug’s safety and effectiveness, and testing and surveillance programs to monitor the safety of approved products that have been commercialized.

Expedited Review and Approval

The FDA has various programs, including Fast Track, priority review, accelerated approval and breakthrough therapy designation, which are intended to expedite or simplify the process for reviewing

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therapeutic candidates, or provide for the approval of a product candidate on the basis of a surrogate endpoint. Even if a product candidate qualifies for one or more of these programs, the FDA may later decide that the product candidate no longer meets the conditions for qualification or that the time period for FDA review or approval will be lengthened. Generally, therapeutic candidates that are eligible for these programs are those for serious or life-threatening conditions, those with the potential to address unmet medical needs and those that offer meaningful benefits over existing treatments. For example, Fast Track is a process designed to facilitate the development and expedite the review of therapeutic candidates to treat serious or life-threatening diseases or conditions and fill unmet medical needs. Priority review is designed to give therapeutic candidates that offer major advances in treatment or provide a treatment where no adequate therapy exists an initial review within six months as compared to a standard review time of ten months.

Although Fast Track and priority review do not affect the standards for approval, the FDA will attempt to facilitate early and frequent meetings with a sponsor of a Fast Track designated product candidate and expedite review of the application for a product candidate designated for priority review. Accelerated approval, which is described in Subpart H of 21 CFR Part 314, provides for an earlier approval for a new product candidate that is (1) intended to treat a serious or life-threatening disease or condition; (2) generally provides a meaningful advantage over available therapies; and (3) demonstrates an effect on either a surrogate endpoint that is reasonably likely to predict clinical benefit or on a clinical endpoint that can be measured earlier than irreversible morbidity or mortality, or IMM, and is reasonably likely to predict an effect on IMM or other clinical benefit, taking into account the severity, rarity or prevalence of the condition and the availability or lack of alternative treatments. A surrogate endpoint is a laboratory measurement or physical sign used as an indirect or substitute measurement representing a clinically meaningful outcome. As a condition of approval, the FDA may require that a sponsor of a product candidate receiving accelerated approval perform post-marketing studies to verify and describe the predicted effect on irreversible morbidity or mortality or other clinical endpoint, and the product may be subject to accelerated withdrawal procedures.

In the Food and Drug Administration Safety and Innovation Act, or FDASIA, which was signed into law in July 2012, the U.S. Congress encouraged the FDA to utilize innovative and flexible approaches to the assessment of therapeutic candidates under accelerated approval. The law required the FDA to issue related guidance and also promulgate confirming regulatory changes. In May 2014, the FDA published a final Guidance for Industry titled “Expedited Programs for Serious Conditions—Drugs and Biologics,” which provides guidance on FDA programs that are intended to facilitate and expedite development and review of new therapeutic candidates as well as threshold criteria generally applicable to concluding that a product candidate is a candidate for these expedited development and review programs.

In addition to the Fast Track, accelerated approval and priority review programs discussed above, the FDA’s “Expedited Programs” guidance also describes the breakthrough therapy designation. A breakthrough therapy is defined as a drug that is intended, alone or in combination with one or more other drugs, to treat a serious or life-threatening disease or conditions, and preliminary clinical evidence indicates that the drug may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints. Drugs designated as breakthrough therapies are eligible for, among other things, the Fast Track designation, intensive guidance on an efficient drug development program, and a commitment from FDA to involve senior managers and experienced review staff in a proactive collaborative, cross-disciplinary review.

In December 2016, the 21st Century Cures Act, or Cures Act, was signed into law. The Cures Act included numerous provisions that may be relevant to our product candidates, including provisions designed to speed development of innovative and breakthrough therapies. The Cures Act amends the FDCA and the Public Health Service Act, or PHSA, to reauthorize and expand funding for the National Institutes of Health, or NIH, and to authorize FDA to increase spending on innovation projects. Central to the Cures Act are provisions that enhance and accelerate FDA’s processes for reviewing and approving new drugs and supplements to approved NDAs. These include, but are not limited to, provisions that (i) require FDA to establish a program to evaluate the potential use of real world evidence to help to support the approval of a new indication for an approved drug and

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to help to support or satisfy post-approval study requirements, (ii) provide that FDA may rely upon qualified data summaries to support the approval of a supplemental application with respect to a qualified indication for an already approved drug, (iii) require FDA to issue guidance for purposes of assisting sponsors in incorporating complex adaptive and other novel trial designs into proposed clinical protocols and applications for new drugs, (iv) affirm that FDA should continue to expedite the approval of breakthrough therapies, and (v) require FDA to establish a process for the qualification of drug development tools for use in supporting or obtaining FDA approval for investigational use of a drug. The Cures Act also includes a provision which requires certain manufacturers or distributors of an investigational drug to make their policies on the availability of certain expanded access programs publicly available. Because the Cures Act was enacted recently and the FDA may take several years to develop these policies, it is difficult to know whether or how the Cures Act will directly affect our business.

Abbreviated New Drug Applications for Generic Drugs

NDA applicants are required to list with the FDA each patent with claims covering the applicant’s product or method of using the product. Upon approval of a drug, each of the patents listed in the application for the drug is then published in the FDA’s Approved Drug Products with Therapeutic Equivalence Evaluations, commonly known as the Orange Book. Drugs listed in the Orange Book can, in turn, be cited by potential generic or 505(b)(2) applicants in support of approval of an abbreviated new drug application, or ANDA, or a 505(b)(2) application. An ANDA provides for marketing of a drug product that has the same active ingredients in the same strengths and dosage form as the listed drug and has been shown to be bioequivalent to the listed drug. Other than the requirement for bioequivalence testing, ANDA applicants are not required to conduct, or submit results of, pre-clinical or clinical tests to prove the safety or effectiveness of their drug product. Drugs approved in this way can often be substituted by pharmacists under prescriptions written for the original listed drug.

The ANDA or 505(b)(2) applicant is required to make a certification to the FDA concerning any patents listed for the approved NDA product in the FDA’s Orange Book. Specifically, the ANDA or 505(b)(2) applicant must certify that: (i) the required patent information has not been filed; (ii) the listed patent has expired; (iii) the listed patent has not expired, but will expire on a particular date and approval is sought after patent expiration; or (iv) the listed patent is invalid or will not be infringed by the new product. The ANDA applicant may also elect to submit a section viii statement certifying that its proposed ANDA labeling does not contain (or carves out) any language regarding the patented method-of-use rather than certify to a listed method-of-use patent. If the applicant does not challenge the listed patents, the ANDA or 505(b)(2) application will not be approved until all the listed patents claiming the referenced product have expired.

A certification that the ANDA or 505(b)(2) product will not infringe the already approved product’s listed patents, or that such patents are invalid, is called a Paragraph IV certification. If the ANDA or 505(b)(2) applicant has provided a Paragraph IV certification to the FDA, the applicant must also send notice of the Paragraph IV certification to the NDA and patent holders once the ANDA or 505(b)(2) application has been received by the FDA. The NDA and patent holders may then initiate a patent infringement lawsuit in response to the notice of the Paragraph IV certification. The filing of a patent infringement lawsuit within 45 days of the receipt of a Paragraph IV certification automatically prevents the FDA from approving the ANDA or 505(b)(2) application until the earlier of 30 months, expiration of the patent, settlement of the lawsuit or a decision in the infringement case that is favorable to the ANDA applicant.

The ANDA or 505(b)(2) application will not be approved until any applicable non-patent exclusivity listed in the Orange Book for the referenced product has expired.

Patent Term Restoration and Marketing Exclusivity

Depending upon the timing, duration and specifics of FDA approval of the use of our drug candidates, some of our U.S. patents may be eligible for limited patent term extension under the Drug Price Competition and

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Patent Term Restoration Act of 1984, commonly referred to as the Hatch-Waxman Act. The Hatch-Waxman Act permits a patent restoration term of up to five years as compensation for patent term lost during product development and the FDA regulatory review process. However, patent term restoration cannot extend the remaining term of a patent beyond a total of 14 years from the product’s approval date. The patent term restoration period is generally one-half the time between the effective date of an IND and the submission date of an NDA plus the time between the submission date of an NDA and the approval of that application, except that this review period is reduced by any time during which the applicant failed to exercise due diligence. Only one patent applicable to an approved product is eligible for the extension and the application for the extension must be submitted prior to the expiration of the patent. The USPTO, in consultation with the FDA, reviews and approves the application for any patent term extension or restoration. In the future, if available, we intend to apply for restorations of patent term for some of our currently owned patents beyond their current expiration dates, depending on the expected length of the clinical trials and other factors involved in the filing of the relevant NDA; however, there can be no assurance that any such extension will be granted to us.

Market exclusivity provisions under the FDCA can also delay the submission or the approval of certain applications. The FDCA provides a five-year period of non-patent marketing exclusivity within the U.S. to the first applicant to gain approval of an NDA for a new chemical entity. A drug is a new chemical entity if the FDA has not previously approved any other new drug containing the same active moiety, which is the molecule or ion responsible for the action of the drug substance. During the exclusivity period, the FDA may not accept for review an abbreviated new drug application, or ANDA, or a 505(b)(2) NDA submitted by another company for another version of such drug where the applicant does not own or have a legal right of reference to all the data required for approval. However, an application may be submitted after four years if it contains a certification of patent invalidity or non-infringement. The FDCA also provides three years of marketing exclusivity for an NDA, 505(b)(2) NDA or supplement to an existing NDA if new clinical investigations, other than bioavailability studies, that were conducted or sponsored by the applicant are deemed by the FDA to be essential to the approval of the application, for example, new indications, dosages or strengths of an existing drug. This three-year exclusivity covers only the conditions of use associated with the new clinical investigations and does not prohibit the FDA from approving ANDAs for drugs containing the original active agent. Five-year and three-year exclusivity will not delay the submission or approval of a full NDA. However, an applicant submitting a full NDA would be required to conduct or obtain a right of reference to all of the preclinical studies and adequate and well-controlled clinical trials necessary to demonstrate safety and effectiveness.

Orphan Drug Designation

Under the Orphan Drug Act, the FDA may grant Orphan Drug Designation to therapeutic candidates intended to treat a rare disease or condition, which is generally a disease or condition that affects either (1) fewer than 200,000 individuals in the U.S., or (2) or more than 200,000 individuals in the U.S. and for which there is no reasonable expectation that the cost of developing and making available in the U.S. a product candidate for this type of disease or condition will be recovered from sales in the U.S. for that product candidate. Orphan Drug Designation must be requested before submitting an NDA. We have received Orphan Drug Designation for KX-02. After the FDA grants Orphan Drug Designation, the identity of the therapeutic agent and its potential orphan use are disclosed publicly by the FDA. Orphan Drug Designation does not convey any advantage in or shorten the duration of the regulatory review and approval process.

If a product candidate that has Orphan Drug Designation subsequently receives the first FDA approval for the disease for which it has such designation, the product candidate is entitled to orphan product exclusivity, which means that the FDA may not approve any other applications to market the same product candidate for the same indication, except under limited circumstances, for seven years. Orphan drug exclusivity, however, could also block the approval of one of our therapeutic candidates for seven years if a competitor obtains approval of the same product candidate as defined by the FDA or if our product candidate is determined to be contained within the competitor’s product candidate for the same indication or disease.

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Pediatric Exclusivity and Pediatric Use

Under the Best Pharmaceuticals for Children Act (the “BPCA”), certain therapeutic candidates may obtain an additional six months of exclusivity if the sponsor submits information requested in writing by the FDA, referred to as a Written Request, relating to the use of the active moiety of the product candidate in children. Although the FDA may issue a Written Request for studies on either approved or unapproved indications, it may only do so where it determines that information relating to that use of a product candidate in a pediatric population, or part of the pediatric population, may produce health benefits in that population.

In addition, the Pediatric Research Equity Act, or PREA, requires a sponsor to conduct pediatric studies for most therapeutic candidates, for a new active ingredient, new indication, new dosage form, new dosing regimen or new route of administration. Under PREA, original NDAs and supplements thereto must contain a pediatric assessment unless the sponsor has received a deferral or waiver. The required assessment must assess the safety and effectiveness of the product candidate for the claimed indications in all relevant pediatric subpopulations and support dosing and administration for each pediatric subpopulation for which the product candidate is safe and effective. The sponsor or FDA may request a deferral of pediatric studies for some or all of the pediatric subpopulations. A deferral may be granted for several reasons, including a finding that the product candidate is ready for approval for use in adults before pediatric studies are complete or that additional safety or effectiveness data needs to be collected before the pediatric studies begin. The law requires the FDA to send a PREA Non-Compliance letter to sponsors who have failed to submit their pediatric assessments required under PREA, have failed to seek or obtain a deferral or deferral extension or have failed to request approval for a required pediatric formulation. It further requires the FDA to post the PREA Non-Compliance letter and sponsor’s response.

As part of the FDASIA, the U.S. Congress made a few revisions to the BPCA and PREA, which were slated to expire on September 30, 2012, and made both laws permanent.

Post-Approval Requirements

Once an approval is granted, the FDA may withdraw the approval if compliance with regulatory requirements is not maintained or if problems occur after the product candidate reaches the market. Later discovery of previously unknown problems with a product candidate may result in restrictions on the product candidate or even complete withdrawal of the product candidate from the market. After approval, some types of changes to the approved product candidate, such as adding new indications, manufacturing changes and additional labeling claims, are subject to further FDA review and approval. In addition, the FDA may under some circumstances require testing and surveillance programs to monitor the effect of approved therapeutic candidates that have been commercialized, and the FDA under some circumstances has the power to prevent or limit further marketing of a product candidate based on the results of these post-marketing programs.

Any therapeutic candidates manufactured or distributed pursuant to FDA approvals for prescription drugs are subject to continuing regulation by the FDA, including, among other things:

• reporting and record-keeping requirements;

• reporting of adverse experiences with the product candidate;

• providing the FDA with updated safety and efficacy information;

• product sampling and distribution requirements;

• notifying the FDA and gaining its approval of specified manufacturing or labeling changes; and

• complying with FDA promotion and advertising requirements, which include, among other things, standards for direct-to-consumer advertising, restrictions on promoting products for uses or in patient populations that are not described in the product’s approved labeling, limitations on industry-sponsored scientific and educational activities and requirements for promotional activities involving the internet.

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Therapeutic manufacturers and other entities involved in the manufacture and distribution of approved therapeutic products are required to register their establishments with the FDA and obtain licenses in certain states and are subject to periodic unannounced inspections by the FDA and some state agencies for compliance with cGMPs and other laws. The FDA periodically inspects manufacturing facilities to assess compliance with cGMP, which imposes extensive procedural, substantive and record-keeping requirements. In addition, changes to the manufacturing process are strictly regulated, and, depending on the significance of the change, may require FDA approval before being implemented. FDA regulations would also require investigation and correction of any deviations from cGMP and impose reporting and documentation requirements upon us and any third-party manufacturers used. Accordingly, manufacturers must continue to expend time, money and effort in the area of production and quality control to maintain compliance with cGMP and other aspects of regulatory compliance.

Disclosure of Clinical Trial Information

Sponsors of clinical trials of FDA-regulated products, including drugs, are required to register and disclose certain clinical trial information, which is publicly available at www.clinicaltrials.gov. Information related to the product, patient population, phase of investigation, study sites and investigators, and other aspects of the clinical trial is then made public as part of the registration. Sponsors are also obligated to disclose the results of their clinical trials after completion. Disclosure of the results of these trials can be delayed under certain limited circumstances. Competitors may use this publicly available information to gain knowledge regarding the progress of development programs. The government recently released a regulation and policy to expand and enhance the requirements related to registering and reporting the results of which may result in greater enforcement of these requirements in the future.

Regulation of Compounding Pharmacies

We compound and sell compounded products. The Compounding Quality Act allows an entity that compounds sterile drugs to register as an outsourcing facility. Once registered (including a fee), an outsourcing facility must meet certain conditions in order to be exempt from the FDCA’s approval requirements and the requirement to label products with adequate directions for use. Under the new law, the drugs must be compounded in compliance with CGMP by or under the direct supervision of a licensed pharmacist in a registered facility pursuant to Section 503B(a). The outsourcing facility must also report specific information about the products that it compounds, including a list of all of the products it compounded during the previous six months, and information about the compounded products, such as the source of the ingredients used to compound pursuant to Section 503B(b)(2). In addition, the outsourcing facility must meet other conditions described in the new law, including reporting adverse events and labeling its compounded products with certain information pursuant to Section 503B(b)(5) and Section 503B(a)(10). Registered outsourcing facilities are prohibited from selling compounded drugs through a wholesale distributor. Registered outsourcing facilities are subject to FDA inspection, and FDA conducts inspections on a risk-based frequency under Section 503B(b)(4).

Pharmaceutical Coverage, Reimbursement and Pricing

Significant uncertainty exists as to the coverage and reimbursement status of any products for which we may obtain regulatory approval. In the U.S., sales of any products for which we may receive regulatory approval for commercial sale will depend in part on the availability of coverage and reimbursement from third-party payors. Third-party payors include government authorities such as Medicare, Medicaid, TRICARE and the Veterans Administration, managed care providers, private health insurers and other organizations.

The Medicaid Drug Rebate Program requires pharmaceutical manufacturers to enter into and have in effect a national rebate agreement with the Secretary of the Department of Health and Human Services as a condition for states to receive federal matching funds for the manufacturer’s outpatient drugs furnished to Medicaid patients. Effective in 2010, the ACA made several changes to the Medicaid Drug Rebate Program, including increasing pharmaceutical manufacturers’ rebate liability by raising the minimum basic Medicaid rebate on most

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branded prescription drugs from 15.1% of average manufacturer price, or AMP, to 23.1% of AMP, and adding a new rebate calculation for “line extensions” (i.e., new formulations, such as extended release formulations) of solid oral dosage forms of branded products, as well as potentially impacting their rebate liability by modifying the statutory definition of AMP. The ACA also expanded the universe of Medicaid utilization subject to drug rebates by requiring pharmaceutical manufacturers to pay rebates on Medicaid managed care utilization as of 2010 and by expanding the population potentially eligible for Medicaid drug benefits. CMS will expand Medicaid rebate liability to the territories of the United States as well, beginning in 2017, if the territories elect to enroll in the Medicaid Drug Rebate Program. In addition, the ACA provides for the public availability of retail survey prices and certain weighted average AMPs under the Medicaid program. The implementation of this requirement by CMS may also provide for the public availability of pharmacy acquisition cost data, which could influence our decisions related to setting product prices and offering related discounts.

In order for a pharmaceutical product to receive federal reimbursement under the Medicare Part B and Medicaid programs or to be sold directly to U.S. government agencies, the manufacturer must extend discounts to entities eligible to participate in the 340B drug pricing program. The required 340B discount on a given product is calculated based on the AMP and Medicaid rebate amounts reported by the manufacturer. Effective in 2010, the Affordable Care Act expanded the types of entities eligible to receive discounted 340B pricing; although, under the current state of the law, with the exception of children’s hospitals, these newly eligible entities will not be eligible to receive discounted 340B pricing on orphan drugs when used for the orphan indication. In addition, as 340B drug pricing is determined based on AMP and Medicaid rebate data, the revisions to the Medicaid rebate formula and AMP definition described above could cause the required 340B discount to increase.

The process for determining whether a payor will provide coverage for a product is typically separate from the process for setting the reimbursement rate that the payor will pay for the product. Third-party payors may limit coverage to specific products on an approved list or formulary which might not include all of the FDA-approved products for a particular indication. Also, third-party payors may refuse to include a particular branded drug on their formularies or otherwise restrict patient access to a branded drug when a less costly generic equivalent or other alternative is available. However, under Medicare Part D—Medicare’s outpatient prescription drug benefit—there are protections in place to ensure coverage and reimbursement for oncology products and all Part D prescription drug plans are required to cover substantially all anti-cancer agents. However, a payor’s decision to provide coverage for a product does not imply that an adequate reimbursement rate will be available. Adequate third-party reimbursement may not be available to enable us to maintain price levels sufficient to realize an appropriate return on our investment in product development.

Third-party payors are increasingly challenging the price and examining the medical necessity and cost- effectiveness of medical products and services, in addition to their safety and efficacy. In order to obtain coverage and reimbursement for any product that might be approved for sale, we may need to conduct expensive pharmacoeconomic studies in order to demonstrate the medical necessity and cost-effectiveness of any products, in addition to the costs required to obtain regulatory approvals. Our drug candidates may not be considered medically necessary or cost-effective. If third-party payors do not consider a product to be cost-effective compared to other available therapies, they may not cover an approved product as a benefit under their plans or, if they do, the level of payment may not be sufficient to allow a company to sell its products at a profit.

The U.S. government and state legislatures have shown significant interest in implementing cost containment programs to limit the growth of government-paid health care costs, including price controls, restrictions on reimbursement and requirements for substitution of generic products for branded prescription drugs. For example, in March 2016, the Centers for Medicare and Medicaid Services, or CMS, issued a proposed rule seeking to reduce reimbursement for drugs paid under Medicare Part B to 102.5% of Average Sales Price and to implement a variety of value-based purchasing tools. Further, the Affordable Care Act, contains provisions that may reduce the profitability of drug products, including, for example, increased rebates for drugs

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reimbursed by Medicaid programs and the extension of Medicaid rebates to Medicaid managed care plans. Several other provisions of the Affordable Care Act focused on cost containment include:

• The Patient-Centered Outcomes Research Institute, which was established to identify priorities in, and conduct comparative clinical effectiveness research, along with funding for such research. The research conducted by the Patient-Centered Outcomes Research Institute may affect the market for certain pharmaceutical products.

• The Independent Payment Advisory Board which, since 2014, has had authority to recommend certain changes to the Medicare program to reduce expenditures by the program when spending exceeds a certain growth rate and such changes could result in reduced payments for prescription drugs. Under certain circumstances, these recommendations will become law unless Congress enacts legislation that will achieve the same or greater Medicare cost savings. However, as of late 2016, the President has yet to nominate anyone to serve on the board.

• The Center for Medicare and Medicaid Innovation within CMS to test innovative payment and service delivery models to lower Medicare and Medicaid spending, potentially including prescription drug spending. Funding has been allocated to support the mission of the Center for Medicare and Medicaid Innovation from 2011 to 2019.

• Effective in 2011, the Affordable Care Act imposed an annual, nondeductible fee on any entity that manufactures or imports certain branded prescription drugs, apportioned among these entities according to their market share in certain government healthcare programs, although this fee would not apply to sales of certain products approved exclusively for orphan indications.

• Effective in 2011, the Affordable Care Act imposed a requirement on manufacturers of branded drugs to provide a 50% discount off the negotiated price of branded drugs dispensed to Medicare Part D patients in the coverage gap (i.e., the “donut hole” or the period of consumer payment for prescription medicine costs which lies between the initial coverage limit and the catastrophic—coverage threshold).

The adoption of government controls and measures, and tightening of restrictive policies in jurisdictions with existing controls and measures, could also limit payments for pharmaceuticals.

The marketability of any products for which we receive regulatory approval for commercial sale may suffer if the government and third-party payors fail to provide adequate coverage and reimbursement. Coverage policies and third-party reimbursement rates may change at any time. Even if favorable coverage and reimbursement status is attained for one or more products for which we receive regulatory approval, less favorable coverage policies and reimbursement rates may be implemented in the future.

Generic Drugs

Given that we manufacturer and market generic drug products, our business may be impacted by laws and policies governing the coverage, pricing, and reimbursement of generic drugs. Generic drugs are the chemical and therapeutic equivalents of innovator medicines and are typically more affordable in comparison to the innovator’s products. Sales of generic medicines have benefitted from policies encouraging generic substitution and a general increasing acceptance of generic drugs on the part of healthcare insurers, consumers, physicians and pharmacists. However, while the U.S. generics market is one of the largest in the world, with generic prescription sales of approximately $70 billion in 2016, the recent trend of rising generic drug prices has drawn scrutiny from the U.S. government. Specifically, beginning in 2014 generic drug pricing became the subject of Congressional inquiries and media attention, and many generic drug manufacturers became the targets of government investigations.

In addition, under amendments to the Medicaid Drug Rebate Statute in 2015, generic drug manufacturers are now required to pay an inflation penalty if price increases on generic drugs exceed the rate of inflation.

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Specifically, the Bipartisan Budget Act of 2015 (“BBA ‘15”) amended section 1927(c)(3) of the Social Security Act to require manufacturers of non-innovator multiple source (N) drugs to pay additional Medicaid rebates if a drug’s AMP increases at a rate that exceeds the rate of inflation. Manufacturers of generic drugs must calculate the additional Medicaid rebates for noninnovator drugs beginning with the rebates that are calculated for the first quarter of 2017.

Also, the ACA revised the methodology for setting Medicaid generic drug reimbursement in order to further limit the reimbursement of generic drugs under the Medicaid program. Specifically, effective April 1, 2016, the Federal Upper Limit (“FUL”), which establishes the government’s maximum payment amount for certain generic drugs, is no less than 175% of the weighted average of the most recently reported monthly AMPs for pharmaceutically and therapeutically equivalent multiple source drug products that are available for purchase by retail community pharmacies on a nationwide basis. Similarly, reimbursement for generic drugs is also limited in Medicare Part B, as the Average Sales Price (the metric upon which reimbursement is based) for multiple-source drugs included within the same multiple-source drug billing and payment code is the volume-weighted average of the various manufacturers’ ASPs for those drug products.

Laboratory Testing Services Coverage and Reimbursement

Given that we market medical devices in the form of in vitro diagnostic devices, or IUDs, used in the performance of clinical laboratory tests, currently limited to drugs of abuse pregnancy and alcohol testing in the U.S., and cardiac marker and infectious disease testing in Asia, our business may be impacted by laws and policies governing the coding, coverage, reimbursement, and demand for clinical laboratory services. With regard to the clinical laboratory services performed on Medicare beneficiaries, health care providers utilizing such tests generally either are paid under prospective payment systems for most tests performed on hospital inpatients and outpatients, or must bill the Medicare Part B program directly in compliance with applicable coding, coverage and reimbursement rules, and accept the amount paid by the Medicare contractor under the Medicare Clinical Laboratory Fee Schedule, or CLFS, as payment in full. Currently, Medicare does not require the beneficiary to pay a co-payment for clinical laboratory services paid under the CLFS. Pursuant to Section 216 of-the federal Protecting Access to Medicare Act of 2014, or PAMA, CMS is modernizing the CLFS by creating a market-based reimbursement system which will require clinical laboratories subject to the law to report certain private payor prices and test volumes, and CMS to set new payment rates for CLFS tests based on the weighted median of reported prices. Under PAMA, price reporting will begin in 2017 and new prices will take effect in 2018, with updates occurring every one to three years thereafter. It is unclear how this new law will affect testing services that use our products at this time, but as a general matter CMS has indicated that prices of many clinical laboratory tests will decrease under PAMA. In addition, state Medicaid programs are prohibited from paying more (and in many instances, pay significantly less) than Medicare, and payment is subject to state-specific coverage, reimbursement, and laboratory law requirements. Certain state Medicaid programs also require Medicaid recipients to pay co-payment amounts for clinical laboratory services. Likewise, payment by private payors is subject to payor-determined coverage and reimbursement policies that vary considerably and are subject to change without notice. Finally, there is increasing legislative attention to opioid abuse in the United States, including passage of the Comprehensive Addiction and Recovery Act of 2016 which, among other things, strengthens state prescription drug monitoring programs and expands educational efforts for certain populations, which may increase the need for drugs of abuse testing. Changes like these related to clinical laboratory services, and any other changes related to coverage or reimbursement may impact the demand for and pricing of some of our products which could adversely affect our ability to operate our business and our financial results.

Reimbursement for Compounded Drugs

Compounding is a practice in which pharmacists combine, mix, or alter ingredients to create a customized medication to meet the needs of an individual patient in response to a licensed practitioner’s prescription. Drug compounding is practiced in a variety of pharmacy settings, such as retail pharmacies, mail-order pharmacies, home infusion pharmacies, and hospital pharmacies. Compounded drugs may be dispensed directly to patients in

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pharmacy settings, or administered to patients in inpatient or outpatient settings, such as hospitals or physician offices. Compounded drugs are generally not approved by the FDA. While they may contain ingredients that are FDA-approved products, compounded drugs may also contain bulk drug substances that are generally not FDA approved.

Given that we intend to compound and sell compounded products, some of which may include active pharmaceutical ingredients (“APIs”) that we manufacture, our business may be impacted by the downstream coverage and reimbursement of compounded products. Generally, federal reimbursement is available for compounded drugs, but is typically dependent upon whether the individual ingredients or bulk drug substances that make up the compounded product are FDA-approved. While the majority of the APIs we sell are FDA-approved, some of our API products have not yet received FDA approval.

There is a national payment policy for compounded drugs under Medicare Part B, but the policy is unclear because it does not stipulate whether payment is available for ingredients that are bulk drug substances, which are generally not FDA-approved. Under Medicare Part B, claims for compounded drugs are typically submitted using a billing code for “not otherwise classified drugs”, and CMS contractors who process Part B claims may conduct further reviews of outpatient claims to determine whether the drug billed under a nonspecific billing code is a compounded drug and to identify its ingredients in order to make payment decisions. However, CMS contractors who process Part B claims do not always collect information on the FDA-approval status of drug ingredients and, therefore, payment may be made for ingredients that are not FDA-approved products. Therefore, there is uncertainty as to whether Medicare payments for compounded drugs are consistent with the Medicare Part B policy.

Under Medicare Part D, federal payments are not available for non-FDA-approved products—including bulk drug substances—and inactive ingredients used to make a compounded drug. Insurers that offer Medicare Part D benefits and Part D-only sponsors, generally, pay pharmacies for each ingredient in the compounded drug that is an FDA-approved product and is otherwise eligible for reimbursement under Part D. However, with respect to non-FDA approved bulk drug substances, insurers that offer Medicare Part D benefits and Part D-only sponsors may choose to pay for such bulk substances but may not submit these payments as part of the Part D transaction data CMS uses to determine federal payments to Part D plans.

Healthcare Fraud and Abuse Laws and Compliance Requirements

If we obtain regulatory approval of our products, we may be subject to various federal and state laws targeting fraud and abuse in the healthcare industry. These laws may impact, among other things, our proposed sales and marketing programs. In addition, we may be subject to patient privacy regulation by both the federal government and the states in which we conduct our business. The laws that may affect our ability to operate include:

• the federal Anti-Kickback Statute, which prohibits, among other things, persons from knowingly and willfully soliciting, receiving, offering, or paying remuneration (a term interpreted broadly to include anything of value, including, for example, gifts, discounts, and credits), directly or indirectly, in cash or in kind, to induce or reward, or in return for, either the referral of an individual for, or the purchase, order, or recommendation of, an item or service reimbursable under a federal healthcare program, such as the Medicare and Medicaid programs;

• federal civil and criminal false claims laws and civil monetary penalty laws, which prohibit, among other things, individuals or entities from knowingly presenting, or causing to be presented, claims for payment to Medicare, Medicaid, or other third-party payors that are false or fraudulent, or making a false statement or record material to payment of a false claim or avoiding, decreasing, or concealing an obligation to pay money owed to the federal government;

• provisions of the federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, which created new federal criminal statutes, referred to as the “HIPAA All-Payor Fraud Prohibition,”

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that prohibit knowingly and willfully executing a scheme to defraud any healthcare benefit program and making false statements relating to healthcare matters;

• the federal transparency laws, including the federal Physician Payment Sunshine Act, which was part of the Affordable Care Act, that require manufacturers of certain drugs and biologics to track and disclose payments and other transfers of value they make to U.S. physicians and teaching hospitals as well as physician ownership and investment interests in the manufacturer, and that such information is subsequently made publicly available in a searchable format on a CMS website;

• provisions of HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act and its implementing regulations, which imposes certain requirements relating to the privacy, security and transmission of individually identifiable health information; and

• state law equivalents of each of the above federal laws, such as anti-kickback and false claims laws which may apply to items or services reimbursed by any third-party payor, including commercial insurers, state transparency reporting and compliance laws; and state laws governing the privacy and security of health information in certain circumstances, many of which differ from each other in significant ways and which may not have the same effect, thus complicating compliance efforts.

The Affordable Care Act broadened the reach of the fraud and abuse laws by, among other things, amending the intent requirement of the federal Anti-Kickback Statute and the applicable criminal healthcare fraud statutes contained within 42 U.S.C. § 1320a-7b. Pursuant to the statutory amendment, a person or entity no longer needs to have actual knowledge of this statute or specific intent to violate it in order to have committed a violation. In addition, the Affordable Care Act provides that the government may assert that a claim including items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the civil False Claims Act or the civil monetary penalties statute. Many states have adopted laws similar to the federal Anti-Kickback Statute, some of which apply to the referral of patients for healthcare items or services reimbursed by any source, not only the Medicare and Medicaid programs.

The federal False Claims Act prohibits anyone from, among other things, knowingly presenting, or causing to be presented, for payment to federal programs (including Medicare and Medicaid) claims for items or services that are false or fraudulent. Although we would not submit claims directly to payors, manufacturers can be held liable under these laws if they are deemed to “cause” the submission of false or fraudulent claims by, for example, providing inaccurate billing or coding information to customers or promoting a product off-label. In addition, our future activities relating to the reporting of wholesaler or estimated retail prices for our products, the reporting of prices used to calculate Medicaid rebate information and other information affecting federal, state, and third-party reimbursement for our products, and the sale and marketing of our products, are subject to scrutiny under this law. For example, pharmaceutical companies have been prosecuted under the federal False Claims Act in connection with their alleged off-label promotion of drugs, purportedly concealing price concessions in the pricing information submitted to the government for government price reporting purposes, and allegedly providing free product to customers with the expectation that the customers would bill federal health care programs for the product. Penalties for a False Claims Act violation include three times the actual damages sustained by the government, plus mandatory civil penalties of between $10,781 and $21,563 for each separate false claim, the potential for exclusion from participation in federal healthcare programs, and, although the federal False Claims Act is a civil statute, conduct that results in a False Claims Act violation may also implicate various federal criminal statutes. In addition, private individuals have the ability to bring actions under the federal False Claims Act and certain states have enacted laws modeled after the federal False Claims Act.

New Legislation and Regulations

From time to time, legislation is drafted, introduced and passed in Congress that could significantly change the statutory provisions governing the testing, approval, manufacturing, marketing, coverage and reimbursement of products regulated by the FDA or other government agencies. In addition to new legislation, FDA and

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healthcare fraud and abuse and coverage and reimbursement regulations and policies are often revised or interpreted by the agency in ways that may significantly affect our business and our products. In particular, we expect that the new presidential administration and U.S. Congress will seek to modify, repeal, or otherwise invalidate all, or certain provisions of, the U.S. healthcare reform legislation. Since taking office, President Trump has continued to support the repeal of all or portions of the Affordable Care Act. President Trump has also recently issued an executive order in which he stated that it is his administration’s policy to seek the prompt repeal of the Affordable Care Act and directed executive departments and federal agencies to waive, defer, grant exemptions from, or delay the implementation of the provisions of the Affordable Care Act to the maximum extent permitted by law. There is still uncertainty with respect to the impact President Trump’s administration and the U.S. Congress may have, if any, and any changes will likely take time to unfold. Such reforms could have an adverse effect on anticipated revenues from therapeutic candidates that we may successfully develop and for which we may obtain regulatory approval and may affect our overall financial condition and ability to develop therapeutic candidates. However, we cannot predict the ultimate content, timing or effect of any healthcare reform legislation or the impact of potential legislation on us.

Furthermore, in the U.S., the health care industry is subject to political, economic, and regulatory influences. Initiatives to reduce the federal budget and debt and to reform health care coverage are increasing cost-containment efforts. We anticipate that federal agencies, Congress, state legislatures, and the private sector will continue to review and assess alternative health care benefits, controls on health care spending, and other fundamental changes to the healthcare delivery system. Any proposed or actual changes could limit coverage for or the amounts that federal and state governments will pay for health care products and services, which could also result in reduced demand for our products or additional pricing pressures, and limit or eliminate our spending on development projects and affect our ultimate profitability. We are not able to predict whether further legislative changes will be enacted or whether FDA or healthcare fraud and abuse or coverage and reimbursement regulations, guidance, policies or interpretations will be changed or what the effect of such changes, if any, may be.

Foreign Corrupt Practices Act

The FCPA prohibits any U.S. individual or business from corruptly offering, paying, promising, or authorizing the provision of anything of value, directly or indirectly, to any foreign official, foreign political party or official thereof, or candidate for foreign political office to obtain or retain business. The FCPA also obligates companies whose securities are listed in the United States to comply with accounting provisions requiring the issuer to maintain books and records that accurately and fairly reflect all transactions of the issuer and its controlled subsidiaries, and to devise and maintain an adequate system of internal accounting controls.

Environment

We are subject to inspections by the FDA for compliance with cGMP and other U.S. regulatory requirements, including U.S. federal, state and local regulations regarding environmental protection and hazardous and controlled substance controls, among others. Environmental laws and regulations are complex, change frequently and have tended to become more stringent over time. We have incurred, and may continue to incur, significant expenditures to ensure we are in compliance with these laws and regulations. We would be subject to significant penalties for failure to comply with these laws and regulations.

PRC Government Regulation

In the PRC, we operate in an increasingly complex legal and regulatory environment. We are subject to a variety of PRC laws, rules and regulations affecting many aspects of our business. This section summarizes the principal PRC laws, rules and regulations relevant to our business and operations.

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Foreign Investment in Pharmaceutical Industry

The Foreign Investment Industrial Guidance Catalogue (2015 Version), or the Foreign Investment Catalogue jointly promulgated by the National Development and Reform Commission, or NDRC, and the Ministry of Commerce, or MOFCOM, in March 2015 and effective in April 2015 and replaced the previous versions. The Foreign Investment Catalogue divides foreign investments in the pharmaceutical industry into four categories: encouraged, permitted, restricted or prohibited. In September 2016, the National People’s Congress Standing Committee adopted a decision on amending the law of foreign invested companies which became effective from October 1, 2016. Upon the effectiveness of the decision, the establishment of the foreign invested enterprise and its subsequent changes will be required to be filed with the relevant authorities instead of obtaining approvals from relevant commerce authorities, except for the foreign invested enterprises which are subject to the special administrative measures regarding foreign investment entry. In October 2016, NDRC and MOFCOM jointly issued a notice according to which the industries falling within the categories in which foreign investment is prohibited or restricted and those falling within the encouraged category subject to relevant requirements of equity or senior management under the Foreign Investment Catalogue, will be subject to the special administrative measures for foreign investment entry.

General Regulations on China Food and Drug Administration

In the PRC, the CFDA monitors and supervises the administration of pharmaceutical products, as well as medical devices and equipment. The CFDA’s primary responsibility includes evaluating, registering and approving new drugs, generic drugs, imported drugs and traditional Chinese medicines; approving and issuing permits for the manufacture, export and import of pharmaceutical products and medical appliances; approving the establishment of enterprises for pharmaceutical manufacture and distribution; formulating administrative rules and policies concerning the supervision and administration of food, cosmetics and pharmaceuticals; and handling significant accidents involving these products. The local provincial drug administrative authorities are responsible for supervision and administration of drugs within their respective administrative regions.

The PRC Drug Administration Law promulgated by the Standing Committee of the National People’s Congress in 1984 and the Implementing Measures of the PRC Drug Administration Law promulgated by the Ministry of Health, or the MOH, in 1989 set forth the legal framework for the administration of pharmaceutical products, including the research, development and manufacturing of drugs.

The PRC Drug Administration Law was revised in February 2001, December 2013, and again in April 2015 respectively. The purpose of the revisions was to strengthen the supervision and administration of pharmaceutical products and to ensure the quality and safety of those products for human use. The revised PRC Drug Administration Law applies to entities and individuals engaged in the development, production, trade, application, supervision and administration of pharmaceutical products. It regulates and prescribes a framework for the administration of pharmaceutical preparations of medical institutions and for the development, research, manufacturing, distribution, packaging, pricing and advertisement of pharmaceutical products. Revised Implementing Measures of the PRC Drug Administration Law promulgated by the State Council took effect in September 2002 and was revised in February 2016, providing detailed implementing regulations for the revised PRC Drug Administration Law.

Under these regulations, we need to follow related regulations for preclinical research, clinical trials and production of new drugs.

Good Laboratories Practice Certification for Preclinical Research

To improve the quality of preclinical research, the CFDA promulgated the Administrative Measures for Good Laboratories Practice of Preclinical Laboratory in 2003 and began to conduct the certification program of Good Laboratories Practice, or the GLP. Under CFDA Circular 214, the CFDA decides whether an institution is

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qualified for undertaking pharmaceutical preclinical research upon the evaluation of the institution’s organizational administration, its research personnel, its equipment and facilities and its operation and management of preclinical pharmaceutical projects. If all requirements are met, a GLP Certification will be issued by the CFDA and the result will be published on the CFDA’s website.

Approval for Clinical Trials and Production of New Drugs

According to the Provisions for Drug Registration promulgated by the CFDA in 2007, the PRC Drug Administration Law, the Provisions on the Administration of Special Examination and Approval of Registration of New Drugs, or the Special Examination and Approval Provisions issued by the CFDA in 2009, and the Circular on Information Publish Platform for Pharmaceutical Clinical Trials issued by the CFDA in 2013, we must comply with the following procedures and obtain several approvals for clinical trials and production of new drugs.

Clinical Trial Application

Upon completion of its preclinical research, a research institution must apply for approval of a Clinical Trial Application before conducting clinical trials.

Domestic Category 1 New Drugs Are Eligible for Special Examination and Approval

According to the Provisions for Drug Registration, drug registration applications are divided into three different types, namely Domestic New Drug Application, Domestic Generic Drug Application, and Imported Drug Application. Drugs fall into one of three categories, namely chemical medicine, biological product, or traditional Chinese or natural medicine. The registrations of chemical medicines are divided into six categories, among which, a Category 1 drug is a new drug that has never been marketed in any country. All of our clinical-stage drug candidates qualify as domestic Category 1 new drugs.

In March 2016, the CFDA promulgated the Work Plan for Reforming the Chemical Medicines Registration Classification System, under which, the registrations of chemical medicines are divided into five categories as follows:

Category 1: Innovative drugs that are not marketed both domestically and abroad. These drugs contain new compounds with clear structures and pharmacological effects and they have clinical value.

Category 2: Modified new drugs that are not marketed both domestically and abroad. With known active components, the drug’s structure, phase, prescription manufacturing process, administration route and indication are optimized and it has obvious clinical advantage.

Category 3: The drugs that are imitated by domestic applicants to original drugs that have been marketed abroad but not domestically. These kinds of drugs are supposed to have the same quality and effects with original drugs. Original drugs are the foremost drugs that are approved to be marketed domestically and /or abroad with complete and full safety and validity data as marketing evidence.

Category 4: The drugs that are imitated by domestic applicants to original drugs that have been marketed domestically. These kinds of drugs are supposed to have the same quality and effects with original drugs.

Category 5: The drugs that have been marketed abroad are applied to be marketed domestically.

The registration of Category 1 or Category 2 drugs above will be subject to the requirements of Domestic New Drug Application under the Provisions for Drug Registration, Domestic Generic Drug Application will be applicable to Category 3 or Category 4 drugs registration, and Imported Drug Application will be applicable to

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Category 5 drugs registration. The applicants whose registration applications for chemical medicines have been accepted by the CFDA before the date of promulgation of the Work Plan for Reforming the Chemical Medicines Registration Classification System can choose to continue the applications process according to the Provisions for Drug Registration or to comply with the new categories under the Work Plan for Reforming the Chemical Medicines Registration Classification System

According to the Special Examination and Approval Provisions, the CFDA conducts special examination and approval for new drugs registration application when:

(1) active ingredients and their preparations extracted from plants, animals and minerals, and newly discovered medical materials and their preparations have not been marketed in China;

(2) the chemical raw material medicines as well as the preparations and biological products thereof haven’t been approved for marketing home and abroad;

(3) the new drugs are for treating AIDS, malignant tumors and rare diseases, etc., and have obvious advantages in clinic treatment; or

(4) the new drugs are for treating diseases with no effective methods of treatment.

The Special Examination and Approval Provisions provide that the applicant may file for special examination and approval at the stage of Clinical Trial Application if the drug candidate falls within items (1) or (2), and for drug candidates that fall within items (3) or (4), the application for special examination and approval must be made when filing for production.

The registration of Category 1 or Category 2 drugs above will be subject to the requirements of Domestic New Drug Application under the Provisions for Drug Registration, Domestic Generic Drug Application will be applicable to Category 3 or Category 4 drugs registration, and Imported Drug Application will be applicable to Category 5 drugs registration. The applicants whose registration applications for chemical medicines have been accepted by the CFDA before the date of promulgation of the Reform Plan Regarding the Category of the Registration of Chemical Medicines can choose to continue the applications process according to the Provisions for Drug Registration or to comply with the new categories under the Reform Plan Regarding the Category of the Registration of Chemical Medicines.

We believe that certain of our products fall within items (2) and (3) above. Therefore, we may file an application for special examination and approval at the Clinical Trial Application stage, which may enable us to pursue a more expedited path to approval in China and bring therapies to patients more quickly.

The Advantages of Category 1 New Drugs over Category 5 Drugs

Under the Provisions for Drug Registration and the Work Plan for Reforming the Chemical Medicines Registration Classification System, Category 5 drugs are drugs which have already been marketed abroad by multinational companies, but are not yet approved in China and Category 5 drug registration will be subject to the requirements of the Imported Drug Application. Compared with the application for Category 5 drugs, the application for Category 1 domestic new drugs has a more straight-forward registration pathway. According to the Special Examination and Approval Provisions, where a special examination and approval treatment is granted, the application for clinical trial and manufacturing will be handled with priority and with enhanced communication with the Center for Drug Evaluation of the CFDA, or the CDE, which will establish a working mechanism for communicating with the applicants. If it becomes necessary to revise the clinical trial scheme or make other major alterations during the clinical trial, the applicant may file an application for communication. When an application for communication is approved, the CDE will arrange the communication with the applicant within one month.

In comparison, according to the Provisions for Drug Registration, the registration pathway for Category 5 drugs is complicated and evolving. Category 5 drug applications may be submitted after a company obtains an

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NDA approval and receive the CPP granted by a major regulatory authority, such as the FDA or the EMA. Multinational companies may need to apply for conducting MRCTs, which means that companies do not have the flexibility to design the clinical trials to fit the Chinese patients and standard-of-care. Category 5 drug candidates may not qualify to benefit from fast track review with priority at the Clinical Trial Application stage. Moreover, a requirement to further conduct local clinical trials can potentially delay market access by several years from its international NDA approval.

Changes to the Review and Approval Process

In August 2015, the State Council issued a statement, Opinions on Reforming the Review and Approval Process for Pharmaceutical Products and Medical Devices, which contained several potential policy changes that could benefit the pharmaceutical industry:

• A plan to accelerate innovative drug approval with a special review and approval process, with a focus on areas of high unmet medical needs, including drugs for HIV, cancer, serious infectious diseases, orphan diseases and drugs on national priority lists.

• A plan to adopt a policy which would allow companies to act as the marketing authorization holder and to hire contract manufacturing organizations to produce drug products.

• A plan to improve the review and approval of clinical trials, and to allow companies to conduct clinical trials at the same time as they are in other countries and encourage local clinical trial organizations to participate in international multi-center clinical trials.

In November 2015, the CFDA released the Circular Concerning Several Policies on Drug Registration Review and Approval, which further clarified the following policies potentially simplifying and accelerating the approval process of clinical trials:

• A one-time umbrella approval procedure allowing approval of all phases of a new drug’s clinical trials at once, rather than the current phase-by-phase approval procedure, will be adopted for new drugs’ clinical trial applications.

• A fast track drug registration or clinical trial approval pathway will be available for the following applications: (1) registration of innovative new drugs treating HIV, cancer, serious infectious diseases and orphan diseases; (2) registration of pediatric drugs; (3) registration of geriatric drugs and drugs treating China-prevalent diseases; (4) registration of drugs sponsored by national science and technology grants; (5) registration of innovative drugs using advanced technology, using innovative treatment methods, or having distinctive clinical benefits; (6) registration of foreign innovative drugs to be manufactured locally in China; (7) concurrent applications for new drug clinical trials which are already approved in the U.S. or European Union, or concurrent drug registration applications for drugs which have applied for marketing authorization and passed onsite inspections in the U.S. or European Union and are manufactured using the same production line in China; and (8) clinical trial applications for drugs with urgent clinical need and patent expiry within three years, and marketing authorization applications for drugs with urgent clinical need and patent expiry within one year.

In March 2016, the CFDA issued the Interim Provisions on the Procedures for Drug Clinical Trial Data Verification that provides procedural rules for CFDA’s on-site verification of clinical data before drug approvals.

Also in February 2016, the CFDA published the Opinions on Implementing a Prioritized Review System to Avoid Drug Review Backlogs, which introduces a prioritized review and approval pathway to clinical trial applications and registration applications of certain drugs as part of CFDA’s ongoing reform of its current drug review and approval system.

The CFDA issued the Procedures for Priority Examination and Approval of Medical Devices, or the Procedures on October 25, 2016, which shall come into effect on January 1, 2017. The Procedures, composed of

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17 articles, specify that the priority in examination and approval shall be given, in relation to the applications of registering Class-III domestic, or Class-II and Class-III imported medical devices, when those applications fall within such categories as diagnosis or treatment of rare disease or malignant tumor with significant clinical advantage. According to the Procedures, the medical device technical evaluation center of the CFDA will tentatively decide on the applicants applying for their project given priority examination and approval, names of their products and the reception numbers and disclose such information on its website for a period of no less than five working days. The Procedures provide that for projects given priority in examination and approval, the medical device technical evaluation center shall communicate with applicants in an active way as required by applicable provisions in the course of evaluating relevant technologies, and may arrange for special talks when necessary; food and drug administrative departments at provincial level shall take the review of the registered quality management system of medical devices as priority; and the CFDA will prioritize their administrative examination and approval.

PRC Enterprise Income Tax Law and Its Implementation

The PRC Enterprise Income Tax Law, or EIT Law, and its implementation rules provide that from January 1, 2008, a uniform income tax rate of 25% is applied equally to domestic enterprises as well as foreign investment enterprises, and permit certain High and New Technologies Enterprises, or HNTEs, to enjoy preferential enterprise income tax rates subject to these HNTEs meeting certain qualification criteria.

The EIT Law and its implementation rules provide that a withholding tax at the rate of 10% is applicable to dividends and other distributions payable by a PRC resident enterprise to investors who are “non-resident enterprises” (that do not have an establishment or place of business in the PRC, or that have such establishment or place of business but the relevant dividend or other distribution is not effectively connected with the establishment or place of business). However, pursuant to the Arrangement between the Mainland and Hong Kong Special Administrative Region for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income effective on December 8, 2006, the withholding tax rate for dividends paid by a PRC resident enterprise is 5% if the Hong Kong enterprise owns at least 25% of the capital of the PRC enterprise; otherwise, the dividend withholding tax rate is 10%. According to the Notice of the PRC State Administration of Taxation on Issues relating to the Administration of the Dividend Provision in Tax Treaties promulgated on February 20, 2009 and effective on the same day, the corporate recipient of dividends distributed by PRC enterprises must satisfy the direct ownership thresholds at all times during the 12 consecutive months preceding the receipt of the dividends. The PRC State Administration of Taxation issued the Notice on How to Understand and Identify the Owner of Benefits in the PRC-HK Tax Agreement on October 27, 2009. Pursuant to these regulations, non-resident enterprises are required to obtain approval from the competent tax authorities in order to enjoy the favorable treatments under the treaties. However, if a company is deemed to be a pass-through entity rather than a qualified owner of benefits, it cannot enjoy the favorable tax treatments provided in the tax arrangement. In addition, if transactions or arrangements are deemed by the relevant tax authorities to be entered into mainly for the purpose of enjoying favorable tax treatments under the tax arrangement, such favorable tax treatments may be subject to adjustment by the relevant tax authorities in the future.

On July 27, 2011, the Ministry of Finance, the General Administration of Customs, and the State Administration of Taxation issued the Notice on the Relevant Tax Policies for the Implementation of the Strategy of Extensive Development of the Western Regions, under which from January 1, 2011 to December 31, 2020, a reduced enterprise income tax rate of 15% is applicable to the enterprises set up in the western regions as designated by the relevant PRC regulations with their main business in the encouraged industries. The encouraged industries are those listed in the Catalog of Encouraged Industries in the Western Regions as promulgated by NDRC. To qualify for the reduced tax rate, an enterprise must derive 70 percent or more of its revenue from the business listed in the Catalog of Encouraged Industries in the Western Regions.

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Regulations Relating to Business Tax and Value-added Tax

Pursuant to the Temporary Regulations on Business Tax, which were promulgated by the State Council on December 13, 1993 and effective on January 1, 1994, as amended on November 10, 2008 and effective January 1, 2009, any entity or individual conducting business in a service industry is generally required to pay business tax at the rate of 5% on the revenues generated from providing such services.

In November 2011, the Ministry of Finance and the State Administration of Taxation, or SAT, promulgated the Pilot Plan for Imposition of Value-Added Tax to Replace Business Tax, or the Pilot Plan. Since January 2012, the SAT has been implementing the Pilot Plan, which imposes value-added tax, or VAT, in lieu of business tax for certain industries in Shanghai. The Pilot Plan was expanded to other regions, including Beijing, in September 2012, and was further expanded nationwide beginning August 1, 2013. VAT is applicable at a rate of 6% in lieu of business taxes for certain services and 17% for the sale of goods and provision of tangible property lease services. VAT payable on goods sold or taxable services provided by a general VAT taxpayer for a taxable period is the net balance of the output VAT for the period after crediting the input VAT for the period. In March 2016, the Ministry of Finance and SAT jointly issued the Notice on Adjustment of Transfer Business Tax to Value Added Tax effective from May 2016, according to which PRC tax authorities have started imposing VAT on revenues from various service sectors, including real estate, construction, financial services and insurance, as well as other lifestyle service sectors, replacing the business tax.

Four Phases of Clinical Trials

A clinical development program consists of Phases 1, 2, 3 and 4. Phase 1 refers to the initial clinical pharmacology and safety evaluation studies in humans. Phase 2 refers to the preliminary evaluation of a drug candidate’s therapeutic effectiveness and safety for particular indication(s) in patients, provide evidence and support for the design of Phase 3 clinical trial, and settle the administrative dose regimen. Phase 3 refers to clinical trials undertaken to confirm the therapeutic effectiveness of a drug. Phase 3 is used to further verify the drug’s therapeutic effectiveness and safety on patients with target indication(s), to evaluate overall benefit-risk relationships of the drug, and ultimately to provide sufficient evidence for the review of drug registration application. Phase 4 refers to a new drug’s post-marketing study to assess therapeutic effectiveness and adverse reactions when the drug is widely used, to evaluate overall benefit-risk relationships of the drug when used among general population or specific groups, and to adjust the administration dose, etc.

New Drug Application

When Phase 1, 2 and 3 of the clinical trials have been completed, the applicant must apply to the CFDA for approval of a new drug application. The CFDA then determines whether to approve the application according to the comprehensive evaluation opinion provided by the CDE of the CFDA. We must obtain approval of a new drug application before our drugs can be manufactured and sold in the PRC market.

Good Manufacturing Practice

All facilities and techniques used in the manufacture of products for clinical use or for sale in the PRC must be operated in conformity with cGMP guidelines as established by the CFDA. Failure to comply with applicable requirements could result in the termination of manufacturing and significant fines.

Animal Test Permits

According to Regulations for the Administration of Affairs Concerning Experimental Animals promulgated by the State Science and Technology Commission in November 1988, as revised in January 2011 and July 2013, and Administrative Measures on the Certificate for Animal Experimentation promulgated by the State Science

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and Technology Commission and other regulatory authorities in January 2001, performing experimentation on animals requires a Certificate for Use of Laboratory Animals. Applicants must satisfy the following conditions:

• Laboratory animals must be qualified and sourced from institutions that have Certificates for Production of Laboratory Animals;

• The environment and facilities for the animals’ living and propagating must meet state requirements;

• The animals’ feed and water must meet state requirements;

• The animals’ feeding and experimentation must be conducted by professionals, specialized and skilled workers, or other trained personnel;

• The management systems must be effective and efficient; and

• The applicable entity must follow other requirements as stipulated by the PRC laws and regulations.

We obtained a Certificate for Use of Laboratory Animals in 2012 regarding the scope of rats and mice.

Regulations Relating to Intellectual Property Rights

Patent

Pursuant to the Patent Law of the PRC and its implementation rules, patents in the PRC fall into three categories, namely invention patent, utility model and design patent. Invention patent refers to a new technical solution proposed in respect of a product, method or its improvement; utility model refers to a new technical solution that is practicable for application and proposed in respect of the shape, structure or a combination of both of a product; and design patent refers to the new design of a certain product in shape, pattern or a combination of both and in color, shape and pattern combinations aesthetically suitable for industrial application. Under the Patent Law of the PRC, the term of patent protection starts from the date the patent was filed. Patents relating to inventions are effective for twenty years from the initial date the patent application was filed, and the term for utility model and designed patents is ten years from the initial date the patent application was filed. The Patent Law of the PRC adopts the principle of “first to file,” which means where more than one person files a patent application for the same invention, a patent will be granted to the person who first filed the application.

Existing patents can become invalid or unenforceable due to a number of factors, including known or unknown prior art, deficiencies in patent application and lack of novelty in technology. In the PRC, a patent must have novelty, innovation and practical application. Under the Patent Law of PRC, novelty means that before a patent application is filed, no identical invention or utility model has been publicly disclosed in any publication in the PRC or abroad or has been publicly used or made known to the public by any other means, whether in or outside of China, nor has any other person filed with the patent authority an application that describes an identical invention or utility model and is published after the filing date. Patents in the PRC are filed with the State Intellectual Property Office, or SIPO. Normally, the SIPO publishes an application for a pharmaceutical invention 18 months after the application is filed, which may be shortened upon request by the applicant. The applicant must apply to the SIPO for a substantive examination within three years from the date the application is filed.

Article 20 of the Patent Law of the PRC provides that, for an invention or utility model completed in China, any applicant (not just Chinese companies and individuals), before filing a patent application outside of China, must first submit it to the SIPO for a confidential examination. Failure to comply with this requirement will result in the denial of any Chinese patent for the subject invention. This added requirement of confidential examination by the SIPO has raised concerns by foreign companies who conduct research and development activities in the PRC or outsource research and development activities to service providers in the PRC.

Patent Enforcement

Unauthorized use of patents without consent from owners of patents, forgery of the patents belonging to other persons, or engagement in other infringement acts against patent rights, will subject the infringers to tortious liabilities. Serious offences may be subject to criminal penalties.

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When a dispute arises as a result of infringement of the patent owner’s patent right, PRC law requires that the parties first attempt to settle the dispute through consultation between them. However, if the dispute cannot be settled through consultation, the patent owner, or an interested party who believes the patent is being infringed, may either file a civil legal suit or file an administrative complaint with the relevant patent administration authority under the SIPO. A PRC court may issue a preliminary injunction upon the patent owner’s or an interested party’s request before instituting any legal proceedings or during the proceedings. Damages for infringement are calculated as either the loss suffered by the patent holder arising from the infringement or the benefit gained by the infringer from the infringement. If it is difficult to ascertain damages in this manner, damages may be determined by using a reasonable multiple of the license fee under a contractual license. As in other jurisdictions, with one notable exception, the patent owner in the PRC has the burden of proving that the patent is being infringed. However, if the owner of a manufacturing process patent alleges infringement of its patent, the alleged infringer has the burden of proving that it has not infringed. To our knowledge, there are no disputes as to our infringement of any third party’s patent.

Medical Patent Compulsory License

According to the Patent Law of the PRC, the SIPO may grant a compulsory license for manufacturing patented drugs and exporting them to countries or regions covered under relevant international treaties to which the People’s Republic of China has acceded.

Exemptions for Unlicensed Manufacture, Use and Import of Patented Drugs

According to the Patent Law of the PRC, any person may manufacture, use or import patented drugs for the purpose of providing information required for administrative examination and approval without authorization granted by the patent owner.

Trade Secrets

According to the Anti-Unfair Competition Law of the PRC, the term “trade secrets” refers to technical information and business information that is unknown to the public, that has utility and may create business interest or profit for its legal owners or holders, and that is maintained as a secret by its legal owners or holders.

Under this law, business persons are prohibited from employing the following methods to infringe trade secrets: (1) obtaining the trade secrets from the legal owners or holders by any unfair methods such as stealing, solicitation or coercion; (2) disclosing, using or permitting others to use the trade secrets obtained illegally under item (1) above; or (3) disclosing, using or permitting others to use the trade secrets, in violation of any contractual agreements or any requirements of the legal owners or holders to keep such trade secrets in confidence. If a third party knows or should have known of the above-mentioned illegal conduct but nevertheless obtains, uses or discloses trade secrets of others, the third party may be deemed to have committed a misappropriation of the others’ trade secrets. The parties whose trade secrets are being misappropriated may petition for administrative corrections, and regulatory authorities may stop any illegal activities and fine infringing parties in the amount of RMB 10,000—200,000. Alternatively, persons whose trade secrets are being misappropriated may file lawsuits in a PRC court for loss and damages caused by the misappropriation.

The measures to protect trade secrets include oral or written agreements or other reasonable measures to require the employees of, or persons in business contact with, legal owners or holders to keep trade secrets confidential. Once the legal owners or holders have asked others to keep trade secrets confidential and have adopted reasonable protection measures, the requested persons bear the responsibility for keeping the trade secrets confidential.

Recently Issued Policies on the Protection of Intellectual Property Rights

On November 4, 2016, the Central Committee of the Communist Party of China and the State Council jointly issued a Guideline on Improving the Property Rights Protection System and Providing Law-based

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Protection to Property Rights (the “Guideline”), effective on the date of its release. The Guideline proposes that the country will provide equal, comprehensive and law-based protection to all kinds of property rights and requires that the punishment of intellectual property rights violations should be strengthened and the limits on compensation for violating intellectual property rights laws should be increased. In addition, the Guideline proposes to explore the establishment of infringement punitive compensation system for such intellectual property rights as patent and copyright, including allowing for punitive damages for serious malicious tort. The Guideline also stipulates to perfect the foreign-related intellectual property rights enforcement mechanism, and strengthen the international cooperation in criminal case enforcement and investigation in foreign-related intellectual property crimes. On November 28, 2016, the Supreme People’s Court released the Implementation Opinions on Appropriately and Lawfully Handling Long-standing Historical Property Rights Cases and the Opinions on Giving Full Play to Judicial Functions to Enhance Judicial Protection of Property Rights (the “Opinions”), effective on the date of their releases. The Opinions stipulate that, among others, efforts shall be made to crack down on intellectual property rights infringement and crimes in accordance with relevant laws and regulations, provide stronger judicial protection to intellectual property rights, introduce judicial interpretations and guiding cases in due time, promote the lawful application of the punitive compensation system, and impose severer punishments on chain-type and industrialized crimes against intellectual property rights.

Regulations Relating to Environmental Protection

China has adopted extensive environmental laws and regulations with national and local standards for emissions control, discharge of waste water and storage and transportation, treatment and disposal of waste materials. At the national level, the relevant environmental protection laws and regulations include the PRC Environmental Protection Law, the PRC Law on the Prevention and Control of Air Pollution, the PRC Law on the Prevention and Control of Water Pollution, the PRC Law on the Promotion of Clean Production, the PRC Law on the Prevention and Control of Noise Pollution, the PRC Law on the Prevention and Control of Solid Waste Pollution, the PRC Recycling Economy Promotion Law, the PRC Law on Environmental Impact Assessment, the Administrative Regulations on the Levy and Use of Discharge Fees and the Measures for the Administration of the Charging Rates for Pollutant Discharge Fees. In recent years, the PRC Government has introduced a series of new policies designed to generally promote the protection of the environment. For instance, on November 10, 2016, the General Office of the State Council has released the Implementing Plan for the Permit System for Controlling the Discharge of Pollutants (the “Plan”). The Plan proposes the need of instituting a system for enterprises and public institutions to control their respective total amount of pollutants discharged, which shall be connected with the environmental impact assessment system organically. The Plan also stipulates that it is necessary to regulate the orderly issuance of pollutant discharge permits, to make a name list to manage the permission of pollutant discharge, to promote the administration of such permission system per industry, and to impose severer administration and control over enterprises and public institutions located at such places where environment quality fails to reach relevant standards. Furthermore, the Plan requires that a national pollutant discharge permit management information platform shall be established by 2017 to strengthen the information disclosure and social supervision.

Regulations Relating to Foreign Exchange and Dividend Distribution

Foreign Exchange Regulation

The Foreign Exchange Administration Regulations, most recently amended in August 2008, are the principal regulations governing foreign currency exchange in China. Under the PRC foreign exchange regulations, payments of current account items, such as profit distributions and trade and service-related foreign exchange transactions, may be made in foreign currencies without prior approval from the State Administration of Foreign Exchange, or SAFE, by complying with certain procedural requirements. In contrast, approval from or registration with appropriate government authorities is required when Renminbi is to be converted into a foreign currency and remitted out of China to pay capital expenses such as the repayment of foreign currency-denominated loans.

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In August 2008, SAFE issued the Circular on the Relevant Operating Issues Concerning the Improvement of the Administration of the Payment and Settlement of Foreign Currency Capital of Foreign-Invested Enterprises, or SAFE Circular 142, regulating the conversion by a foreign-invested enterprise of foreign currency-registered capital into Renminbi by restricting how the converted Renminbi may be used. In addition, SAFE promulgated Notice on Issues concerning Further Clarifying and Regulating the Foreign Exchange Administration under Some Capital Accounts, or Circular 45, on November 9, 2011 to clarify the application of SAFE Circular 142. Under SAFE Circular 142 and Circular 45, Renminbi capital converted from foreign currency registered capital of a foreign-invested enterprise may only be used for purposes within the business scope approved by the applicable government authority and may not be used for equity investments within the PRC. In addition, SAFE strengthened its oversight of the flow and use of the Renminbi capital converted from foreign currency registered capital of foreign-invested enterprises. The use of such Renminbi capital may not be changed without SAFE’s approval, and such Renminbi capital may not, in any case, be used to repay Renminbi loans whose proceeds were not used. Furthermore, SAFE promulgated Notice on Issues Concerning Strengthening Administration of Foreign Exchange Services in November 2010, which tightens the regulation over settlement of net proceeds from overseas offerings, such as our initial public offering, and requires, among other things, the authenticity of settlement of net proceeds from offshore offerings to be closely examined and the net proceeds to be settled in the manner described in our prospectus or otherwise approved by our board of directors. Violations of these SAFE regulations may result in severe monetary or other penalties, including confiscation of earnings derived from such violation activities, a fine of up to 30% of the RMB funds converted from the foreign invested funds or in the case of a severe violation, a fine ranging from 30% to 100% of the Renminbi funds converted from the foreign-invested funds.

In November 2012, SAFE promulgated the Circular of Further Improving and Adjusting Foreign Exchange Administration Policies on Foreign Direct Investment, which substantially amends and simplifies the current foreign exchange procedure. Pursuant to this circular, the opening of various special purpose foreign exchange accounts, such as pre-establishment expenses accounts, foreign exchange capital accounts and guarantee accounts, the reinvestment of Renminbi proceeds by foreign investors in the PRC, and remittance of foreign exchange profits and dividends by a foreign-invested enterprise to its foreign shareholders no longer require the approval or verification of SAFE, and multiple capital accounts for the same entity may be opened in different provinces, which was not previously possible. In addition, SAFE promulgated the Circular on Printing and Distributing the Provisions on Foreign Exchange Administration over Domestic Direct Investment by Foreign Investors and the Supporting Documents in May 2013, which specifies that the administration by the SAFE or its local branches over direct investment by foreign investors in the PRC will be conducted by way of registration, and banks must process foreign exchange business relating to the direct investment in the PRC based on the registration information provided by SAFE and its branches.

Under the Circular of the SAFE on Further Improving and Adjusting the Policies for Foreign Exchange Administration under Capital Accounts promulgated by the SAFE on January 10, 2014 and effective from February 10, 2014, administration over the outflow of the profits by domestic institutions has been further simplified. In principle, a bank is no longer required to examine transaction documents when handling the outflow of profits of no more than the equivalent of $50,000 by a domestic institution. When handling the outflow of profits exceeding the equivalent of $50,000, the bank, in principle, is no longer required to examine the financial audit report and capital verification report of the domestic institution, provided that it must examine, according to the principle of transaction authenticity, the profit distribution resolution of the board of directors (or the profit distribution resolution of the partners) relating to this profit outflow and the original copy of its tax record-filing form. After each profit outflow, the bank must affix its seal to and endorsements on the original copy of the relevant tax record-filing form to indicate the actual amount of the profit outflow and the date of the outflow.

On March 30, 2015, SAFE promulgated the Circular on Reforming the Management Approach regarding the Settlement of Foreign Exchange Capital of Foreign-invested Enterprises, or SAFE Circular 19, which became effective on June 1, 2015. According to SAFE Circular 19, the foreign exchange capital of foreign-invested

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enterprises may be settled on a discretionary basis, meaning that the foreign exchange capital in the capital account of a foreign-invested enterprise for which the rights and interests of monetary contribution has been confirmed by the local foreign exchange bureau (or the book-entry registration of monetary contribution by the banks) can be settled at the banks based on the actual operational needs of the foreign-invested enterprise. The proportion of such discretionary settlement is temporarily determined as 100%. The Renminbi converted from the foreign exchange capital will be kept in a designated account, and if a foreign-invested enterprise needs to make further payment from such account, it still must provide supporting documents and go through the review process with the banks.

Furthermore, SAFE Circular 19 stipulates that the use of capital by foreign-invested enterprises must adhere to the principles of authenticity and self-use within the business scope of enterprises. The capital of a foreign-invested enterprise and capital in RMB obtained by the foreign-invested enterprise from foreign exchange settlement must not be used for the following purposes:

1. directly or indirectly used for the payment beyond the business scope of the enterprises or the payment prohibited by relevant laws and regulations;

2. directly or indirectly used for investment in securities, unless otherwise provided by relevant laws and regulations;

3. directly or indirectly used for granting the entrusted loans in RMB, unless permitted by the scope of business, repaying the inter-enterprise borrowing (including advances by the third party), or repaying the bank loans in RMB that have been sub-lent to the third party; and/or

4. paying the expenses related to the purchase of real estate that is not for self-use, except for the foreign-invested real estate enterprises.

On June 9, 2016, SAFE issued the Notice to Reform and Regulate the Administration Policies of Foreign Exchange Capital Settlement to further reform foreign exchange capital settlement nationwide.

Our PRC subsidiaries’ distributions to the offshore parent and carrying out cross-border foreign exchange activities shall comply with the various SAFE registration requirements described above.

Share Option Rules

Under the Administration Measures on Individual Foreign Exchange Control issued by the People’s Bank of China on December 25, 2006, all foreign exchange matters involved in employee share ownership plans and share option plans in which PRC citizens participate require approval from SAFE or its authorized branch. In addition, under the Notices on Issues concerning the Foreign Exchange Administration for Domestic Individuals Participating in Share Incentive Plans of Overseas Publicly-Listed Companies, or Share Option Rules, issued by the SAFE on February 15, 2012, PRC residents who are granted shares or share options by companies listed on overseas stock exchanges under share incentive plans are required to (1) register with the SAFE or its local branches; (2) retain a qualified PRC agent, which may be a PRC subsidiary of the overseas listed company or another qualified institution selected by the PRC subsidiary, to conduct the SAFE registration and other procedures with respect to the share incentive plans on behalf of the participants; and (3) retain an overseas institution to handle matters in connection with their exercise of share options, purchase and sale of shares or interests and funds transfers. We will make efforts to comply with these requirements upon completion of our initial public offering.

Regulation of Dividend Distribution

The principal laws, rules and regulations governing dividend distribution by foreign-invested enterprises in the PRC are the Company Law of the PRC, as amended, the Wholly Foreign-owned Enterprise Law and its implementation regulations, the Cooperative Joint Venture Law and its implementation regulations and the

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Equity Joint Venture Law and its implementation regulations. Under these laws, rules and regulations, foreign-invested enterprises may pay dividends only out of their accumulated profit, if any, as determined in accordance with PRC accounting standards and regulations. Both PRC domestic companies and wholly-foreign owned PRC enterprises are required to allocate at least 10% of their respective accumulated after-tax profits each year, if any, to fund certain capital reserve funds until the aggregate amount of these reserve funds have reached 50% of the registered capital of the enterprises. A PRC company is not permitted to distribute any profits until any losses from prior fiscal years have been offset. Profits retained from prior fiscal years may be distributed together with distributable profits from the current fiscal year.

Labor Laws and Social Insurance

Pursuant to the PRC Labor Law and the PRC Labor Contract Law, employers must execute written labor contracts with full-time employees. All employers must comply with local minimum wage standards. Violations of the PRC Labor Contract Law and the PRC Labor Law may result in the imposition of fines and other administrative and criminal liability in the case of serious violations.

In addition, according to the PRC Social Insurance Law, employers like our PRC subsidiaries in China must provide employees with welfare schemes covering pension insurance, unemployment insurance, maternity insurance, work-related injury insurance, medical insurance, and housing funds.

Employees

As of March 31, 2017, we had 429 full-time employees and 8 part-time employees. Of these, 186 are engaged in full-time research and development and laboratory operations and 251 are engaged in full-time selling, general and administrative functions. As of March 31, 2017, 39% of our personnel were located in the U.S. and 61% were located in Asia. We have also engaged and may continue to engage independent consultants and contractors to assist us with our operations. None of our employees are represented by a labor union or covered by a collective bargaining agreement. We have never experienced any employment related work stoppages, and we consider our relations with our employees to be good.

Legal Proceedings

From time to time we may become involved in legal proceedings or be subject to claims arising in the ordinary course of our business. We are not presently a party to any legal proceedings that, if determined adversely to us, would individually or taken together have a material adverse effect on our business, results of operations, financial condition or cash flows. Regardless of the outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors.

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MANAGEMENT

Executive Officers and Directors

The following table provides information with respect to our directors and executive officers as of March 31, 2017.

Name	Age	Position(s)
Executive Officers
Johnson Lau, M.D.	56	Chief Executive Officer and Chairman of the Board
Jeffrey Yordon	68	Chief Operating Officer and President, Athenex Pharmaceutical Division
Nick Riehle	64	Chief Financial Officer
Rudolf Kwan, M.B., B.S.	64	EVP, Chief Medical Officer
Simon Pedder, Ph.D.	56	Chief Business and Strategy Officer, Proprietary Products
William Zuo, Ph.D.	55	President, China
Non-Employee Directors
Kim Campbell(3)	70	Director
Manson Fok, M.B., B.S.	60	Director
Antony Leung(1)	65	Director
Jinn Wu, Ph.D.(2)	68	Director
Song-Yi Zhang(2)	61	Director
Michael Cannon(2)(3)	71	Director Nominee
Sheldon Trainor-Degirolamo(1)	53	Director Nominee
James Zukin(1)(3)	68	Director Nominee

⁽¹⁾ Member of the audit committee upon completion of this offering.

⁽²⁾ Member of the compensation committee upon completion of this offering.

⁽³⁾ Member of the nominating and corporate governance committee upon completion of this offering.

The following is a biographical summary of the experience of our executive officers and directors:

Executive Officers

Johnson Lau

Dr. Lau has served as our Chief Executive Officer since 2011, and as Chairman of the Board since our inception in 2003. Dr. Lau has had extensive leadership experience in both scientific and business management. He previously served as Chairman and CEO of Ribapharm Inc., and oversaw the company’s initial public offering in 2002. Prior to Ribapharm, he served as SVP and Head of Research and Development for ICN Pharmaceuticals Inc. Prior to joining ICN, Dr. Lau served as the Senior Director of Antiviral Therapy Research at Schering-Plough. Dr. Lau has contributed more than 200 scientific publications, editorials/reviews and chapters in peer reviewed scientific journals and has edited two books. He was a former Managing Director at Roth Capital Partners and a Director of the Board of Chelsea Therapeutics, serving as the Chair of the Audit and Risk Management Committee as well as the Corporate Governance Committee. He is currently serving on the Board of Porton Fine Chemicals, and private companies including Avalon, Avagenex Limited, Aiviva Corporation, and Hong Kong X-tech Startup platform as a general partner and mentor. He is also an Executive Board Member of the charity Project Vision and is an honorary professor/adjunct professor of the University of Hong Kong, Hong Kong Polytechnic University and Chongqing Southwestern Hospital, and a member of the Advisory Board of the School of Biomedical Sciences of the Chinese University of Hong Kong. Dr. Lau received his medical degree, or MBBS, and medical doctorate degree, or M.D., from the University of Hong Kong. He is also a Fellow of the Royal College of Physicians.

We believe that Dr. Lau serves as a valuable member of our board of directors due to the perspective and experience he brings as our Chairman and CEO.

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Jeffrey Yordon

Mr. Yordon joined our company as President, Athenex Pharmaceutical Division in April 2016 and in February 2017 he was appointed as our Chief Operating Officer. Mr. Yordon has held multiple senior management positions in the pharmaceutical industry over the last 46 years. Mr. Yordon was the Founder, Chairman and CEO of Sagent Pharmaceuticals from 2007 until joining us in 2016. Prior to that Mr. Yordon was the COO of American Pharmaceutical Partners where he was a co-founder until the company was eventually sold to Fresenius. Mr. Yordon was the CEO of Faulding Pharmaceuticals, CEO and founder of YorPharm, COO of Gensia Pharmaceuticals and he was involved in the sale of each of these companies to Apotex, Teva and Hospira, respectively. Mr. Yordon was an Ernst & Young Entrepreneur of the Year in 2011, was inducted into the Chicago Entrepreneur Hall of Fame in 2014, won a prestigious Innovation Award from the City of Chicago, was appointed to the Chicago Innovation Council in 2014, was appointed by Governor Rauner to the Illinois Sports Facilities Authority in 2015, has been appointed to be the Chairman of the Board of the Northern Illinois University Foundation, is the Chair of the NIU Political Science Advisory Panel and is actively involved in the NIU Athletic program. Mr. Yordon received a B.A. in Political Science from Northern Illinois University.

Nick Riehle

Mr. Riehle joined our company in January 2017 and in February 2017 was appointed as our Chief Financial Officer. Previously, Mr. Riehle served as Vice President, Administration and Chief Financial Officer of Chelsea Therapeutics, Inc., a publicly-held biopharmaceutical company, from 2004 until 2014. Prior to that, Mr. Riehle served as Chief Financial Officer at HAHT Commerce, Inc., a software company, from 1996 until 2003 and in various roles at Nortel Networks and IBM. He also currently serves on the board of directors of a privately held media company. Mr. Riehle received his Bachelor of Commerce from McGill University, his MBA from York University and earned a Certified Management Accountant (CMA) designation in Ontario, Canada.

Rudolf Kwan

Dr. Kwan has served as our Chief Medical Officer since 2014 and has advised our company since 2008. Until February 2017, Dr. Kwan was engaged on a consultant basis. Dr. Kwan has over twenty years of experience in the pharmaceutical industry in global clinical development and operations. Before joining us, he served dual roles at Schering-Plough as Vice President and Regional Head of Asia Pacific Global Clinical Operations and Vice President of Global Clinical Development, CNS. In the clinical operations position, Dr. Kwan successfully recruited Heads of Clinical Operations for China, South East Asia, Australia, Taiwan and South Korea and set up the infrastructure to conduct global clinical trials in Asia Pacific for Schering-Plough. As Vice President of Global Clinical Development, CNS, he was responsible for the clinical development of all Schering-Plough’s central nervous system drugs, globally, where his achievements included overseeing development and execution of a bioequivalence registration strategy for a new formulation of Temodol for glioblastoma, which led to a simultaneous global registration. He also designed and executed multiple global development programs. He held similar positions at Chiron Corporation and was at Smith-Kline Beecham. Dr. Kwan obtained his medical degree (MBBS) from the University of Hong Kong, and received subsequent training at the University of Wales and is a member of the Royal College of Physicians in the United Kingdom. He was a member and Chair of the Data Monitoring and Safety Board and Protocol Review Board for the Clinical Trial Network of the National Institute on Drug Abuse of the U.S. National Institutes of Health, or NIH. He was also a member of several advisory panels and grant review panels for the NIH.

Simon Pedder

Dr. Pedder joined our company as Chief Business Development Officer in February 2016 and he now serves as our Chief Business and Strategy Officer for Proprietary Products. Dr. Pedder has had a long career in both drug development and commercialization. This includes recent leadership roles with publicly traded Biotechnology companies. He was President and CEO of Cellectar Biosciences from April 2014 to June 2015.

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He was President and CEO of Chelsea Therapeutics from May 2004 to July 2012. Previously he was Vice President of Oncology Pharma Business, and a company officer at Hoffmann-La Roche, as well he has served as the Life Cycle Leader and Global Project Leader of Pegasys/IFN and Head of Hepatitis Franchise at Roche. Formerly, he was a member of the faculty in the Department of Pharmacology in College of Medicine in the University of Saskatchewan, where he obtained his Ph.D in Pharmacology. During his longstanding career in pharmaceutical development, Dr. Pedder has led the late stage development and commercial launch of multiple proprietary pharmaceutical products. In addition to his Ph.D in Pharmacology, Dr. Pedder obtained a Master of Science in Toxicology from Concordia University, a Bachelor of Science in Environmental Studies from the University of Waterloo, and completed the Roche-sponsored Pharmaceutical Executive Management Program at Columbia Business School.

William Zuo

Dr. Zuo joined our company in 2015 as President of our China operations in conjunction with our acquisition of Polymed. Dr. Zuo served as President of Polymed Therapeutics since 1995 and Chairman of Chongqing Taihao Pharmaceutical since 2012. Dr. Zuo’s career has focused on the development, manufacture, and sale and marketing of various complex API on a global basis, especially injectable oncology API. Dr. Zuo was the CEO of the Fibrocell Science Group Companies in Asia from 2010 to 2013. Dr. Zuo oversaw the introduction of the U.S. FDA approved cell therapeutics product, LaViv, to the Asia market. He has overseen the construction of multiple cGMP facilities in China and has extensive experience with the Food and Drug Administrations in both China and the United States. Dr. Zuo received his Ph.D in Nanotechnology from Rice University where he worked extensively with Dr. Richard Smalley, the late Nobel Prize Scholar in Chemistry. Dr. Zuo also has Master degrees in Chemical Engineering and Applied Mathematics from Rice University.

Non-Employee Directors

Kim Campbell

The Right Honourable Kim Campbell has served as a member of our board of directors since 2015. Ms. Campbell served as Canada’s nineteenth and first female Prime Minister in 1993. More recently, Ms. Campbell has served as the Founding Principal of Peter Lougheed Leadership College at the University of Alberta since 2014, and as a professional speaker since 2001. She previously held cabinet portfolios as Minister of Justice and Attorney General, Minister of State for Indian Affairs and Northern Development and Minister of National Defence and Minister of Veterans’ Affairs. She was the first woman to hold the Justice and Defence portfolios, and the first woman to be Defence Minister of a NATO country. Ms. Campbell participated in major international meetings including the Commonwealth, NATO, the G-7 Summit and the United Nations General Assembly. After her tenure as Prime Minister, Ms. Campbell was a fellow at the Institute of Politics (Spring 1994) and the Joan Shorenstein Center for the Study of Press and Politics (1994-1995) at the Harvard Kennedy School of Government. She served as the Canadian Consul General in Los Angeles (1996-2000), then returned to Harvard to teach at the Center for Public Leadership at the Kennedy School (2001-2004).

Ms. Campbell is a founding member of the Club of Madrid, an organization of former heads of government and state who work to promote democratic values. She served as Secretary General (2004-2006). She has also served as its Acting President in 2002, its Vice President in 2003-2004 and served on its Board of Directors from 2007-2011. Ms. Campbell is a member and chair emerita of the Council of Women World Leaders (1993-2003). The Council’s membership consists of women who hold or have held the office of President or Prime Minister. Ms. Campbell is a member of the International Women’s Forum, a global organization of women of significant and diverse achievement. She served as its president (2003-2005) and was inducted into the IWF Hall of Fame in 2008.

Today, Ms. Campbell devotes the majority of her time to serving as the founding principal of the new Peter Lougheed Leadership College at the University of Alberta. She is also a trustee of the International Center for the

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Study of Radicalisation and Political Violence at King’s College London. She is a member of the Pacific Council on International Policy, the West Coast affiliate of the Council on Foreign Relations, and the Global Council of the Asia Society of New York. She is on the advisory board of Equal Voice and an honorary patron of Informed Opinions. She is also a senior advisor to the Crisis Group and an honorary board member of the Climate Action Reserve and previously served as a trustee of the Salk Institute for Biological Studies (2007-2010).

We believe that Ms. Campbell serves as a valuable member of our board of directors due to her extensive experience serving on the boards of directors of a variety of other entities over the course of her career.

Manson Fok

Dr. Fok has served as a member of our board of directors since 2015. Since October 2011, Dr. Fok has been the Chairman of Pedder Clinic, a private medical practice in Hong Kong. He is also the Dean, Faculty of Health Sciences at Macau University of Science and Technology, or MUST; Hospital Director of University Hospital at MUST; President of the Macau Healthcare Management and Promotion Association; Censor-in-Chief, World Chinese Doctors’ Association; Honorary Fellow, Chinese College of Surgeons; Committee member, The Council of Medical Affairs in Macau SAR, among many other leadership positions. Dr. Fok is also a director of Avalon Global. Dr. Fok was awarded the 2014 Gusi Peace Prize in Humanitarianism for his remarkable contributions to medical education, healthcare delivery and cross-border biotechnology developments that act as a bridge within Asia and across continents. In 2015, Dr. Fok was appointed as the CEO of the same Peace Prize Foundation to continue promoting peace, cooperation and healthcare development in the Asia-Pacific region. After receiving his medical degree (MBBS) from the University of Hong Kong in 1982, Dr. Fok was appointed faculty in the Surgical Unit of the University of Hong Kong. Dr. Fok has published many original research papers in high-ranking international medical journals and chapters in various academic books focusing on minimally invasive treatment for esophageal surgery.

We believe that Dr. Fok serves as a valuable member of our board of directors due to his extensive knowledge of cross-border biotechnology developments that act as a bridge between the U.S. and Asia.

Antony Leung

Mr. Leung has served as a member of our board of directors since March 2016. Since February 2014, Mr. Leung has been Group Chief Executive Officer of Nan Fung Group, a Hong Kong-based company focusing on property & investment businesses, and since April 2016 he has also served as its Chairman. Mr. Leung previously served as a Senior Managing Director and Chairman of Greater China of The Blackstone Group (HK) Limited from January 2007 through January 2014, and also as the Financial Secretary of Hong Kong Special Administrative Region. He is also Independent Non-Executive Director of China Merchants Bank, Chairman of charity organizations Heifer International Hong Kong and Food Angel, and Chairman of Harvard Business School Association of Hong Kong.

Mr. Leung has had extensive experience in financial services, including Chairman of Asia of JP Morgan Chase, Asia Head of Citi Private Bank, and Regional Head of Citi Investment Bank, Treasury and Greater China. In addition, he was independent director of Industrial and Commercial Bank of China, China Mobile (Hong Kong) Limited, American International Assurance (Hong Kong) Limited, and international advisory board member of China Development Bank. His past public service includes Non-Official Member of the Executive Council, member of the Exchange Fund Advisory Committee, Hong Kong Airport Authority, and Chairman of the Education Commission and University Grants Committee in Hong Kong.

Mr. Leung graduated from the University of Hong Kong in 1973, and attended Harvard Business School’s Program for Management Development and Advanced Management Program.

We believe that Mr. Leung serves as a valuable member of our board of directors due to his extensive knowledge of global capital markets and of the business environment in Hong Kong and the PRC.

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Jinn Wu

Dr. Wu has served as a member of our board of directors since 2007. In 1987, Dr. Wu founded Xenobiotic Laboratory, or XBL, in Plainsboro, New Jersey, a contract research organization that provides an extensive array of clinical and preclinical research services to the biotechnology and pharmaceutical industries, and he served as its President until 2014. Since then, Dr. Wu has served as Chief Scientific Officer and Senior Vice President of WuXi AppTec from 2015 to 2016 and, beginning in 2017, now serves as Scientific Strategic Advisor to WuXi AppTec. Dr. Wu earned a Ph.D in Natural Products and Medicinal Chemistry from Ohio State University and spent several years as a research scientist at FMC Corporation before founding XBL. He is an adjunct professor at the University of Medicine and Dentistry of New Jersey and is a member of the American Association of Pharmaceutical Scientists, the International Society for the Study of Xenobiotics, the American Society of Pharmacognosy and the American Chemical Society.

We believe that Dr. Wu serves as a valuable member of our board of directors due to his extensive medical experience and experience with clinical and preclinical research services.

Song-Yi Zhang

Mr. Zhang is the founder of Mandra Capital, an investment holding company focused on early stage opportunities in internet, life science, materials and technologies. Mr. Zhang has more than twenty years of investment banking and direct investment experience. In addition to his responsibilities as Chairman of Mandra Capital since its inception in 2002, Mr. Zhang serves as a director of SINA Corporation since April 2004, a company listed on the Nasdaq Stock Market, and an independent non-executive director of China Long Yuan Electric Power Group Corp. since July 2009 and China Renewal Energy Investment Limited from April 2008 to April 2013 and since January 2016, each a company listed on Hong Kong Stock Exchange. Prior to founding Mandra Capital, Mr. Zhang served as a Managing Director of Asia Merger, Acquisition and Divestiture Group, and the co-Head of Asia Resources and Infrastructure Group of Morgan Stanley, and a Senior Associate of Milbank, Tweed, Hadley & McCloy LLP. Mr. Zhang holds a Juris Doctor degree from Yale University.

We believe that Mr. Zhang serves as a valuable member of our board of directors due to his extensive experience investing in biotechnology companies.

Director Nominees

Michael Cannon

Mr. Cannon will join our board of directors effective upon the completion of this offering. Mr. Cannon has over forty years experience in the pharmaceutical industry, and has served as an Executive Director of BioSentinel, Inc. since July 2010. Previously, he worked at SICOR Inc., a Swiss-Italian API manufacturing company, in a variety of positions in manufacturing, quality and regulatory affairs, before transitioning to business development. Mr. Cannon was a member of the team that orchestrated the merger of SICOR with Gensia of San Diego in 1997 and after the merger he served as Chief Scientific Officer. He then served as a member of SICOR’s board and president of the biotech division until the company was sold to Teva in 2004. Mr. Cannon also serves on the boards of directors of Moleculin Biotech Inc. and three privately held companies. Mr. Cannon received a B.S. in Chemistry from Fordham College.

We believe that Mr. Cannon’s experience in both scientific and business development roles in the pharmaceutical industry, as well as his knowledge of our company, qualifies him to serve on our board of directors.

Sheldon Trainor-Degirolamo

Mr. Trainor-Degirolamo will join our board of directors effective upon the completion of this offering. Mr. Trainor-Degirolamo is the Founder and Managing Director of PacBridge Capital Partners (HK) Limited, a

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principal investment and advisory firm based in Hong Kong, which he founded in 2009. Prior to establishing PacBridge, Mr. Trainor-Degirolamo spent more than 20 years in roles of increasing responsibility in the financial services industry, including with Credit Suisse Australia, Morgan Stanley Asia and as Head of Investment Banking for Asia and as Vice Chairman of Merrill Lynch Asia. Since 2012, he has also served as an Executive Director of Macau Legend Development Company Ltd., a company listed on the Hong Kong Stock Exchange. Mr. Trainor-Degirolamo received his Bachelor of Commerce from the University of British Columbia.

We believe that Mr. Trainor-Degirolamo’s experience in investing and financial services, as well as his knowledge of our company, qualifies him to serve on our board of directors.

James Zukin

Mr. Zukin will join our board of directors effective upon the completion of this offering. Mr. Zukin is a co-founder of Houlihan Lokey, Inc., and served in various capacities from 1976 until his retirement in 2013, most recently as Senior Managing Director of Houlihan Lokey, Inc. and Chairman of its subsidiary, Houlihan Lokey Howard & Zukin Investment Consulting (Beijing) Co., Ltd. Mr. Zukin has served on the faculty of various World Bank, IFC, and IMF conferences. He serves as a delegate to the Paris Club meetings involving the private sector. Mr. Zukin frequently speaks at business conferences in the United States and Asia on M&A, financial restructuring and shareholder liquidity, among other topics. Mr. Zukin earned a B.A. in Economics from the University of California at Berkeley and an M.B.A. from Harvard Business School.

We believe that Mr. Zukin experience in investment advisory services in both the U.S. and Asia, as well as his knowledge of our company, qualifies him to serve on our board of directors.

Board of Directors and Director Independence

Upon completion of this offering, our board of directors will consist of eight non-employee directors and our Chief Executive Officer, Johnson Lau.

We intend to amend and restate our certificate of incorporation and bylaws in connection with this offering to provide that the number of directors may be determined from time to time by resolution of our board of directors. Upon the closing of this offering, we will have directors. Our board of directors will be divided into three classes, as follows:

• Class I, which initially will consist of             ,             and             , whose terms will expire at our annual meeting of stockholders to be held in 2017;

• Class II, which initially will consist of             ,            and             , whose terms will expire at our annual meeting of stockholders to be held in 2018; and

• Class III, which initially will consist of             ,             and             , whose terms will expire at our annual meeting of stockholders to be held in 2019.

Upon the expiration of the initial term of office for each class of directors, each director in such class shall be elected for a term of three years and serve until a successor is duly elected and qualified or until his or her earlier death, resignation or removal. Any additional directorships resulting from an increase in the number of directors or a vacancy will be filled by the directors then in office.

Directors will only be removed with cause by the affirmative vote of at least a majority of the stock then entitled to vote at an election of directors. Because only one-third of our directors will be elected at each annual meeting, two consecutive annual meetings of stockholders could be required for the stockholders to change a majority of the board.

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We have entered into a voting agreement with Mandra Health Limited that, subject to certain requirements, requires us to use our best efforts to include a director nominee of Mandra’s choosing in any slate of nominees to be recommended by our board of directors to our shareholders for election. For additional information about this agreement, please see “Certain Relationships and Related Party Transactions—Mandra Voting Agreement.”

There is no family relationship between any director, executive officer or person nominated to become a director or executive director.

Our board has determined that each of Ms. Campbell and Messrs. Cannon, Leung, Trainor-Degirolamo, Wu and Zukin are “independent” as defined in the currently applicable listing standards of the NASDAQ Global Market. Dr. Lau is not independent because he is one of our executive officers.

Board Committees

Our board directs the management of our business as provided by Delaware law and conducts its business through meetings of the board of directors, an audit committee, a compensation committee, and a nominating and corporate governance committee. Further, from time to time, other committees may be established under the direction of the board when necessary to address specific issues. The composition of the board committees will comply, when required, with the applicable rules of the NASDAQ Global Market and applicable law.

Compensation Committee

Upon completion of this offering, our compensation committee will consist of Dr. Wu as chair, Mr. Cannon and Mr. Zhang, each of Dr. Wu and Mr. Cannon is an independent director, as defined in the NASDAQ Global Market qualification standards. Mr. Zhang is not an independent director. The NASDAQ listing standards and SEC rules provide a grace period for meeting the compensation committee independence requirements for a company conducting an initial public offering. That grace period provides that one member of the committee must be independent at the time of listing, a majority of the members must be independent within 90 days of listing, and all committee members must be independent within one year of listing. The functions of this committee include:

• reviewing our company’s overall compensation strategy, including base salary, incentive compensation and equity-based grants, to assure that it promotes stockholder interests and supports our strategic and tactical objectives, and that it provides for appropriate rewards and incentives for our management and employees;

• reviewing and recommending to the Board compensation for our executive officers and the board of directors;

• administering and, if necessary, revising our company’s 401(k) plan, any deferred compensation plans, and any additional employee benefit plans;

• reviewing with management our company’s major compensation-related risk exposures and the steps management has taken, or should consider taking, to monitor or mitigate such exposures; and

• overseeing our company’s compliance with regulatory requirements associated with compensation of our directors, executive officers and other employees, including reviewing executive compensation disclosures, any conflict of interest disclosure with regard to any compensation consultant retained by the compensation committee, and any other compensation disclosure prepared in response to disclosure requirements to the extent applicable to us.

Compensation Committee Interlocks and Insider Participation

During the last fiscal year, Messrs. Fok, Wu and Zhang served as the members of our compensation committee.

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Audit Committee

Upon completion of this offering, our audit committee will consist of Mr. Zukin as chair, Mr. Leung and Mr. Trainor-Degirolamo, each of whom is an independent director, as defined in the NASDAQ Global Market qualification standards.

Mr. Zukin qualifies as an “audit committee financial expert” as that term is defined in the rules and regulations established by the SEC. The functions of this committee include:

• overseeing our company’s corporate accounting and financial reporting practices, the audit of the our financial statements by the company’s independent registered public accounting firm, and our internal audit function;

• monitoring the periodic reviews of the adequacy of the accounting and financial reporting processes and systems of internal control that are conducted by the independent registered public accounting firm and our company’s senior management, and internal audit function;

• appointing the independent registered public accounting firm; determining and approving the fees paid to such firm and reviewing and evaluating the qualifications, independence and performance of such firm;

• reviewing and evaluating the organization and performance of our company’s internal audit function; and

• preparing a report to be included in our company’s annual proxy statement as required by the rules and regulations of the SEC under U.S. federal securities laws.

Both our independent registered public accounting firm and internal financial personnel regularly meet privately with the audit committee and have unrestricted access to this committee.

Nominating and Governance Committee

Upon completion of this offering, our nominating and governance committee will consist of Ms. Campbell as chair, Mr. Cannon and Mr. Zukin. All members of the nominating and governance committee are independent directors, as defined in the NASDAQ Global Market qualification standards. The functions of this committee include:

• identifying, considering and recommending to the board candidates for nomination to the board of directors consistent with criteria approved by the board of directors;

• developing and recommending corporate governance guidelines and policies for our company;

• overseeing the evaluation of the board of directors and its committees, including an annual evaluation of the corporate governance committee; and

• advising the board of directors on corporate governance matters and performance matters relating to the board of directors, including recommendations regarding the structure and composition of the board of directors and its committees.

Indemnification Agreements

We have entered into indemnification agreements with certain of our current and former directors and executive officers and will enter into indemnification agreements with our other directors and officers in connection with this offering. These agreements will require us to indemnify these individuals to the fullest extent permitted under Delaware law against liabilities that may arise by reason of their service to us, and to advance expenses incurred as a result of any proceeding against them as to which they could be indemnified. We also intend to enter into indemnification agreements with our future directors and executive officers.

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Certain Legal Proceedings

Mr. Zukin, who will join our board of directors effective upon the completion of this offering, pled no contest in the State of California in August 2015 to reckless driving causing bodily injury as a result of an accident that occurred in July 2014.

Letter Agreement with Former Officer

On December 8, 2016, we entered into a letter agreement with one of our former executive officers and directors, Flint Besecker. Please see “Certain Relationships and Related Party Transactions—Letter Agreement with Former Officer.”

Code of Conduct and Ethics

Our board of directors has adopted a code of conduct and ethics that establishes the standards of ethical conduct applicable to all directors, officers and employees of our company and addresses, among other things, conflicts of interest, corporate opportunities, regulatory reporting, medical device laws, communications and confidentiality requirements. We intend to amend the code in connection with this offering to also address, among other things, compliance with disclosure controls and procedures and internal controls over financial reporting. We intend to disclose any amendments to the code, or any waivers of its requirements, on our website to the extent required by the applicable rules and exchange requirements. The inclusion of our website address in this prospectus does not include or incorporate by reference into this prospectus the information on or accessible through our website. The audit committee is responsible for applying and interpreting our code of conduct and ethics in situations where questions are presented to it.

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EXECUTIVE AND DIRECTOR COMPENSATION

Director Compensation

The compensation and benefits for service as a member of the board of directors is determined by our board of directors. We reimburse each of our directors for any out-of-pocket expenses in connection with attending meetings of our board of directors and committees of the board of directors.

Historically, certain of our non-employee directors have been granted options to purchase shares of our common stock as compensation for their service on our board of directors. These grants were in lieu of cash or other compensation and were not awarded according to any schedule or on an annual basis.

Director Compensation Table

The following table shows information regarding the compensation earned during the year ended December 31, 2016 by our non-employee directors.

Name	Fees Earned or Paid in Cash ($)		Stock Awards ($)	Option Awards ($)(1)		All Other Compensation ($)	Total ($)
Kim Campbell		20,000						20,000
Manson Fok		20,000						20,000
Antony Leung		20,000			249,931			269,931
Jinn Wu		20,000						20,000
Song-Yi Zhang		20,000						20,000

⁽¹⁾ The amounts in this column reflect the aggregate grant date fair value of the stock options under FASB ASC Topic 718, which was determined using the Black-Scholes Method and the assumptions set forth in “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Estimates—Stock-Based Compensation and Fair Value of our Common Stock.”

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The following table summarizes the outstanding equity awards held by our non-employee directors as of December 31, 2016.

Name	Number of Securities Underlying Unexercised Options Exercisable (#)		Number of Securities Underlying Unexercised Options Unexercisable (#)		Option Exercise Price ($)		Option Expiration Date
Kim Campbell		24,000		24,000		9.00		10/17/2025
Manson Fok		80,000		—		4.55		1/2/2023
		48,000		—		4.55		5/13/2023
		20,000		—		4.55		10/11/2023
		40,000		—		4.55		6/12/2024
		48,000		—		7.50		5/18/2025
		24,000		24,000		9.00		10/17/2025
Antony Leung		—		48,000		9.00		2/28/2026
Jinn Wu		16,000		—		2.25		4/24/2017
		16,000		—		4.55		5/9/2021
		16,000		—		4.55		3/26/2022
		90,000		—		4.55		1/2/2023
		10,000		—		4.55		2/12/2024
		24,000		—		5.50		2/5/2025
		30,000		—		5.50		2/5/2025
		48,000		48,000		5.50		3/20/2025
Song-Yi Zhang		80,000		—		7.50		5/18/2025
		24,000		24,000		9.00		10/17/2025

Executive Compensation

As an emerging growth company, we have opted to comply with the executive compensation disclosure rules applicable to “smaller reporting companies,” as such term is defined in the rules promulgated under the Securities Act, which require compensation disclosure for our principal executive officer and the two most highly compensated executive officers other than our principal executive officer. Our named executive officers for the year ended December 31, 2016 are: Johnson Lau, our Chief Executive Officer and Chairman of the Board, Jeffrey Yordon, President, Athenex Pharmaceutical Division and Simon Pedder, EVP, Chief Business Development Officer. Since December 31, 2016, Mr. Yordon was also appointed as our Chief Operating Officer, and Dr. Pedder was appointed as our Chief Business and Strategy Officer for Proprietary Products.

The primary objective of our compensation policies and programs with respect to executive compensation is to serve our stockholders by attracting, retaining and motivating talented and qualified executives. We focus on providing a competitive compensation package that provides, at the discretion of our board of directors, long-term incentives for the achievement of corporate and individual performance objectives. Decisions regarding executive compensation are the primary responsibility of our compensation committee. Our board of directors regularly assesses our compensation policies for any practices that are reasonably likely to have a material adverse effect on our company; as of the end of December 31, 2016, our board of directors concluded that our compensation policies did not present any such risks to the company.

In 2016, we compensated our named executive officers through a mix of base salary and equity compensation at levels that we believed were comparable to those of executives at companies of similar size and stage of development, and that rewarded our named executive officers for their contributions.

We have not yet established a formal policy with respect to our allocations between long-term equity compensation and short-term incentive compensation. As a private company, our compensation plans and the

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amount of each compensation element to pay our named executive officers were generally developed by our management and approved by our board of directors on an individual, case-by-case basis utilizing a number of factors, including publicly available data and our general business conditions and objectives, as well as our subjective determination with respect to each executive’s individual contributions to such objectives.

Summary Compensation Table

The following table shows information regarding the compensation earned during the year ended December 31, 2016 by our named executive officers.

Name and Principal Position	Year		Salary ($)		Bonus ($)		Stocks Awards ($)		Option Awards ($)(1)		Nonqualified deferred compensation earnings ($)		All Other Compensation ($)(2)		Total ($)
Johnson Lau		2016		200,000		—		—		—		300,000		21,687		521,687
Chief Executive Officer and Chairman of the Board
Jeffrey Yordon		2016		254,538		—		1,800,000		785,184		—		2,237		2,841,959
Chief Operating Officer and President, Athenex Pharmaceutical Division
Simon Pedder		2016		172,308		—				536,126		—		16,645		725,079
Chief Business and Strategy Officer, Proprietary Products

⁽¹⁾ The amounts in this column reflect the aggregate grant date fair value of the stock options under FASB ASC Topic 718, which was determined using the Black-Scholes Method and the assumptions set forth in “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Estimates—Stock-Based Compensation and Fair Value of our Common Stock.”

⁽²⁾  The amounts reflect (i) $8,000, $2,237 and $5,538 in 401(k) matching contributions for each of Dr. Lau, Mr. Yordon and Dr. Pedder, respectively, and (ii) $13,687 and $11,107 in company-paid health insurance premiums for each of Dr. Lau and Dr. Pedder, respectively.

Narrative to Summary Compensation Table

We are currently evaluating various compensation programs to implement upon the completion of this offering. The disclosures below describe our historical compensation practices.

Annual Salary

We review compensation annually for our named executive officers. In setting base salaries and bonuses and granting equity incentive awards, we consider compensation for comparable positions in the market, the historical compensation levels of our executives, individual performance as compared to our expectations and objectives, our desire to motivate our employees to achieve short- and long-term results that are in the best interests of our stockholders, and a long-term commitment to our company. We do not target a specific competitive position or a specific mix of compensation among base salary, bonus or long-term incentives.

Our board of directors has historically determined the compensation for our executive officers and more recently delegated this authority to the compensation committee, other than with respect to our chief executive officer. Our compensation committee typically reviews and discusses management’s proposed compensation

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with the chief executive officer for all executive officers other than the chief executive officer. Based on those discussions and its discretion, the compensation committee then approves the compensation for our executive officers. Our board of directors, without members of management present, discusses the compensation committee’s report on these matters and approves the compensation of our chief executive officer. To date, our compensation committee has not engaged a compensation consultant or adopted a peer group of companies for purposes of determining executive compensation.

Long-Term Incentives

Our 2013 Plan authorizes us to make grants to eligible recipients of non-qualified stock options. To date, we have granted only stock options to our named executive officers under the 2013 Plan.

We typically grant stock options at the start of employment to each named executive officer and our other employees. To date, we have not maintained a practice of granting additional equity on an annual basis, but we have granted additional equity following significant equity financings, and we have retained discretion to provide additional targeted grants in certain circumstances.

We award our equity grants on the date our board of directors approves the grant. We set the option exercise price and grant date fair value based on our per-share valuation on the date of grant. For grants in connection with initial employment, vesting begins on the initial date of employment. Time vested stock option grants to our executives and most employees typically vest 25% on each anniversary of the vesting commencement date over either a three- or four-year period.

Outstanding Equity Awards at 2016 Year-End

The following table summarizes the outstanding equity awards held by our named executive officers as of December 31, 2016.

Name	Number of Securities Underlying Unexercised Options Exercisable (#)		Number of Securities Underlying Unexercised Options Unexercisable (#)		Option Exercise Price ($)		Option Expiration Date		Number of shares or units of stock that have not vested (#)		Market value of shares or units of stock that have not vested ($)(1)
Lau		60,000		—		4.25		12/3/2018
		41,944		—		4.55		5/9/2021
		198,056		—		4.55		5/9/2021
		150,000		—		4.55		3/26/2022
		1,200,000		—		4.55		1/2/2023
		466,667		933,333		7.50		5/22/2025
Yordon		—		150,000		9.00		6/19/2026		150,000		1,650,000
Pedder		15,000		5,000		4.55		5/13/2023
		—		100,000		9.00		2/28/2026

⁽¹⁾  At December 31, 2016, the fair market value of our common stock was $11.00.

Pension Benefits

We do not have any qualified or non-qualified defined benefit pension plans.

Non-qualified Deferred Compensation

Our Restated Non-Qualified Deferred Compensation Plan, or Deferred Compensation Plan, allows certain of our officers to defer portions of their compensation to be paid at specific times after their separation from the company.

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Named Executive Officer Employment Agreements

We have entered into employment agreements with certain of our officers, including certain of our named executive officers. Our employment agreements with our named executive officers are summarized below.

Johnson Lau

We entered into an amended and restated employment agreement, dated June 1, 2015, with our current Chief Executive Officer and Board Chairman, Johnson Lau. Under the agreement, Dr. Lau is entitled to receive a base salary, subject to adjustment by our board of directors from time to time, deferred compensation, and certain equity awards.

Dr. Lau is entitled to receive a grant of 400,000 shares of our common stock, provided our valuation is greater than $200 million, immediately prior to the occurrence of certain liquidity events, including the completion of this offering. This stock incentive will only take effect if the liquidity event occurs while Mr. Lau is our chief executive officer.

Pursuant to the terms of his employment agreement, we issued to Dr. Lau 880,000 shares of our common stock in exchange for a promissory note, which has since been satisfied. See “Certain Relationships and Related Party Transactions—Contractual Arrangements—Share Purchases.”

Jeffrey Yordon

We entered into an employment agreement, effective February 21, 2017, with Jeffrey Yordon, our Chief Operating Officer and President of Athenex Pharmaceutical Division. Under the agreement, Mr. Yordon is entitled to receive a base salary, consideration for a cash bonus at the discretion of our Compensation Committee, and an award of an option to purchase 230,000 shares of our common stock subject to vesting in equal installments over three years to be granted upon the completion of this offering.

Mr. Yordon’s employment agreement has an initial term of three years, after which it will automatically renew for additional one-year terms until terminated pursuant to its terms. The agreement may be terminated by Mr. Yordon, either with or without good reason, as such term is defined in the agreement, and by us, either with or without cause, as such term is defined in the agreement. Pursuant to the agreement, depending on the circumstances of his termination, Mr. Yordon may be entitled to certain payments or benefits on or after termination. The agreement also contains customary non-solicitation, non-competition and confidentiality provisions.

Simon Pedder

We entered into an employment agreement, effective February 21, 2017, with Simon Pedder, our Chief Business and Strategy Officer, Proprietary Products. Under the agreement, Dr. Pedder is entitled to receive a base salary, consideration for a cash bonus at the discretion of our Compensation Committee, and an award of an option to purchase 130,000 shares of our common stock subject to vesting in equal installments over four years to be granted upon the completion of this offering.

Dr. Pedder’s employment agreement has an initial term of three years, after which it will automatically renew for additional one-year terms until terminated pursuant to its terms. The agreement may be terminated by Dr. Pedder, either with or without good reason, as such term is defined in the agreement, and by us, either with or without cause, as such term is defined in the agreement. Pursuant to the agreement, depending on the circumstances of his termination, Dr. Pedder may be entitled to certain payments or benefits on or after termination. The agreement also contains customary non-solicitation, non-competition and confidentiality provisions.

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Employee Benefit Plans

Our employees, including our named executive officers, are eligible to receive various employee benefits. These benefits include the following: medical, dental, and vision care plans; a 401(k) plan; group term life insurance; accidental death and dismemberment; short term and long term disability insurance, flexible spending accounts for unreimbursed medical expenses and dependent care accounts; Employee Assistance Program, holidays and paid time off.

401(k) Plan

Our employees are eligible to participate in our 401(k) plan. Our 401(k) plan is intended to qualify as a tax-qualified plan under Section 401(a) of the Code. Our 401(k) plan provides that each participant may contribute a portion of his or her pre-tax compensation, up to a statutory limit, which for most employees is $18,000 in 2016. Participants who are 50 years or older can also make “catch-up” contributions, which in 2016 may be up to an additional $6,000 (or a combined maximum of $24,000). Employee contributions are held and invested by the plan’s trustee. Our 401(k) plan also permits us to make discretionary contributions and matching contributions. We make matching contributions to our employees of an amount equal to 50% of their elective deferral which does not exceed 8% of their compensation.

Equity Incentive Plans

2004 Common Unit Option Plan

Our board of directors adopted our 2004 Common Unit Option Plan, or 2004 Plan, and our stockholders approved it, in 2004, when we were organized as a Delaware limited liability company. Our 2004 Plan provided for the grant of options to purchase units representing interests in the limited liability company to our employees, directors, and consultants and any parent’s or subsidiary’s employees, directors and consultants. In conjunction with our conversion from a Delaware limited liability company to a Delaware corporation in 2012, we amended and restated our 2004 Plan such that all outstanding unit options under the 2004 Plan became fully vested as of October 1, 2012. Upon our conversion into a corporation, these fully vested unit options were converted into fully vested options to purchase shares of our common stock. We discontinued issuing options under the 2004 Plan in 2011.

As of March 31, 2017, options to purchase 41,944 shares remained outstanding under our 2004 Plan. No other awards were made under the 2004 Plan.

If any change is made in, or other event occurs with respect to, our common stock without the receipt of consideration by us, through merger, consolidation, reorganization, recapitalization, reincorporation, stock and certain other dividends, stock split, combination of shares, exchange of shares, change in corporate structure or other transaction, the shares subject to the 2004 Plan or subject to any option or award granted under the 2004 Plan would be similarly adjusted.

2007 Common Unit Option Plan

Our board of directors adopted our 2007 Common Unit Option Plan, or 2007 Plan, and our stockholders approved it, in 2007, when we were organized as a Delaware limited liability company. Our 2004 Plan provided for the grant of options to purchase units representing interests in the limited liability company to our employees, directors, and consultants and any parent’s or subsidiary’s employees, directors and consultants. In conjunction with our conversion from a Delaware limited liability company to a Delaware corporation in 2012, we amended and restated our 2007 Plan such that all outstanding unit options under the 2007 Plan became fully vested as of October 1, 2012. Upon our conversion into a corporation, these fully vested unit options were converted into fully vested options to purchase shares of our common stock. We discontinued issuing options under the 2007 Plan in 2012.

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As of March 31, 2017, options to purchase 1,007,388 shares remained outstanding under our 2007 Plan. No other awards were made under the 2007 Plan.

If any change is made in, or other event occurs with respect to, our common stock without the receipt of consideration by us, through merger, consolidation, reorganization, recapitalization, reincorporation, stock and certain other dividends, stock split, combination of shares, exchange of shares, change in corporate structure or other transaction, the shares subject to the 2007 Plan or subject to any option or award granted under the 2007 Plan would be similarly adjusted.

2013 Common Stock Option Plan

Our board of directors adopted our 2013 Common Stock Option Plan, or 2013 Plan, in 2012. Our 2013 Plan provides for the grant of non-qualified stock options to our employees, directors, and consultants and any parent’s or subsidiary’s employees, directors and consultants. We will cease issuing awards under the 2013 Plan upon the implementation of the 2017 Plan, which is described below. Following our initial public offering, we will grant equity awards under our 2017 Plan.

As of March 31, 2017, we had reserved 10,200,000 shares of our common stock for issuance under our 2013 Plan. As of March 31, 2017, options to purchase 8,165,657 of these shares remained outstanding and 2,025,543 of these shares remained available for future grant. No other awards have been made under the 2013 Plan.

If any change is made in, or other event occurs with respect to, our common stock without the receipt of consideration by us, through merger, consolidation, reorganization, recapitalization, reincorporation, stock and certain other dividends, stock split, combination of shares, exchange of shares, change in corporate structure or other transaction, the shares subject to the 2013 Plan or subject to any option or award granted under the 2013 Plan would be similarly adjusted.

2017 Omnibus Incentive Plan

Our 2017 Omnibus Incentive Plan, or 2017 Plan, was adopted by our Board of Directors on              and approved by our stockholders thereafter. The 2017 Plan will become effective prior to the completion of this offering. The 2017 Plan will provide for the grant of incentive stock options, within the meaning of Section 422 of the Code, to our employees and any parent and subsidiary employees, and for the grant of non-qualified stock options, stock appreciation rights, restricted stock, restricted stock units, dividend equivalent rights, cash-based awards (including annual cash incentives and long-term cash incentives), and any combination thereof to our employees, directors, and consultants and to employees, directors, and consultants of certain affiliated entities.

In connection with this offering, we have reserved for issuance under the 2017 Plan shares of our common stock equal to the sum of: (i)              shares of common stock; and (ii) up to              shares of our common stock underlying awards granted under our 2013 Plan and outstanding when the 2017 Plan becomes effective that are forfeited, canceled, or expire (whether voluntarily or involuntarily). In addition, the 2017 Plan provides for an annual increase to the number of shares of our common stock available for issuance thereunder on the first business day of each calendar year beginning with the calendar year following the calendar year in which the 2017 Plan becomes effective, equal to the lesser of (i)              shares, (ii)     percent of the number of shares of our common stock outstanding as of the last day of the immediately preceding calendar year, and (iii) a lesser number of shares determined by the administrator (as defined below).

Our Board of Directors or a committee of our Board of Directors, which we refer to as the “administrator” in this description, will administer the 2017 Plan. In the case of awards intended to qualify as “performance-based compensation” within the meaning of Section 162(m) of the Code, the administrator will consist of two or more “outside directors” within the meaning of Section 162(m) of the Code. The administrator will have the power to determine and interpret the terms and conditions of the awards, including, as applicable, the employees,

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directors, and consultants who will receive awards, the exercise price, the number of shares subject to each award, the vesting schedule and exercisability of the awards, the restrictions on transferability of awards, and the form of consideration payable upon exercise. The administrator also will have the authority to reduce the exercise price of any outstanding stock options and the base appreciation amount of any stock appreciation rights if the exercise price or base appreciation amount exceeds the fair market value of the underlying shares, and to cancel such options and stock appreciation rights in exchange for new awards, in each case without stockholder approval.

The 2017 Plan will allow for the grant of incentive stock options that qualify under Section 422 of the Code only to our employees and employees of any of our parents or subsidiaries. Non-qualified stock options may be granted to our employees and directors and those of certain of our affiliates. The per share exercise price of all options granted under the 2017 Plan must be equal to at least the per share fair market value of our common stock on the date of grant. The term of an incentive stock option may not exceed 10 years, except that with respect to any employee who owns more than 10% of the voting power of all classes of our outstanding stock or any parent or subsidiary corporation as of the grant date, the term must not exceed 5 years, and the exercise price must equal at least 110% of the fair market value on the grant date.

After the continuous service of an employee, director or consultant terminates, he or she may exercise his or her option, to the extent vested, for the period of time specified in the option agreement. However, an option may not be exercised later than the expiration of its term.

The 2017 Plan will allow for the grant of stock appreciation rights. Stock appreciation rights allow the recipient to receive the appreciation in the fair market value of our common stock between the date of grant and the exercise date. The administrator will determine the terms of stock appreciation rights, including when such rights become exercisable and whether to pay the increased appreciation in cash or with shares of our common stock, or a combination thereof, except that the base appreciation amount used to determine the cash or shares to be issued pursuant to the exercise of a stock appreciation right will be no less than 100% of the fair market value per share on the date of grant. After the continuous service of an employee, director or consultant terminates, he or she may exercise his or her stock appreciation right, to the extent vested, only to the extent provided in the stock appreciation right agreement.

The 2017 Plan will allow for the grant of restricted stock. Restricted stock awards are shares of our common stock that vest in accordance with terms and conditions, if any, established by the administrator. The administrator will determine the number of shares of restricted stock granted to any employee, director or consultant. The administrator may impose whatever conditions, if any, on vesting it determines to be appropriate. For example, the administrator may set restrictions based on the achievement of specific performance goals. Shares of restricted stock that do not vest are subject to our right of repurchase or forfeiture.

The 2017 Plan will allow for the grant of restricted stock units. Restricted stock units are awards that will result in payment to a recipient at the end of a specified period only if the vesting criteria established by the administrator, if any, are achieved or the award otherwise vests. The administrator may impose whatever conditions, if any, to vesting, or restrictions and conditions, if any, to payment that it determines to be appropriate. The administrator may set restrictions based on the achievement of specific performance goals or on the continuation of service or employment. Payments of earned restricted stock units may be made, in the administrator’s discretion, in cash, with shares of our common stock or other securities, or a combination thereof.

The 2017 Plan also will allow for the grant of awards denominated in cash that may be settled in cash or shares of common stock, which may be subject to restrictions, as established by the administrator. Prior to the first stockholder meeting at which directors are to be elected to our Board of Directors that occurs after the close of the third calendar year following the calendar year in which this offering occurs, the maximum aggregate amount of cash that may be issued pursuant to awards under the 2017 Plan to employees who would otherwise be covered by Section 162(m) of the Code will be $            . Section 162(m) of the Code generally applies to a

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public company’s chief executive officer and its three other most highly compensated executive officers, other than its chief financial officer.

The administrator will determine the provisions, terms, and conditions of each award including vesting schedules, forfeiture provisions, form of payment (cash, shares, or other consideration) upon settlement of the award, payment contingencies, and satisfaction of any performance criteria. The performance criteria established by the administrator for any awards intended to qualify as “performance-based compensation” for purposes of Section 162(m) of the Code, will be one of, or combination of, the following: net earnings or net income (before or after taxes); earnings per share; revenues or sales (including net sales or revenue growth); net operating profit; return measures (including return on assets, net assets, capital, invested capital, equity, sales, or revenue); cash flow (including operating cash flow, free cash flow, cash flow return on equity, and cash flow return on investment); earnings before or after taxes, interest, depreciation, or amortization; gross or operating margins; productivity ratios; share price (including growth measures and total stockholder return); expense targets; margins; operating efficiency; market share; working capital targets and change in working capital; economic value added or EVA^® (net operating profit after tax minus the sum of capital multiplied by the cost of capital); or net operating income. The performance criteria may be applicable to our company, our affiliates or any individual segments of our company or any affiliate and may be measured over any specified period, on an absolute basis or relative to a pre-established target, to previous years’ results or to a designated comparison group, in each case as specified by the administrator.

The 2017 Plan will allow for the transfer of awards under the 2017 Plan only (i) by will, (ii) by the laws of descent and distribution and (iii) for awards other than incentive stock options, to the extent authorized by the administrator to certain persons or entities. Only the recipient of an incentive stock option may exercise such award during his or her lifetime.

In the event of certain changes in our capitalization, to prevent enlargement of the benefits or potential benefits available under the 2017 Plan, the administrator will make adjustments to one or more of the number of shares that are covered by outstanding awards, the exercise or purchase price of outstanding awards, the numerical share limits contained in the 2017 Plan, and any other terms that the administrator determines require adjustment.

The 2017 Plan provides that in the event of certain corporate transactions, as such term is defined in the 2017 Plan, the portion of each outstanding award that is neither continued by us nor assumed or replaced by the successor entity or its parent will automatically terminate. In connection with a corporate transaction or change in control, as such term is defined in the 2017 Plan, the administrator has the authority to provide for the full or partial automatic vesting and exercisability of one or more outstanding unvested awards under the 2017 Plan and the release from restrictions on transfer or forfeiture rights of such awards on such terms and conditions as the administrator may specify. In addition, any incentive stock option accelerated in connection with a corporate transaction or change in control will remain exercisable as an incentive stock option to the extent the dollar limitation under the Code is not exceeded, with any excess becoming a nonqualified stock option.

The 2017 Plan will automatically terminate 10 years following the date it becomes effective, unless we terminate it sooner. In addition, our Board of Directors has the authority to amend, suspend or terminate the 2017 Plan provided such action does not impair the rights under any outstanding award.

2017 Employee Stock Purchase Plan

Our 2017 Employee Stock Purchase Plan, or ESPP, was adopted by our Board of Directors in             and will become effective prior to the completion of this offering and will enable eligible employees of ours and designated affiliates to purchase shares of our common stock at a discount following its effectiveness. In this description, we sometimes refer to an eligible employee’s right to purchase shares of our common stock under the ESPP as an “option”. Purchases will be accomplished through participation in discrete offering periods. The ESPP is intended to qualify as an employee stock purchase plan under Section 423 of the Code. We initially

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reserved              shares of our common stock for issuance under the ESPP. In addition, the ESPP provides for an annual increase to the number of shares of our common stock available for issuance thereunder on the first business day of each calendar year beginning with the calendar year following the calendar year in which the ESPP becomes effective, equal to the lesser of (i)              shares, (ii)      percent of the number of shares of our common stock outstanding as of the last day of the immediately preceding calendar year, and (iii) a lesser number of shares determined by the administrator (as defined below).

Our Board of Directors or a committee designated by the board, which we refer to as the “administrator” in this description, will administer the ESPP. Our employees generally are eligible to participate in the ESPP (except for employees (i) whose customary employment is 20 hours or less per week, (ii) whose customary employment is for not more than 5 months in any calendar year, (iii) who have not been employed for such continuous period as the administrator may require (up to a maximum of 2 years), or (iv) who are citizens or residents of a non-U.S. jurisdiction under certain circumstances, although the administrator may permit such categories of employees to participate in the ESPP in its discretion). Employees who are 5% stockholders, or would become 5% stockholders as a result of their participation in the ESPP, are ineligible to participate in the ESPP. We may impose additional restrictions on eligibility. Under the ESPP, eligible employees generally will be able to acquire shares of our common stock by accumulating funds through payroll deductions. Our eligible employees will be able to select a rate of payroll deduction between     % and     % of their eligible compensation.

When an offering period commences, our employees who meet the eligibility requirements and wish to participate in the ESPP will be required to enroll in a timely manner. Once an employee is enrolled, participation will be automatic in subsequent offering periods. An employee’s participation automatically ends upon termination of employment for any reason.

It is anticipated that the offering periods will be for six months. The duration of the first offering period may be shorter or longer.

No participant will have the right to purchase our shares in an amount, when aggregated with purchase rights under all our employee stock purchase plans that are also in effect in the same calendar year(s), that has a fair market value of more than $25,000, determined as of the first day of the applicable offering period, for each calendar year in which that right is outstanding. In addition, no participant will be permitted to purchase more than            shares during any one offering period or such lesser amount determined by the administrator. The purchase price for shares of our common stock purchased under the ESPP may be as low as 85% of the lower of the fair market value of our common stock on the first trading day of the applicable offering period or the last trading day of the applicable offering period.

In the event of certain corporate transactions (as defined in the ESPP), each option will be assumed by the successor corporation or a parent or subsidiary of the successor corporation, unless the administrator determines to shorten the offering period then in progress, in which case the options will either be exercised automatically or we will pay the option holder an amount equal to the excess, if any, of (x) the fair market value of the shares subject to the options over (y) the purchase price due had the options been exercised automatically.

The ESPP will terminate on the             anniversary of its adoption by our Board of Directors, unless it is terminated earlier by the administrator. The administrator may at any time and for any reason terminate or amend the ESPP. Except in connection with certain corporate transactions or changes in capitalization, no such termination can adversely affect options previously granted, provided that the ESPP may be terminated by the administrator under certain circumstances if the administrator determines that the termination of the ESPP or one or more offering periods is in our best interests or in the best interests of our stockholders. Except as described in the previous sentence, or in connection with certain corporate transactions or changes in capitalization, no amendment may make any change in any option theretofore granted which adversely affects the rights of any participant without the consent of affected participants. To the extent necessary to comply with Section 423 of the Code (or any successor rule or provision or any other applicable law), we will obtain stockholder approval of any amendment in such a manner and to such a degree as required.

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CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

The following is a summary of each transaction or series of similar transactions since January 1, 2014, or any currently proposed transaction, to which we were or are a party in which:

• the amount involved exceeded or exceeds $120,000; and

• any of our directors or executive officers, any holder of 5% of any class of our voting capital stock or any member of their immediate family had or will have a direct or indirect material interest.

Beneficial ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power with respect to such securities.

Convertible Note Financings

We completed convertible note financings between September 2016 and February 2017, in which we issued and sold to 10 investors an aggregate of approximately $48.0 million principal amount of notes convertible into shares of our common stock. We completed an additional convertible note financing in April 2017 in which we sold to one investor a convertible note with a principal amount of $20.0 million. Upon completion of this offering, the notes will automatically convert into a number of shares of our common stock equal to the outstanding principal amount of such notes divided by a     % discount to the initial public offering price. The investors include one of the holders of more than 5% of our outstanding common stock, Advance Data Services Limited, controlled by Ma Huateng, an entity affiliated with Antony Leung, one of our directors, Dr. Manson Fok, one of our directors, and Mandra. The table below shows the principal amount of convertible notes purchased by each related party and the number of shares of common stock each note will automatically convert into upon completion of this offering.

Related Party	Principal Amount of Convertible Note		Shares of Common Stock Upon Completion of Offering
Advance Data Services Limited(1)	$	10,000,000
Sunderland Global Limited	$	10,000,000
Manson Fok	$	2,000,000
Mandra Medical Limited	$	2,000,000

⁽¹⁾  Pursuant to the terms of the convertible loan agreement, another entity controlled by Ma Huateng assigned the agreement and all of its rights thereunder to Advance Data Services Limited in April 2017.

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Sales of Preferred Stock and Common Stock

From time to time since January 1, 2014, we have financed our operations through sales of shares of our common stock and sales of our Series A preferred stock, which were subsequently converted into common stock on a 1-to-1.1 basis, effective May 8, 2014. The table below sets forth the date, purchase price and number of shares purchased for each sale of shares of our common stock or Series A preferred stock, on an as-converted basis, to parties who were, at the time of such sale, any of our directors, executive officers or holders of 5% of any class of our voting capital stock or any member of their immediate family had or will have a direct or indirect material interest:

Date of Sale	Name of Related Party	Aggregate Purchase Price ($)		Shares of Common Stock Purchased
March 26, 2014	Flint Besecker	$	2,000,000		440,000
March 26, 2014	Johnson Lau	$	4,000,000		880,000
March 29, 2014	Mandra Health Limited	$	5,000,006		1,000,000
August 13, 2014	Mandra Health Limited	$	3,000,000		600,000
September 8, 2014	Mandra Health Limited	$	5,000,000		1,000,000
January 22, 2015	Flint Besecker	$	550,000		100,000
January 22, 2015	Johnson Lau	$	550,000		100,000
January 30, 2015	Mandra Health Limited	$	12,867,768		2,557,776
February 5, 2015	Flint Besecker	$	3,300,000		600,000
February 5, 2015	Johnson Lau	$	3,300,000		600,000
February 5, 2015	Jinn Wu	$	176,000		32,000
April 17, 2015	Charter Link International Ltd.	$	10,500,000		1,400,000
April 17, 2015	Advance Data Services Limited(1)	$	30,000,000		4,000,000
April 17, 2015	Manson Fok	$	1,000,020		133,336
May 31, 2015	William Zuo	$	6,300,000		840,000
June 5, 2015	Mandra Health Limited	$	6,600,000		1,200,000
July 17, 2015	Flint Besecker	$	944,352		104,928
July 17, 2015	Rudolf Kwan	$	187,092		20,788
July 17, 2015	Mandra Health Limited	$	5,000,006		853,148
March 1, 2016	Mandra Health Limited	$	5,000,003		666,667
March 31, 2016	William Zuo	$	2,499,993		277,777
May 26, 2016	Mandra Health Limited	$	3,499,988		466,665

⁽¹⁾  Pursuant to the terms of our shareholders’ agreement, another entity controlled by Ma Huateng, which purchased the shares of our common stock on April 17, 2015, transferred ownership of those shares to Advance Data Services Limited in April 2017.

Shareholders Agreement

We entered into a shareholders agreement with certain of our shareholders, dated May 8, 2014, as amended from time to time, which prescribes the size of our board of directors and grants the shareholders party to the agreement with certain information rights. The agreement also provides that no shareholder shall, voluntarily or involuntarily, transfer all or any part of his or her shares of common stock without the prior written approval of the board of directors, subject to certain permitted transfers. This agreement will be terminated upon the closing of this offering.

Additional Shareholder Rights

Charter Link

We entered into a purchase agreement for our previously outstanding Series A convertible preferred stock, dated February 18, 2013 and amended on July 14, 2013, with Charter Link International Ltd., or Charter Link, for an aggregate price of $5,000,000. Among other things, the agreement gives Charter Link an option to

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purchase additional shares of our common stock in the event of certain issuances by us of our common stock. This option will be terminated upon the closing of this offering. The agreement also gives Charter Link the right to designate an individual to our board of directors who shall serve until our first annual shareholders meeting, and to require us to include the name of such nominee in the slate of nominees for director that is submitted to our shareholders at each subsequent annual shareholders meeting, as long as Charter Link continues to beneficially own more than 5% of our outstanding common stock. The agreement also provides that all of our directors, founders and another shareholder, must vote all their shares from time to time for the election of such nominee. This right will be terminated upon the closing of this offering.

Mandra Health Limited

We entered into a stock purchase and option agreement, dated March 4, 2014, with Mandra Health Limited, or Mandra, which provided for the purchase of our Series A convertible preferred stock by Mandra over two tranches, as well as an option to purchase additional shares, for an aggregate sales price of $25,000,000. Among other things, the agreement also gives Mandra the preemptive right to purchase all or part of its pro rata share, based on its percentage ownership of our then-outstanding common stock, of any new securities we issue to new investors. This preemptive right shall terminate upon the closing of this offering.

Voting Agreements

Mandra Health Limited

We entered into a voting agreement, dated March 4, 2014, with Mandra and certain other shareholders whereby Mandra shall be entitled to nominate one nominee for appointment or election to our board of directors for as long as Mandra beneficially owns 10% or more of our then-outstanding common stock on a fully-diluted basis. Upon the closing of this offering, we will be required to use our best efforts to include Mandra’s nominee on any slate of nominees to be recommended to our shareholders for election to the board of directors. The agreement shall terminate upon the earlier of: (i) seven years from the date of the agreement, (ii) a written agreement by and among the parties thereto, (iii) the fifth anniversary of the closing of this offering or (iv) the date Mandra no longer beneficially owns 10% or more of our then-outstanding common stock on a fully-diluted basis. Upon completion of this offering, Mandra will own approximately             % of our outstanding common stock, assuming an initial public offering price of $             per share, the midpoint of the price range set forth on the cover of this prospectus.

Manson Fok

We entered into a voting agreement, dated March 1, 2013, with Dr. Manson Fok and certain other shareholders whereby such shareholders agreed to vote all shares beneficially owned by them at any annual or special meeting of our shareholders or in any action by written consent for the election of one nominee of Dr. Fok to our board of directors. The shareholders party to this agreement also agreed not to vote to or consent to remove any director nominated by Dr. Fok unless Dr. Fok consents, approves and recommends such removal. The agreement shall terminate upon the earlier of: (i) seven years from the date of the agreement, (ii) a written agreement by and among the parties thereto, (iii) the fifth anniversary of the closing of this offering or (iv) the date Dr. Fok no longer beneficially owns at least 5% of the then-outstanding shares of our common stock. Upon completion of this offering, Dr. Fok will own approximately             % of our outstanding common stock, assuming an initial public offering price of $             per share, the midpoint of the price range set forth on the cover of this prospectus.

CDE Acquisition

In July 2015, we acquired all of the outstanding equity interests in CDE in a stock-for-stock transaction valued at approximately $14.9 million. Prior to the transaction, certain of our directors, officers and stockholders,

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including Dr. Lau, Mr. Fok, Mr. Zhang and Dr. Kwan, had a financial interest in CDE. In addition, Dr. Lau and Mr. Fok served as directors of CDE. Consequently, our board of directors established a special committee of disinterested directors with authority to review, evaluate, negotiate, and approve or reject the terms and conditions of the transaction and to retain its own financial and legal advisors to assist in connection therewith. Following negotiation of the transaction between the committee and its advisors and representatives of CDE, the special committee determined that the proposed terms of the transaction were fair to us from a financial point of view and approved our entry into the definitive agreements and consummation of the transactions contemplated thereby.

Contractual Arrangements

Avalon BioMedical (Management) Limited

Since 2015, CDE has entered into a series of agreements with Avalon BioMedical (Management) Limited, or Avalon BioMedical, under which Avalon BioMedical will occupy space and use certain services and facilities and pay to CDE 30% in 2015 and 50% in 2016 of the total services expenses and rent payment incurred for the Hong Kong research and development facility. Pursuant to such agreements, Avalon BioMedical paid to CDE approximately $0.2 million and $0.3 million in 2015 and 2016, respectively. Dr. Lau, our Chief Executive Officer and Chairman, and Dr. Fok and Mr. Zhang, two of our directors, collectively have a controlling interest in, and serve on the board of directors of, Avalon Global Holdings Limited, the indirect parent of Avalon BioMedical. As of December 31, 2016, Avalon BioMedical held 678,880 shares of our common stock. We do not hold any interest in Avalon BioMedical.

Chongqing Taisheng Biotechnology Co., Ltd.

We purchase certain pharmaceutical ingredients from Chongqing Taisheng Biotechnology Co., Ltd., or Taisheng, a company which is owned by Dr. William Zuo, one of our officers. Purchases from Taisheng amounted to $0.1 million and $0.2 million for the years ended December 31, 2015 and 2016, respectively. We believe that the prices we pay to Taisheng for these ingredients are comparable to prices available from third parties selling similar ingredients of similar quality.

Xenobiotic Laboratory

Xenobiotic Laboratory, or XBL, is a contract research company. Dr. Lau, our Chairman and CEO, and Dr. Wu, one of our directors, owned 30% and 70%, respectively, of XBL until it was sold to a third party in September 2014. Prior to that sale, Dr. Lau and Dr. Wu also served as directors of XBL. Up until the date XBL was sold to a third party in 2014, we paid approximately $188,000 to XBL for contract research services.

ZenRx Limited

ZenRx is a contract research company located in New Zealand. ZenRx conducts certain clinical development with our company and we have entered into the ZenRx License with ZenRx. See “Business—License and Collaboration Agreements—ZenRx License Agreement.” Dr. Rudolf Kwan, our Chief Medical Officer, serves on the board of directors of ZenRx, and in 2014, 2015 and 2016, we paid approximately $0.1 million, $0.1 million and less than $0.1 million, respectively, to ZenRx for clinical research.

Dr. William Zuo

Dr. Zuo, who serves as President of our China operation, was entitled to certain payments following our acquisition of Polymed in 2015. In 2015 and 2016, we paid Dr. Zuo $2.5 million and $2.5 million worth of our common stock in connection with such acquisition. See Management’s Discussion and Analysis of Financial Position—Liquidity And Capital Resources—Indebtedness.”

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Dr. Rudolf Kwan

Dr. Kwan, our Chief Medical Officer, provided services to us as a consultant until February 2017 through RSJ Consulting LLC, a limited liability company of which he is the principal. We have paid consulting fees of $144,000, $149,333 and $164,000 to RSJ Consulting LLC in each of 2014, 2015 and 2016, respectively. We have not paid any fees to RSJ Consulting LLC for any other services other than the consulting services of Dr. Kwan.

Dr. Jane Fang

We have entered into a consulting agreement with Dr. Jane Fang, who is the wife of Dr. Lau, our Chairman and CEO to provide consulting advice related to the development of our KX-01 ointment, reporting to Dr. Kwan, our Chief Medical Officer. We have paid consulting fees of $1,600, $0 and $127,000 to Dr. Fang in each of 2014, 2015 and 2016, respectively.

Equity Issuances

We have entered into employment agreements and arrangements with certain of our executive officers and have granted stock options to our executive officers and certain of our directors. For additional information about these agreements and transactions, see “Executive and Director Compensation—Director Compensation” and “Executive and Director Compensation—Executive Compensation.”

Letter Agreement with Former Officer

On December 8, 2016, we entered into a letter agreement with one of our former executive officers and directors, Flint Besecker, pursuant to which Mr. Besecker agreed to take on a lesser role within the Company and to return to the Company certain executive compensation benefits previously granted to him in order to, among other things, provide us with additional flexibility to grant incentive stock awards to other employees of the Company in the future. Under the December 8, 2016 agreement, among other things, Mr. Besecker (i) resigned from his roles as Chief Financial Officer and Chief Operating Officer and agreed to accept a new, part-time role in Strategic Operations, (ii) resigned from our Board of Directors, (iii) agreed to terminate both the vested and unvested portion of an option to purchase 1,280,000 shares of our common stock previously granted to him with an exercise price of $7.50 per share, (iv) agreed to resell to us, for nominal consideration, 546,667 shares of our common stock previously purchased by him with the proceeds of a loan from the Company that was forgivable over time, (v) agreed to resell to us, for nominal consideration, 100,000 shares of our common stock owned by him as a result of an incentive stock award previously made to him, and (v) agreed to certain continuing confidentiality, non-competition and transfer restrictions as a former executive officer of the Company. Mr. Besecker subsequently resigned from his position in Strategic Operations, and since January 13, 2017 has no longer been employed with our Company.

Share Purchases

In 2014, we sold to Dr. Lau and Flint Besecker, an executive officer at the time, 880,000 and 440,000 shares, respectively, of our common stock in exchange for promissory notes in the amounts of $4,000,000 and $2,000,000, respectively. In 2015, we sold to Dr. Lau and Mr. Besecker, an executive officer at the time, 600,000 shares each of our common stock in exchange for promissory notes in the amount of $3.3 million each. Pursuant to the terms of the promissory notes, one-third of the principal amount outstanding would be forgiven each year over a three-year period, contingent on their continued employment. In October 2016, our board of directors accelerated the forgiveness of the full remaining value of each of the promissory notes described above and extinguished the notes and, in connection therewith, repurchased 174,309 and 148,416 shares from Dr. Lau and Mr. Besecker, respectively, to satisfy certain tax obligations.

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Directed Share Program

At our request, the underwriters have reserved for sale, at the initial public offering price, up to     % of the shares offered by this prospectus for sale to some of our directors, officers, employees and related persons as part of a directed share program. The directed share program will not limit the ability of such directors, officers and their family members, or holders of more than 5% of our capital stock, to purchase more than $120,000 in value of our common stock. We do not currently know the extent to which these related persons will participate in our directed share program, if at all, or the extent to which they will purchase more than $120,000 in value of our common stock.

Participation in this Offering

Certain of our existing stockholders and their affiliated entities, including stockholders affiliated with certain of our directors, have indicated an interest in purchasing up to an aggregate of approximately $         million worth of shares of our common stock in this offering at the initial public offering price. However, because indications of interest are not binding agreements or commitments to purchase, the underwriters could determine to sell more, less or no shares to any of these stockholders and any of these stockholders could determine to purchase more, less or no shares in this offering. The underwriters will receive the same underwriting discounts and commissions on any shares purchased by these stockholders as they will on any other shares sold to the public in this offering.

Indemnification Agreements with Officers and Directors

See “Management—Indemnification Agreements.”

Policies and Procedures for Related Party Transactions

Following this offering, pursuant to the written charter of our audit committee adopted in 2017, our audit committee of the board of directors will be responsible for reviewing and approving, prior to our entry into any such transaction, all related party transactions and potential conflict of interest situations involving a principal stockholder, a member of the board of directors or senior management. In addition, our company policies require that our officers and employees avoid using their positions for purposes that are, or give the appearance of being, motivated by a desire for personal gain.

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PRINCIPAL STOCKHOLDERS

The following table indicates information as of March 31, 2017, except for footnote 2, which is as of April [    ], 2017, regarding the ownership of our common stock, both before and after giving effect to the sale of common stock offered in this offering, for:

• each person who is known by us to own more than 5% of our shares of common stock;

• each named executive officer;

• each of our directors; and

• all of our directors and executive officers as a group.

The following table does not reflect any shares of common stock that may be purchased in this offering pursuant to our directed share program described under “Underwriting.”

The number of shares beneficially owned and the percentage of shares beneficially owned are based on 41,347,768 shares of our common stock outstanding as of December 31, 2016, which includes 661,982 issued but unvested restricted shares. Unvested shares of restricted stock are subject to our right to repurchase such shares until such shares have vested. These shares are deemed to be outstanding and beneficially owned by the person holding those shares for the purpose of computing the percentage ownership of that person and for the purpose of computing the percentage ownership of any other person. Percentage ownership of our common stock after this offering (assuming no exercise of the underwriters’ over-allotment option to purchase additional shares) assumes our sale of shares in this offering. Unless otherwise indicated in the footnotes to the table, and subject to community property laws where applicable, the following persons have sole voting and investment control with respect to the shares beneficially owned by them.

Beneficial ownership for the purposes of the following table is determined in accordance with the rules and regulations of the SEC. These rules generally provide that a person is the beneficial owner of securities if such person has or shares the power to vote or direct the voting thereof, or to dispose or direct the disposition thereof or has the right to acquire such powers within 60 days. Also, in accordance with SEC rules, shares of common stock that may be acquired by an individual or group within 60 days of December 31, 2016, pursuant to the exercise of options, warrants or other rights, are deemed to be outstanding for the purpose of computing the percentage ownership of such individual or group, but are not deemed to be outstanding for the purpose of computing the percentage ownership of any other person shown in the table. Except as otherwise indicated, the address of each of the persons in this table is c/o Athenex, Inc., 1001 Main Street, Suite 600, Buffalo, NY 14203.

	Shares Beneficially Owned Prior to the Offering		Percentage of Shares Beneficially Owned
			Before Offering			After Offering
Name of Beneficial Owner
5% Stockholders:
Mandra Entities(1)		6,715,784		16.24	%
Ma Huateng(2)		4,080,000		9.85	%
Pharminex, LLC(3)		2,693,776		6.51	%
Charter Link International Ltd.(4)		2,500,000		6.05	%
Directors and Named Executive Officers:
Johnson Lau(5)		5,746,583		13.08	%
Simon Pedder(6)		45,000		*
Jeffrey Yordon(7)		183,709		*
Kim Campbell(8)		24,000		*
Manson Fok(9)		2,181,216		5.24	%
Antony Leung(10)		690,664		1.67	%
Jinn Wu(11)		521,208		1.25	%
Song-Yi Zhang(12)		7,502,664		18.10	%

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	Shares Beneficially Owned Prior to the Offering		Percentage of Shares Beneficially Owned
			Before Offering			After Offering
Michael Cannon(13)		36,528		*
Sheldon Trainor-Degirolamo(14)		943,334		2.28	%
James Zukin(15)		531,100		1.28	%
All executive officers, directors and director nominees as a group(16) (14 persons)		18,738,547		41.43	%

⁽¹⁾ Consists of (i) 6,428,608 shares of common stock held of record by Mandra Medical Limited and (ii) 287,176 shares of common stock held of record by Mandra Health Limited. Mandra Medical Limited and Mandra Health Limited are collectively referred to as the Mandra Entities. Each of Mandra Health Limited and Mandra Medical Limited are wholly-owned subsidiaries of Beansprouts Limited. Song-Yi Zhang, a member of our board of directors, together with his spouse, owns all of the outstanding interests in Beansprouts Limited and shares voting and dispositive power over the shares held by it. The amount above does not include $2.0 million worth of convertible notes issued to Mandra Medical Limited in January 2017 that will automatically convert into                  shares of our common stock upon the completion of this offering. The address for each of Mandra Medical Limited, Mandra Health Limited and Beansprouts Limited is c/o Newhaven Trustees (BVI) Limited, 3^rd Floor, J&C Building, P.O. Box 933, Road Town, Tortola, British Virgin Islands, VG1110.

⁽²⁾ Consists of (i) 4,000,000 shares of common stock held by Advance Data Services Limited, which acquired the shares by transfer from another entity controlled by Ma Huateng, pursuant to our shareholders’ agreement, on April [    ], 2017, and (ii) 80,000 shares of common stock issuable upon the exercise of options exercisable within 60 days of March 31, 2017 held of record by Ma Huateng. Ma Huateng is a Director of Advance Data Services Limited and has sole voting and dispositive power over the shares held by Advance Data Services Limited. The amount above does not include $10.0 million worth of convertible notes issued to an entity controlled by Ma Huateng in September 2016, which were assigned to Advance Data Services Limited pursuant to the terms of the convertible note agreement in April 2017, which will automatically convert into shares of our common stock upon the completion of this offering. The address for Accord Data Holdings, Inc. is 29/F Three Pacific Place, 1 Queen’s Road East, Wanchai, Hong Kong.

⁽³⁾ Charles Lannon, John Bellomo and Jonathan Swiatkowski are the directors of Pharminex, LLC and share voting and dispositive power over the shares held by Pharminex, LLC. The address for Pharminex, LLC is 6467 Main Street, Williamsville, New York 14221.

⁽⁴⁾ Edward Cheng Seng Chong and Paul Cheng Link Man are the directors of Charter Link International Ltd. and share voting and dispositive power over the shares held by Charter Link International Ltd. The address for Charter Link International, Inc. is Room 1802 Harbour Centre, 25 Harbour Road, Wanchai, Hong Kong.

⁽⁵⁾ Consists of (i) 2,322,722 shares of common stock, (ii) 2,583,334 shares of common stock issuable upon the exercise of options exercisable within 60 days of March 31, 2017, (iii) 161,647 shares of restricted common stock, subject to certain repurchase rights, held by Dr. Lau’s spouse, and (iv) 678,880 shares of common stock held by Avalon Biomedical (Management) Limited (“Avalon Biomedical”), an indirect wholly-owned subsidiary of Avalon Global Holdings Limited (“Avalon Global”). Dr. Lau owns all of the outstanding interests in Creative Decade Global Limited, which owns 30% of the outstanding interests in Avalon Global, and Dr. Lau serves on the board of directors of Avalon Global and has shared voting and dispositive power with respect to the shares held by Avalon Biomedical.

⁽⁶⁾ Consists of 45,000 shares of common stock issuable upon the exercise of options exercisable within 60 days of March 31, 2017.

⁽⁷⁾ Consists of (i) 33,709 shares of common stock and (ii) 150,000 shares of restricted common stock subject to certain repurchase rights.

⁽⁸⁾ Consists of 24,000 shares of common stock issuable upon the exercise of options exercisable within 60 days of March 31, 2017.

⁽⁹⁾ Consists of (i) 1,242,336 shares of common stock, (ii) 260,000 shares of common stock issuable upon the exercise of options exercisable within 60 days of March 31, 2017 and (iii) 678,880 shares of common stock held by Avalon Biomedical, an indirect wholly-owned subsidiary of Avalon Global. Dr. Fok, together with his spouse, owns all of the outstanding interests in Sino Glory Developments Limited, which owns 30% of the outstanding

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interests in Avalon Global, and Dr. Fok serves on the board of directors of Avalon Global and shares voting and dispositive power with respect to the has shared held by Avalon Biomedical. The amount above does not include $2.0 million worth of convertible notes issued to Dr. Fok in January 2017 that will automatically convert into              shares of our common stock upon the completion of this offering.

⁽¹⁰⁾ Consists of (i) 24,000 shares of common stock issuable upon the exercise of options within 60 days of March 31, 2017 and (ii) 666,664 shares of common stock owned by Sunderland Global Limited. Sunderland Global Limited is an indirect wholly-owned subsidiary of Nan Fung Group. Mr. Leung is the CEO of Nan Fung Group and has shared voting and dispositive power over the shares held by Sunderland Global Limited. The amount above does not include $10.0 million worth of convertible notes issued to Sunderland Global Limited in September 2016 that will automatically convert into              shares of our common stock upon the completion of this offering.

⁽¹¹⁾ Consists of (i) 223,208 shares of common stock, and (ii) 298,000 shares of common stock issuable upon the exercise of options exercisable within 60 days of March 31, 2017.

⁽¹²⁾ Consists of (i) the shares described in footnote (1) above, (ii) 4,000 shares of common stock, (iii) 104,000 shares of common stock issuable upon the exercise of options exercisable within 60 days of March 31, 2017, and (iv) 678,880 shares of common stock held by Avalon Biomedical, an indirect wholly-owned subsidiary of Avalon Global. Mr. Zhang, together with his spouse, indirectly owns all of the outstanding interests in Mandra Medical Limited, which owns 30% of the outstanding interests in Avalon Global, and Mr. Zhang serves on the board of directors of Avalon Global and has shared voting and dispositive power with respect to the shares held by Avalon Biomedical.

⁽¹³⁾  Consists of 36,528 shares of common stock held by Cannon Venture No. 2 LP. Michael Cannon, who has been nominated to join our Board upon the completion of this offering, is the general partner of Cannon Venture No. 2 LP and has sole voting and dispositive power over the shares held by it.

⁽¹⁴⁾  Consists of 943,334 shares of common stock held by PacBridge Partners V Investment Co Ltd. Sheldon Trainor-Degirolamo, who has been nominated to join our Board upon the completion of this offering, is the sole director and shareholder of PacBridge Partners V Investment Co Ltd. and has sole voting and dispositive power over the shares held by it.

⁽¹⁵⁾  Consists of (i) 465,100 shares of common stock held directly by James Zukin, who has been nominated to join our Board upon the completion of this offering and (ii) 66,000 shares of common stock held by the James Zukin Trust dated 11/4/05, of which Mr. Zukin is the trustee and beneficiary. Mr. Zukin has sole voting and dispositive power over the shares held by the Trust. Mr. Zukin is a member of Pharminex, LLC, but does not have voting or dispositive power over the shares of our common stock held by it.

⁽¹⁶⁾ Consists of (i) 14,858,213 shares of common stock and (ii) 3,880,334 shares of common stock issuable upon the exercise of options exercisable within 60 days of March 31, 2017.

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DESCRIPTION OF CAPITAL STOCK

The following description of certain provisions of our amended and restated certificate of incorporation and amended and restated bylaws to be adopted prior to the closing of this offering does not purport to be complete. You should also refer to the copies of our amended and restated certificate of incorporation and amended and restated bylaws which have been filed with the SEC as exhibits to our registration statement, of which this prospectus forms a part. The description of common stock and preferred stock reflect changes to our capital structure that will occur upon the closing of this offering in accordance with the terms of the amended and restated certificate of incorporation that will be adopted by us immediately prior to the closing of this offering.

Upon the closing of this offering, our authorized capital stock will consist of              shares of common stock, par value $0.001 per share, and              shares of preferred stock, par value $0.001 per share.

Common Stock

As of December 31, 2016, there were 41,347,768 shares of our common stock outstanding, which includes 661,982 issued but unvested restricted shares, held of record by 311 stockholders. Under the amended and restated certificate of incorporation and amended and restated bylaws, holders of common stock are entitled to one vote per share on all matters submitted to a vote of our stockholders and do not have cumulative voting rights in the election of directors. This means that, subject to any rights of holders of outstanding shares of our preferred stock, if any, to vote in the election of directors, the holders of a majority of our outstanding shares of common stock can elect all of the directors standing for election by holders of our common stock and the holders of the remaining outstanding shares of our common stock will not be able to elect any such directors. The shares of common stock offered by this prospectus, when issued, will be fully paid and non-assessable and will not be subject to any redemption or sinking fund provisions. Holders of common stock do not have any preemptive, subscription or conversion rights.

Holders of common stock are entitled to receive dividends if and when declared by the board of directors out of legally available funds, subject to the rights of preferred stockholders, if any, and the terms of any existing or future agreements between us and our lenders. We presently intend to retain future earnings, if any, for use in the operation and expansion of our business. We do not anticipate paying cash dividends on our common stock in the foreseeable future. See “Dividend Policy.” In the event of our liquidation, dissolution or winding up, common stockholders are entitled to share ratably in all assets legally available for distribution after payment of or provision for all of our debts and other liabilities, and subject to the prior rights of any holders of outstanding shares of our preferred stock, if any.

Preferred Stock

Upon the closing of this offering, our board of directors will be authorized, without vote or action by the stockholders, to issue from time to time up to an aggregate of              shares of preferred stock in one or more series and to fix or alter the designations, preferences, rights and any qualifications, limitations or restrictions of the shares of each of these series, including the dividend rights, dividend rates, conversion rights, voting rights, terms and rights of redemption, including without limitation sinking fund provisions, redemption price or prices, liquidation preferences and the number of shares constituting any series. The issuance of preferred stock may have the effect of delaying, deferring or preventing a change in control of us without further action by our stockholders and may adversely affect the dividend, liquidation and voting and other rights of the holders of common stock. The issuance of preferred stock with voting and conversion rights may adversely affect the voting power of the holders of common stock, including the loss of voting control to others. We currently have no plans to issue any shares of preferred stock.

We believe that the ability to issue preferred stock without the expense and delay of a special stockholders’ meeting will provide us with increased flexibility in structuring possible future financings and acquisitions, and

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in meeting other corporate needs that might arise. This also permits the board of directors to issue preferred stock containing terms which could impede the completion of a takeover attempt. This could discourage an acquisition attempt or other transaction which stockholders might believe to be in their best interests or in which they might receive a premium for their stock over the then market price of the stock.

Options and Warrants

As of March 31, 2017, options to purchase a total of 9,214,989 shares of our common stock were outstanding with a weighted average exercise price of $6.25 per share, and up to              additional shares of our common stock were reserved for future issuance under our 2017 Plan. After this offering, we intend to cease granting awards under our 2013 Plan, and instead grant awards, including options, under our 2017 Plan, which is expected to be adopted in connection with this offering. For a more complete discussion of our equity incentive plans, please see “—Employee Benefit Plans.”

As of March 31, 2017, warrants to purchase up to an aggregate of 344,000 shares of our common stock were outstanding at a weighted average exercise price of $0.44 per share.

Anti-takeover Provisions of Delaware Law, Our Amended and Restated Certificate of Incorporation and Amended and Restated Bylaws

The provisions of the Delaware General Corporation Law, or DGCL, our amended and restated certificate of incorporation and our amended and restated bylaws may have the effect of delaying, deferring or discouraging another person from acquiring control of us by means of a tender offer, a proxy contest or otherwise, or removing incumbent officers and directors. These provisions, some of which are described below, may discourage certain types of coercive takeover practices and takeover bids that our board of directors may consider inadequate and to encourage any person seeking to acquire control of us to first negotiate with our board of directors. We believe the benefits of increased protection of our ability to negotiate with the proponent of an unfriendly or unsolicited proposal to acquire or restructure us outweighs the disadvantages of discouraging takeover or acquisition proposals because, among other things, negotiation of these proposals could result in an improvement of their terms.

Classified Board

Our amended and restated certificate of incorporation will provide that subject to the rights of holders of any series of preferred stock with respect to director elections, the board shall be divided into three (3) classes. The initial term of the directors who are members of Class I will expire at the first annual meeting of stockholders following the closing of this offering, the initial term of the directors who are members of Class II will expire at the second annual meeting of stockholders following the closing of this offering, and the initial term of the directors who are members of Class III will expire at the third annual meeting of stockholders following the closing of this offering. At each annual meeting of stockholders, commencing with the first annual meeting of stockholders following the closing of this offering, each of the successors elected to replace the directors of a class whose term shall have expired at such annual meeting shall be elected to hold office until the third annual meeting next succeeding his or her election and until his or her respective successor shall have been duly elected and qualified. Our stockholders will elect only one class of directors each year. We believe that classification of our board of directors will help to assure the continuity of our business strategies and policies. The classified board provision could have the effect of making the replacement of incumbent directors more time consuming and difficult. At least two annual meetings of our stockholders will generally be required to effect a change in a majority of our board of directors.

Removal of Directors; Filling Vacancies and Newly Created Directorships

Our amended and restated certificate of incorporation and amended and restated bylaws will provide that subject to any limitations imposed by law and the rights of the holders of any series of our preferred stock, the

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board of directors or any individual director may be removed from office by our stockholders only for cause. Subject to the rights of holders of any series of outstanding preferred stock, vacancies in the board and newly created directorships shall, unless otherwise provided by law, be filled solely by the affirmative vote of a majority of directors then in office, or by a sole remaining director, and shall not be filled by stockholders.

No Written Consent of Stockholders

Our amended and restated certificate of incorporation will provide that all stockholder actions are required to be taken by a vote of the stockholders at an annual or special meeting, and that stockholders may not take any action by written consent in lieu of a meeting.

Special Meetings of Stockholders

Our amended and restated certificate of incorporation will provide that special meetings of stockholders may only be called by the chairman of our board of directors, our chief executive officer, or our board of directors. In addition, our amended and restated bylaws prohibit the conduct of any business at a special meeting other than as specified in the notice of such meeting.

Advance Notice Requirements and Procedures

Our amended and restated bylaws will establish advance notice procedures with regard to stockholder proposals relating to the nomination of candidates for election as directors or new business to be brought before meetings of our stockholders. These procedures will provide that notice of stockholder nominations and proposals must be timely given in writing to our secretary prior to the meeting at which the action is to be taken. Generally, to be timely, notice must be received at our principal executive offices not later than the ninetieth (90th) day nor earlier than the one hundred twentieth (120th) day prior to the first anniversary of the annual meeting for the preceding year. The notice must contain certain information specified in the bylaws. These provisions may have the effect of precluding the conduct of certain business at a meeting if the proper procedures are not followed. These provisions may also discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise attempting to obtain control of our company.

Amendment to Certificate of Incorporation and Bylaws

Our amended and restated certificate of incorporation will provide that the affirmative votes of the holders of at least seventy-five percent (75%) of the voting power of all of the then-outstanding shares of our voting stock will be required to amend certain provisions of our certificate of incorporation, including provisions relating to the size of our board of directors, term and classification of directors, rights of holders of preferred stock relating to director elections, removal of directors, filling board vacancies and newly-created directorships, special meetings of stockholders, shareholder action by written consent, limitation of liability and indemnification, and amendment of the certificate of incorporation and bylaws.

The affirmative votes of the holders of at least seventy-five percent (75%) of the voting power of all of the then-outstanding shares of our voting stock will be required to amend or repeal our bylaws. In addition, our amended and restated bylaws may be amended by our board of directors.

Blank Check Preferred Stock

Our amended and restated certificate of incorporation will provide for          authorized shares of preferred stock. The existence of authorized but unissued shares of preferred stock may enable our board of directors to render more difficult or to discourage an attempt to obtain control of us by means of a merger, tender offer, proxy contest or otherwise. For example, if in the due exercise of its fiduciary obligations, our board of directors were

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to determine that a takeover proposal is not in the best interests of us or our stockholders, our board of directors could cause shares of preferred stock to be issued without stockholder approval in one or more private offerings or other transactions that might dilute the voting or other rights of the proposed acquirer or insurgent stockholder or stockholder group. In this regard, our certificate of incorporation grants our board of directors broad power to establish the rights and preferences of authorized and unissued shares of preferred stock. The issuance of shares of preferred stock could decrease the amount of earnings and assets available for distribution to holders of shares of common stock. The issuance may also adversely affect the rights and powers, including voting rights, of these holders and may have the effect of delaying, deterring or preventing a change in control of us.

Section 203 of the DGCL

Upon the closing of this offering, we will be subject to the provisions of Section 203 of the DGCL, as amended. In general, Section 203 prohibits a publicly-held Delaware corporation from engaging in a “business combination” with an “interested stockholder” for a three-year period following the time that this stockholder becomes an interested stockholder, unless the business combination is approved in a prescribed manner. A “business combination” includes, among other things, a merger, asset or stock sale or other transaction resulting in a financial benefit to the interested stockholder. An “interested stockholder” is a person who, together with affiliates and associates, owns, or did own within three years prior to the determination of interested stockholder status, 15 percent or more of the corporation’s voting stock.

Under Section 203, a business combination between a corporation and an interested stockholder is prohibited unless it satisfies one of the following conditions:

• before the stockholder became interested, the board of directors of the corporation approved either the business combination or the transaction which resulted in the stockholder becoming an interested stockholder;

• upon consummation of the transaction which resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least 85 percent of the voting stock of the corporation outstanding at the time the transaction commenced, excluding for purposes of determining the voting stock outstanding (but not the outstanding voting stock owned by the interested stockholder), shares owned by persons who are directors and also officers, and employee stock plans, in some instances; or

• at or after the time the stockholder became interested, the business combination was approved by the board of directors of the corporation and authorized at an annual or special meeting of the stockholders by the affirmative vote of at least 66 2/3 percent of the outstanding voting stock which is not owned by the interested stockholder.

A Delaware corporation may “opt out” of these provisions with an express provision in its original certificate of incorporation or an express provision in its certificate of incorporation or bylaws resulting from a stockholders’ amendment approved by at least a majority of the outstanding voting shares. We have not opted out of these provisions. As a result, mergers or other takeover or change in control attempts of us may be discouraged or prevented.

Delaware as Sole and Exclusive Forum

Our amended and restated certificate of incorporation will provide that, unless a majority of our board of directors consents in writing to an alternative forum, the Court of Chancery of the State of Delaware (or, if the Court of Chancery does not have jurisdiction, another state court located within the State of Delaware, or, if no court located within the State of Delaware has jurisdiction, the federal district court for the District of Delaware) shall, to the fullest extent permitted by law, be the sole and exclusive forum for (i) any derivative action or proceeding brought on behalf of us, (ii) any action asserting a claim of breach of a fiduciary duty owed by any of our directors, officers or other employees to us or our stockholders, (iii) any action asserting a claim against us

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arising pursuant to any provision of the DGCL, as amended, or our certificate of incorporation or bylaws, or (iv) any action asserting a claim against us or any of our directors, officers or employees governed by the internal affairs doctrine of the State of Delaware.

NASDAQ Global Market Listing

We have applied to have our common stock listed on the NASDAQ Global Market under the symbol “ATNX”.

Convertible Loans and Registration Rights

Between September 2016 and April 2017 we entered into convertible loan agreements with an aggregate principal amount of $75.0 million. While the convertible loan agreements do not confer any specific registration rights to the loan holders, the agreements do provide, upon conversion of each loan into shares of our common stock, that we will grant to the loan holders registration rights for such issued common stock that are comparable to any registration rights held by other shareholders. Currently, no other shareholders hold any registration rights with respect to any of our outstanding shares of common stock.

Upon the closing of this offering, $68.0 million of the convertible loans will automatically convert into                      shares of our common stock, which is based on a 20.0% discount to the initial public offering price of $         per share, the midpoint of the price range set forth on the cover of this prospectus. The remaining $7.0 million of the convertible loans, held by Hanmi, may be converted at Hanmi’s option at discounted rates from 20.0% to 22.5% at various dates up to the maturity date of October 1, 2018.

Transfer Agent and Registrar

The transfer agent and registrar for our common stock will be Computershare Trust Company, Inc.

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SHARES ELIGIBLE FOR FUTURE SALE

Prior to this offering, there has been no public market for our common stock, and we cannot predict the effect, if any, that market sales of shares of our common stock or the availability of shares of our common stock for sale will have on the market price of our common stock prevailing from time to time. Nevertheless, sales of substantial amounts of our common stock, including shares issued upon exercise of outstanding options or warrants, or the perception that these sales could occur in the public market after this offering could adversely affect market prices prevailing from time to time and could impair our ability to raise capital through the sale of our equity securities.

Immediately after the closing of this offering, based on the number of shares outstanding as of December 31, 2016, we will have              shares of common stock outstanding. All of the shares sold in this offering (other than any shares sold pursuant to our directed share program, which are subject to lock-up agreements) will be freely tradable without restriction under the Securities Act unless purchased by our “affiliates”, as that term is defined in Rule 144 under the Securities Act.

The remaining shares of our common stock will be “restricted securities” under Rule 144.

Subject to the lock-up and market stand-off agreements described below and the provisions of Rule 144 and 701 under the Securities Act, these restricted securities will be available for sale in the public market as follows:

Date Available for Sale	Shares Eligible for Sale	Description
Date of Prospectus		Shares eligible for sale pursuant to Rule 144 that are not subject to lock-up or market stand-off
90 Days after Date of Prospectus		Shares eligible for sale pursuant to Rules 144 and 701 that are not subject to lock-up or market stand-off
180 Days after Date of Prospectus		Release of lock-up and market stand-off; shares eligible for sale pursuant to Rules 144 and 701

Rule 144

In general, under Rule 144 as currently in effect, any person who is or has been an affiliate of ours during the 90 days immediately preceding the sale and who has beneficially owned shares for at least six months is entitled to sell, within any three-month period commencing 90 days after the date of this prospectus, a number of shares that does not exceed the greater of:

• 1% of the then-outstanding shares of common stock, which will equal approximately shares immediately after this offering; and

• the average weekly trading volume during the four calendar weeks preceding the sale, subject to the filing of a Form 144 with respect to the sale.

Sales under Rule 144 by our affiliates are also subject to certain manner of sale provisions and notice requirements and to the availability of current public information about us.

A person who is not deemed to have been an affiliate of ours at any time during the 90 days immediately preceding the sale and who has beneficially owned his or her shares for at least six months is entitled to sell his or her shares under Rule 144 without regard to the limitations described above, subject only to the availability of current public information about us during the six months after the initial six-month holding period is met. After a nonaffiliate has beneficially owned his or her shares for one year or more, he or she may freely sell his or her shares under Rule 144 without complying with any Rule 144 requirements.

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We are unable to estimate the number of shares that will be sold under Rule 144, since this will depend on the market price for our common stock, the personal circumstances of the sellers and other factors. Prior to the offering, there has been no public market for the common stock, and there can be no assurance that a significant public market for the common stock will develop or be sustained after the offering. Any future sale of substantial amounts of the common stock in the open market may adversely affect the market price of the common stock offered by this prospectus.

Rule 701

In general, under Rule 701 under the Securities Act, any of our employees, directors, consultants or advisors who purchased shares from us in connection with a qualified compensatory stock or option plan or other written agreement and in compliance with Rule 701, is eligible to resell those shares 90 days after the effective date of this offering in reliance on Rule 144, but without compliance with the various restrictions, including the holding period, contained in Rule 144.

Lock-up and Market Stand-Off Agreements

We, our directors and executive officers, and certain of our other stockholders have agreed that, subject to certain exceptions, they will not sell any common stock without the prior written consent of Credit Suisse Securities (USA) LLC and J.P. Morgan Securities LLC for a period of 180 days from the date of this prospectus.

Employee Benefit Plans

Any employee or consultant, other than certain executive officers in some cases, who purchased his or her shares under a written compensatory plan or contract is entitled to rely on the resale provisions of Rule 701, which permits non-affiliates to sell their Rule 701 shares without having to comply with the public information, holding period, volume limitation or notice provisions of Rule 144 and permits affiliates to sell their Rule 701 shares without having to comply with the Rule 144 holding period restrictions, in each case commencing 90 days after the date of this prospectus. As of the holders of options to purchase approximately shares of common stock will be eligible to sell their shares upon the expiration of the 180-day lockup period, subject to the vesting of those options.

We intend to file a registration statement on Form S-8 under the Securities Act as soon as practicable after the completion of the offering to register shares of common stock subject to outstanding stock options or reserved for issuance under our stock plans. This registration will permit the resale of these shares by non-affiliates in the public market without restriction under the Securities Act, upon completion of the lock-up period described above. Shares registered under the Form S-8 registration statement held by affiliates will be subject to Rule 144 volume limitations. See “Management—Executive Compensation” and “—Employee Benefit Plans.”

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TAXATION

The following is a general summary of certain PRC and United States federal income tax consequences relevant to an investment in our common stock. The discussion is not intended to be, nor should it be construed as, legal or tax advice to any particular prospective purchaser. The discussion is based on laws and relevant interpretations thereof in effect as of the date of this prospectus, all of which are subject to change or different interpretations, possibly with retroactive effect. The discussion does not address U.S. state or local tax laws, or tax laws of jurisdictions other than the People’s Republic of China and the United States. You should consult your own tax advisors with respect to the consequences of acquisition, ownership and disposition of our common stock.

People’s Republic of China Taxation

We are a holding company incorporated in the U.S., and we gain a material portion of our income by way of dividends from our PRC subsidiaries. The EIT Law and its implementation rules, both of which became effective on January 1, 2008, provide that China-sourced income of foreign enterprises, such as dividends paid by a PRC subsidiary to its equity holders that are non-resident enterprises, will normally be subject to PRC withholding tax at a rate of 10%, unless any such foreign investor’s jurisdiction of incorporation has a tax treaty with China that provides for a different withholding arrangement.

Under the EIT Law, an enterprise established outside of China with a “de facto management body” within China is considered a “resident enterprise,” which means that it is treated in a manner similar to a Chinese enterprise for enterprise income tax purposes. Although the implementation rules of the EIT Law define “de facto management body” as a managing body that exercises substantive and overall management and control over the production and business, personnel, accounting books and assets of an enterprise, the only official guidance for this definition currently available is set forth in Circular 82, issued by the State Administration of Taxation, which provides guidance on the determination of the tax residence status of a Chinese-controlled offshore incorporated enterprise, defined as an enterprise that is incorporated under the laws of a foreign country or territory and that has a PRC enterprise or enterprise group as its primary controlling shareholder. Although Athenex does not have a PRC enterprise or enterprise group as our primary controlling shareholder and is therefore not a Chinese-controlled offshore incorporated enterprise within the meaning of Circular 82, in the absence of guidance specifically applicable to us, we have applied the guidance set forth in Circular 82 to evaluate the tax residence status of Athenex and its subsidiaries organized outside the PRC.

According to Circular 82, a Chinese-controlled offshore incorporated enterprise will be regarded as a PRC tax resident by virtue of having a “de facto management body” in China and will be subject to PRC enterprise income tax on its worldwide income only if all of the following criteria are met:

• the primary location of the day-to-day operational management is in the PRC;

• decisions relating to the enterprise’s financial and human resource matters are made or are subject to approval by organizations or personnel in the PRC;

• the enterprise’s primary assets, accounting books and records, company seals, and board and shareholders meeting minutes are located or maintained in the PRC; and

• 50% or more of voting board members or senior executives habitually reside in the PRC.

We do not believe that we meet any of the conditions outlined in the immediately preceding paragraph. Athenex and its offshore subsidiaries are incorporated outside the PRC. As a holding company, our key assets and records, including the resolutions and meeting minutes of our board of directors and the resolutions and meeting minutes of our shareholders, are located and maintained outside the PRC. In addition, we are not aware of any offshore holding companies with a corporate structure similar to ours that has been deemed a PRC “resident enterprise” by the PRC tax authorities. Accordingly, we believe that Athenex and its offshore

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subsidiaries should not be treated as a “resident enterprise” for PRC tax purposes if the criteria for “de facto management body” as set forth in Circular 82 were deemed applicable to us. However, as the tax residency status of an enterprise is subject to determination by the PRC tax authorities and uncertainties remain with respect to the interpretation of the term “de facto management body” as applicable to our offshore entities, we will continue to monitor our tax status.

The implementation rules of the EIT Law provide that, (i) if the enterprise that distributes dividends is domiciled in the PRC or (ii) if gains are realized from transferring equity interests of enterprises domiciled in the PRC, then such dividends or capital gains are treated as China-sourced income. It is not clear how “domicile” may be interpreted under the EIT Law, and it may be interpreted as the jurisdiction where the enterprise is a tax resident. Therefore, if we are considered to be a PRC tax resident enterprise for PRC tax purposes, any dividends we pay to our overseas shareholders which are non-resident enterprises as well as gains realized by such shareholders from the transfer of our shares may be regarded as China-sourced income and as a result become subject to PRC withholding tax at a rate of up to 10%.

Furthermore, if we are considered a PRC resident enterprise and the competent PRC tax authorities consider dividends we pay with respect to our shares and the gains realized from the transfer of our shares to be income derived from sources within the PRC, such dividends and gains we pay to our overseas shareholders who are non-resident individuals may be subject to PRC individual income tax at a rate of 20%, unless any such non-resident individuals’ jurisdiction has a tax treaty with China that provides for a preferential tax rate or a tax exemption. It is also unclear whether, if we are considered a PRC resident enterprise, holders of our shares would be able to claim the benefit of income tax treaties or agreements entered into between China and other countries or areas.

See “Risk Factors—Risks Related to Doing Business in the People’s Republic of China—We may be treated as a resident enterprise for PRC tax purposes under the PRC Enterprise Income Tax Law, and we may therefore be subject to PRC income tax on our global income.” and “Risk Factors—Risks Related to Doing Business in the People’s Republic of China—Dividends payable to our foreign investors and gains on the sale of our common stock by our foreign investors may become subject to PRC tax law.”

United States

The following is a general discussion of the material U.S. federal income and estate tax consequences of the ownership and disposition of our common stock by a beneficial owner that is a “non-U.S. holder.” For purposes of this discussion, a “non-U.S. holder” is a person or entity that does not own or has not owned, actually or constructively, more than 5% of our common stock, and is for U.S. federal income tax purposes:

• a non-resident alien individual, other than certain former citizens and residents of the U.S.;

• a corporation, or other entity treated as a corporation for U.S. federal income tax purposes, created or organized under the laws of a jurisdiction other than the U.S., any state thereof or the District of Columbia;

• an estate, other than an estate the income of which is subject to U.S. federal income taxation regardless of its source; or

• a trust, other than if a court within the U.S. is able to exercise primary supervision over the administration of the trust and one or more U.S. persons have the authority to control all substantial decisions of the trust or if the trust has a valid election in effect under applicable U.S. Treasury regulations to be treated as a U.S. person.

A “non-U.S. holder” does not include an individual who is present in the U.S. for 183 days or more in the taxable year of disposition of our stock and is not otherwise a resident of the United States for U.S. federal income tax purposes. Such an individual is urged to consult his or her own tax advisor regarding the U.S. federal income tax consequences of the sale, exchange or other disposition of our common stock.

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This discussion is based on the Code, and administrative pronouncements, judicial decisions and final, temporary and proposed Treasury Regulations, changes to any of which subsequent to the date of this prospectus may affect the tax consequences described herein, possibly with a retroactive effect. This discussion does not address all aspects of U.S. federal income and estate taxation that may be relevant to non-U.S. holders in light of their particular circumstances and does not address any tax consequences arising under the laws of any state, local or foreign jurisdiction.

The discussion below is limited to non-U.S. holders that hold our shares of common stock as capital assets within the meaning of the Code and that are not subject to special rules under the Code (e.g., financial institutions, governments or agencies or instrumentalities thereof, controlled foreign corporations, passive foreign investment companies, insurance companies, tax-exempt organizations, broker-dealers and traders in securities or commodities, persons that hold our common stock as part of a “straddle,” “hedge,” “conversion transaction,” “synthetic security” or integrated investment or other risk reduction strategy, and persons subject to the alternative minimum tax or Medicare contribution tax).

If a partnership, or any entity treated as a partnership for U.S. federal income tax purposes, is a holder of our common stock, the tax treatment of a partner in the partnership will generally depend upon the status of the partner and the activities of the partnership. A holder that is a partnership, and the partners in such partnership, should consult their own tax advisers regarding the tax consequences of the acquisition, holding and disposition of our common stock.

Prospective holders are urged to consult their tax advisors with respect to the particular tax consequences to them of acquiring, holding and disposing of our common stock, including the consequences under the laws of any state, local or foreign jurisdiction.

Distributions

As discussed in the section entitled “Dividend Policy,” we do not anticipate paying any dividends on our common stock in the foreseeable future. In the event that we do pay dividends, any dividends paid to a non-U.S. holder of our common stock to the extent made out of our current or accumulated earnings and profits (as determined under U.S. federal income tax principles) generally will be subject to withholding tax at a 30% rate, or a reduced rate specified by an applicable income tax treaty. In order to obtain a reduced rate of withholding under an applicable income tax treaty, a non-U.S. holder must provide an Internal Revenue Service Form W-8BEN (or other applicable form) certifying its entitlement to benefits under the treaty. Special certification and other requirements apply to certain non-U.S. holders that are pass-through entities rather than corporations or individuals.

A non-U.S. holder of our common stock eligible for a reduced rate of U.S. withholding tax pursuant to an income tax treaty may obtain a refund of any excess amounts withheld by timely filing an appropriate claim for refund with the Internal Revenue Service.

The withholding tax does not apply to dividends paid to a non-U.S. holder that provides a Form W-8ECI, certifying that the dividends are effectively connected with the non-U.S. holder’s conduct of a trade or business within the U.S. and, if required by an applicable income tax treaty, are attributable to a U.S. permanent establishment (“effectively connected dividends”). Instead, effectively connected dividends will be subject to regular U.S. income tax as if the non-U.S. holder were a U.S. resident, subject to any applicable income tax treaty providing otherwise. A non-U.S. corporation receiving effectively connected dividends may also be subject to an additional “branch profits tax,” currently at the rate of 30% (or a lower rate prescribed under an applicable income tax treaty).

To the extent dividends on our common stock, if any, exceed our current and accumulated earnings and profits, they will first reduce the non-U.S. holder’s adjusted basis in our common stock, but not below zero, and

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then will be treated as gain to the extent of any excess, and taxed in the same manner as gain realized from a sale or other disposition of common stock as described in the next section.

Gain on Disposition of Common Stock

A non-U.S. holder generally will not be subject to U.S. federal income tax on gain realized on a sale or other disposition of common stock unless:

• the gain is effectively connected with a trade or business of the non-U.S. holder in the U.S., subject to an applicable income tax treaty providing otherwise; or

• we are or have been a “U.S. real property holding corporation,” as defined below, at any time within the five-year period preceding the disposition or during the non-U.S. holder’s holding period, whichever period is shorter.

An individual non-U.S. holder described in the first bullet point immediately above will be subject to tax on the net gain derived from the sale under regular graduated U.S. federal income tax rates. If a non-U.S. holder that is a foreign corporation falls under the first bullet point immediately above, it will be subject to tax on its net gain in the same manner as if it were a United States person as defined under the Code and, in addition, may be subject to the branch profits tax equal to 30% of its effectively connected earnings and profits or at such lower rate as may be specified by an applicable income tax treaty.

We are not, and do not anticipate becoming, a U.S. real property holding corporation. Generally, a corporation is a “U.S. real property holding corporation” if the fair market value of its U.S. real property interests (as defined in the Code and the applicable Treasury regulations) equals or exceeds 50% of the aggregate fair market value of its worldwide real property interests and its other assets used or held for use in a trade or business. Even if we were to become a U.S. real property holding corporation, gain on the sale or other disposition of common stock by a non-U.S. holder generally would not be subject to U.S. federal income tax, provided that the common stock is regularly traded on an established securities market and the non-U.S. holder does not actually or constructively own more than 5% of the common stock during the shorter of (1) the five-year period ending on the date of the disposition or (2) the period of time during which the holder held such shares.

Information Reporting Requirements and Backup Withholding

Information returns will be filed with the Internal Revenue Service in connection with payments of dividends to a non-U.S. holder. Copies of the information returns reporting such dividends and withholding may also be made available to the tax authorities in the country in which the non-U.S. holder resides under the provisions of an applicable income tax treaty. Unless a non-U.S. holder complies with certification procedures to establish that it is not a U.S. person, information returns may be filed with the Internal Revenue Service in respect of the proceeds from a sale or other disposition of common stock and the non-U.S. holder may be subject to U.S. backup withholding on payments of dividends or on the proceeds from a sale or other disposition of common stock. The certification procedures required to claim a reduced rate of withholding under a treaty will satisfy the certification requirements necessary to avoid the backup withholding tax as well. The amount of any backup withholding from a payment to a non-U.S. holder will be allowed as a credit against such holder’s U.S. federal income tax liability and may entitle such holder to a refund, provided that the required information is furnished to the Internal Revenue Service in a timely manner.

Federal Estate Tax

Individual non-U.S. holders and entities the property of which is potentially includible in such an individual’s gross estate for U.S. federal estate tax purposes (for example, a trust funded by a non-U.S. holder individual and with respect to which the individual has retained certain interests or powers), should note that, absent an applicable treaty benefit, the common stock will be treated as U.S. situs property subject to U.S. federal estate tax.

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Additional Withholding Requirements

U.S. source payments to certain foreign financial institutions and non-financial foreign entities may be subject to withholding under the U.S. Foreign Account Tax Compliance Act, or FATCA. Subject to certain exceptions, FATCA, as it has been supplemented by published IRS guidance, generally provides that a 30% withholding tax will be imposed on payments to certain foreign financial institutions and certain non-financial foreign entities of certain types of U.S. source income, including dividends, and that, beginning on January 1, 2019, a 30% withholding tax will be imposed on payments to a foreign financial institution or a non-financial foreign entity of proceeds from the sale of property that could give rise to U.S. source dividends. However, such withholding taxes may be avoided by the foreign financial institution if the foreign financial institution enters into an agreement (an “FFI Agreement”) with the IRS to disclose the name, address and taxpayer identification number of certain U.S. persons (as defined for U.S. Federal income tax purposes) that are account holders in the foreign financial institution (which includes certain equity holders of such institution, as well as certain account holders that are foreign entities with U.S. owners) and may be avoided by the non-financial foreign entity if it either certifies that it does not have any substantial direct or indirect U.S. owners or provides information regarding substantial direct or indirect U.S. owners of the entity. Treasury Regulations gradually phase in the information that must be disclosed by the foreign financial institution pursuant to the terms of an FFI Agreement. Prospective investors are encouraged to consult with their own tax advisors regarding the possible implications of FATCA on their ownership of common stock.

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UNDERWRITING

We are offering the shares of common stock described in this prospectus through a number of underwriters. Credit Suisse Securities (USA) LLC and J.P. Morgan Securities LLC are acting as joint book-running managers of the offering and as representatives of the underwriters. We have entered into an underwriting agreement with the underwriters. Subject to the terms and conditions of the underwriting agreement, we have agreed to sell to the underwriters, and each underwriter has severally agreed to purchase, at the public offering price less the underwriting discounts and commissions set forth on the cover of this prospectus, the number of shares of common stock listed next to its name in the following table:

Name	Number of shares
Credit Suisse Securities (USA) LLC
J.P. Morgan Securities LLC
Deutsche Bank Securities Inc.
Total

The underwriters are committed to purchase all the shares of common stock offered by us if they purchase any shares. The underwriting agreement also provides that if an underwriter defaults, the purchase commitments of non-defaulting underwriters may also be increased or the offering may be terminated.

The underwriters propose to offer the shares of common stock directly to the public at the initial public offering price set forth on the cover of this prospectus and to certain dealers at that price less a concession not in excess of $        per share. After the initial public offering of the shares, the offering price and other selling terms may be changed by the underwriters. Sales of shares made outside of the U.S. may be made by affiliates of the underwriters.

The underwriters have an option to buy up to             additional shares of common stock from us to cover sales of shares by the underwriters which exceed the number of shares specified in the table above. The underwriters have 30 days from the date of this prospectus to exercise this option to purchase additional shares of common stock. If any shares are purchased with this option to purchase additional shares, the underwriters will purchase shares in approximately the same proportion as shown in the table above. If any additional shares of common stock are purchased, the underwriters will offer the additional shares on the same terms as those on which the shares are being offered.

The underwriting fee is equal to the public offering price per share of common stock less the amount paid by the underwriters to us per share of common stock. The underwriting fee is $        per share. The following table shows the per share and total underwriting discounts and commissions to be paid to the underwriters assuming both no exercise and full exercise of the underwriters’ option to purchase additional shares.

	Without exercise of option to purchase additional shares	With full exercise of option to purchase additional shares
Per share	$	$
Total	$	$

We estimate that the total expenses of this offering, including registration, filing and listing fees, printing fees and legal and accounting expenses, but excluding the underwriting discounts and commissions, will be approximately $        million. We have agreed to reimburse the underwriters for expenses of approximately $        relating to the clearance of this offering with the Financial Industry Regulatory Authority.

A prospectus in electronic format may be made available on the web sites maintained by one or more underwriters, or selling group members, if any, participating in the offering. The underwriters may agree to

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allocate a number of shares to underwriters and selling group members for sale to their online brokerage account holders. Internet distributions will be allocated by the representatives to underwriters and selling group members that may make Internet distributions on the same basis as other allocations.

Directed Share Program

At our request, the underwriters have reserved for sale, at the initial public offering price, up to     % of the common stock offered by this prospectus for sale to our director nominees, officers and certain of our employees and other persons associated with us. Pursuant to the underwriting agreement, the sales will be made by J.P. Morgan Securities LLC, an underwriter of this offering, through a Directed Share Program. If these persons purchase reserved common stock, it will reduce the number of shares of common stock available for sale to the general public. Any reserved shares of common stock that are not so purchased will be offered by the underwriters to the general public on the same terms as the other shares of common stock offered by this prospectus.

The company and its officers, directors, and certain holders of the company’s common stock and options have agreed with the underwriters, subject to certain exceptions, not to dispose of or hedge any of their common stock, or securities convertible into or exchangeable for common stock during the period from the date of this prospectus continuing through the date 180 days after the date of this prospectus, except with the prior written consent of Credit Suisse Securities (USA) LLC and J.P. Morgan Securities LLC. This agreement does not apply to any existing employee benefit plans. See “Shares Eligible for Future Sale” for a discussion of certain transfer restrictions.

We have agreed to indemnify the underwriters against certain liabilities, including liabilities under the Securities Act.

The address of Credit Suisse Securities (USA) LLC is Eleven Madison Avenue, New York, New York 10010, United States of America. The address of J.P. Morgan Securities LLC is 383 Madison Avenue, New York, New York 10179, United States of America.

We intend to apply to have our common stock approved for listing/quotation on The NASDAQ Global Market under the symbol “ATNX.”

In connection with this offering, the underwriters may engage in stabilizing transactions, which involves making bids for, purchasing and selling shares of common stock in the open market for the purpose of preventing or retarding a decline in the market price of the common stock while this offering is in progress. These stabilizing transactions may include making short sales of the common stock, which involves the sale by the underwriters of a greater number of shares of common stock than they are required to purchase in this offering, and purchasing shares of common stock on the open market to cover positions created by short sales. Short sales may be “covered” shorts, which are short positions in an amount not greater than the underwriters’ option to purchase additional shares referred to above, or may be “naked” shorts, which are short positions in excess of that amount. The underwriters may close out any covered short position either by exercising their option to purchase additional shares, in whole or in part, or by purchasing shares in the open market. In making this determination, the underwriters will consider, among other things, the price of shares available for purchase in the open market compared to the price at which the underwriters may purchase shares through the option to purchase additional shares. A naked short position is more likely to be created if the underwriters are concerned that there may be downward pressure on the price of the common stock in the open market that could adversely affect investors who purchase in this offering. To the extent that the underwriters create a naked short position, they will purchase shares in the open market to cover the position.

The underwriters have advised us that, pursuant to Regulation M of the Securities Act, they may also engage in other activities that stabilize, maintain or otherwise affect the price of the common stock, including the

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imposition of penalty bids. This means that if the representatives of the underwriters purchase common stock in the open market in stabilizing transactions or to cover short sales, the representatives can require the underwriters that sold those shares as part of this offering to repay the underwriting discount received by them.

These activities may have the effect of raising or maintaining the market price of the common stock or preventing or retarding a decline in the market price of the common stock, and, as a result, the price of the common stock may be higher than the price that otherwise might exist in the open market. If the underwriters commence these activities, they may discontinue them at any time. The underwriters may carry out these transactions on The NASDAQ Global Market, in the over-the-counter market or otherwise.

Prior to this offering, there has been no public market for our common stock. The initial public offering price will be determined by negotiations between us and the representatives of the underwriters. In determining the initial public offering price, we and the representatives of the underwriters expect to consider a number of factors including:

• the information set forth in this prospectus and otherwise available to the representatives;

• our prospects and the history and prospects for the industry in which we compete;

• an assessment of our management;

• our prospects for future earnings;

• the general condition of the securities markets at the time of this offering;

• the recent market prices of, and demand for, publicly traded common stock of generally comparable companies; and

• other factors deemed relevant by the underwriters and us.

Neither we nor the underwriters can assure investors that an active trading market will develop for our common stock, or that the shares will trade in the public market at or above the initial public offering price.

Selling restrictions

General

Other than in the U.S., no action has been taken by us or the underwriters that would permit a public offering of the securities offered by this prospectus in any jurisdiction where action for that purpose is required. The securities offered by this prospectus may not be offered or sold, directly or indirectly, nor may this prospectus or any other offering material or advertisements in connection with the offer and sale of any such securities be distributed or published in any jurisdiction, except under circumstances that will result in compliance with the applicable rules and regulations of that jurisdiction. Persons into whose possession this prospectus comes are advised to inform themselves about and to observe any restrictions relating to the offering and the distribution of this prospectus. This prospectus does not constitute an offer to sell or a solicitation of an offer to buy any securities offered by this prospectus in any jurisdiction in which such an offer or a solicitation is unlawful.

Canada

The shares may be sold only to purchasers purchasing, or deemed to be purchasing, as principal that are accredited investors, as defined in National Instrument 45-106 Prospectus Exemptions or subsection 73.3(1) of the Securities Act (Ontario), and are permitted clients, as defined in National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations. Any resale of the shares must be made in accordance with an exemption from, or in a transaction not subject to, the prospectus requirements of applicable securities laws.

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Securities legislation in certain provinces or territories of Canada may provide a purchaser with remedies for rescission or damages if this prospectus (including any amendment thereto) contains a misrepresentation, provided that the remedies for rescission or damages are exercised by the purchaser within the time limit prescribed by the Securities legislation of the purchaser’s province or territory. The purchaser should refer to any applicable provisions of the Securities legislation of the purchaser’s province or territory for particulars of these rights or consult with a legal advisor. Pursuant to section 3A-3 of National Instrument 33-105 Underwriting Conflicts (NI 33-105), the underwriters are not required to comply with the disclosure requirements of NI 33-105 regarding underwriters conflicts of interest in connection with this offering.

United Kingdom

This document is only being distributed to and is only directed at persons who are “qualified investors” (as defined in the Prospectus Directive) who are (i) persons having professional experience in matters relating to investments falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the “Order”) (ii) high net worth entities, and (iii) other persons to whom it may lawfully be communicated, falling with Article 49(2)(a) to (d) of the Order (all such persons together being referred to as “relevant persons”). The securities are only available to, and any invitation, offer or agreement to subscribe, purchase or otherwise acquire such securities will be engaged in only with, relevant persons. This document and its contents are confidential and should not be distributed, published or reproduced (in whole or in part) or disclosed by any recipients to any other person in the United Kingdom. Any person who is not a relevant person should not act or rely on this document or any of its contents.

European Economic Area

In relation to each Member State of the European Economic Area which has implemented the Prospectus Directive (each, a “Relevant Member State”), with effect from and including the date on which the Prospectus Directive was implemented in that Relevant Member State no offer of securities described in this prospectus may be made to the public in that Relevant Member State other than:

• to any legal entity which is a qualified investor as defined in the Prospectus Directive;

• to fewer than 150 natural or legal persons (other than qualified investors as defined in the Prospectus Directive) per Relevant Member State, subject to obtaining the prior consent of the underwriters; or

• in any other circumstances falling within Article 3(2) of the Prospectus Directive;

provided that no such offer of securities described in this prospectus shall result in a requirement for the publication by us or any underwriter of a prospectus pursuant to Article 3 of the Prospectus Directive

For the purposes of this provision, the expression an “offer of securities to the public” in relation to any securities in any Relevant Member State means the communication in any form and by any means of sufficient information on the terms of the offer and the securities to be offered so as to enable an investor to decide to purchase or subscribe for the securities, as the same may be varied in that Member State by any measure implementing the Prospectus Directive in that Relevant Member State. The expression “Prospectus Directive” means Directive 2003/71/EC (as amended, including by Directive 2010/73/EU) and includes any relevant implementing measure in each Relevant Member State.

Switzerland

The shares may not be publicly offered in Switzerland and will not be listed on the SIX Swiss Exchange, or the SIX, or on any other stock exchange or regulated trading facility in Switzerland. This document has been prepared without regard to the disclosure standards for issuance prospectuses under art. 652a or art. 1156 of the Swiss Code of Obligations or the disclosure standards for listing prospectuses under art. 27 ff. of the SIX Listing

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Rules or the listing rules of any other stock exchange or regulated trading facility in Switzerland. Neither this prospectus nor any other offering or marketing material relating to the shares or the offering may be publicly distributed or otherwise made publicly available in Switzerland.

Neither this prospectus nor any other offering or marketing material relating to the offering, the Company, or the shares have been or will be filed with or approved by any Swiss regulatory authority. In particular, this document will not be filed with, and the offer of shares will not be supervised by, the Swiss Financial Market Supervisory Authority FINMA, and the offer of shares has not been and will not be authorized under the Swiss Federal Act on Collective Investment Schemes, or the CISA. The investor protection afforded to acquirers of interests in collective investment schemes under the CISA does not extend to acquirers of shares.

China

This prospectus does not constitute a public offer of the shares offered by this prospectus, whether by sale or subscription, in China. The shares are not being offered or sold directly or indirectly in China to or for the benefit of, legal or natural persons of the PRC.

Further, no legal or natural persons of China may directly or indirectly purchase any of the shares without obtaining all prior Chinese governmental approvals that are required, whether statutorily or otherwise. Persons who come into possession of this prospectus are required by the issuer and its representatives to observe these restrictions.

Hong Kong

The shares may not be offered or sold by means of any document other than (i) in circumstances which do not constitute an offer to the public within the meaning of the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap.32, Laws of Hong Kong), or (ii) to “professional investors” within the meaning of the Securities and Futures Ordinance (Cap.571, Laws of Hong Kong) and any rules made thereunder, or (iii) in other circumstances which do not result in the document being a “prospectus” within the meaning of the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap.32, Laws of Hong Kong), and no advertisement, invitation or document relating to the shares may be issued or may be in the possession of any person for the purpose of issue (in each case whether in Hong Kong or elsewhere), which is directed at, or the contents of which are likely to be accessed or read by, the public in Hong Kong (except if permitted to do so under the laws of Hong Kong) other than with respect to shares which are or are intended to be disposed of only to persons outside Hong Kong or only to “professional investors” within the meaning of the Securities and Futures Ordinance (Cap. 571, Laws of Hong Kong) and any rules made thereunder.

Singapore

This prospectus has not been registered as a prospectus with the Monetary Authority of Singapore. Accordingly, this prospectus and any other document or material in connection with the offer or sale, or invitation for subscription or purchase, of the shares may not be circulated or distributed, nor may the shares be offered or sold, or be made the subject of an invitation for subscription or purchase, whether directly or indirectly, to persons in Singapore other than (i) to an institutional investor under Section 274 of the Securities and Futures Act, Chapter 289 of Singapore (the “SFA”), (ii) to a relevant person, or any person pursuant to Section 275(1A), and in accordance with the conditions, specified in Section 275 of the SFA or (iii) otherwise pursuant to, and in accordance with the conditions of, any other applicable provision of the SFA.

Where the shares of common stock are subscribed or purchased under Section 275 by a relevant person which is: (a) a corporation (which is not an accredited investor) the sole business of which is to hold investments and the entire share capital of which is owned by one or more individuals, each of whom is an accredited investor; or (b) a trust (where the trustee is not an accredited investor) whose sole purpose is to hold investments

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and each beneficiary is an accredited investor, shares, debentures and units of shares and debentures of that corporation or the beneficiaries’ rights and interest in that trust shall not be transferable for 6 months after that corporation or that trust has acquired the shares under Section 275 except: (1) to an institutional investor under Section 274 of the SFA or to a relevant person, or any person pursuant to Section 275(1A), and in accordance with the conditions, specified in Section 275 of the SFA; (2) where no consideration is given for the transfer; or (3) by operation of law.

Japan

The securities have not been and will not be registered under the Financial Instruments and Exchange Law of Japan (the Financial Instruments and Exchange Law) and each underwriter has agreed that it will not offer or sell any securities, directly or indirectly, in Japan or to, or for the benefit of, any resident of Japan (which term as used herein means any person resident in Japan, including any corporation or other entity organized under the laws of Japan), or to others for re-offering or resale, directly or indirectly, in Japan or to a resident of Japan, except pursuant to an exemption from the registration requirements of, and otherwise in compliance with, the Financial Instruments and Exchange Law and any other applicable laws, regulations and ministerial guidelines of Japan.

Certain of the underwriters and their affiliates have provided in the past to us and our affiliates and may provide from time to time in the future certain commercial banking, financial advisory, investment banking and other services for us and such affiliates in the ordinary course of their business, for which they have received and may continue to receive customary fees and commissions. In addition, from time to time, certain of the underwriters and their affiliates may effect transactions for their own account or the account of customers, and hold on behalf of themselves or their customers, long or short positions in our debt or equity securities or loans, and may do so in the future.

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LEGAL MATTERS

The validity of the issuance of the shares of common stock offered hereby will be passed upon for us by our counsel, Sidley Austin LLP, Washington, District of Columbia. Certain legal matters as to PRC law will be passed upon for us by Commerce & Finance Law Offices and certain legal matters as to British Virgin Islands law will be passed upon for us by Ogier. The underwriters are being represented by Simpson Thacher & Bartlett LLP with respect to certain legal matters as to United States federal securities and New York state law. Certain legal matters as to PRC law will be passed upon for the underwriters by King & Wood Mallesons.

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EXPERTS

The consolidated financial statements of Athenex Inc. and its subsidiaries (the “Company”) as of December 31, 2015 and 2016 and for the years then ended, included in this Prospectus and the related financial statement schedules included elsewhere in the Registration Statement have been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in their report appearing herein and elsewhere in this Registration Statement (which report expresses an unqualified opinion on the consolidated financial statements and financial statement schedules and includes an explanatory paragraph regarding a going concern uncertainty). Such consolidated financial statements and financial statement schedules have been so included in reliance upon the report of such firm given their authority as experts in accounting and auditing.

The combined financial statements of Polymed Therapeutics, Inc. and Chongqing Taihao Pharmaceutical Co., Ltd. as of December 31, 2014 and 2013 and for the years then ended, included in this prospectus have been audited by Freed Maxick CPAs, P.C., an independent auditor, as stated in their report herein. Such combined financial statements have been so included in reliance upon the report of such firm given their authority as experts in accounting and auditing.

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CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS

ON ACCOUNTING AND FINANCIAL DISCLOSURE

On July 26, 2015, our board of directors approved the dismissal of Freed Maxick CPAs, P.C., or Freed Maxick, as our independent accountants. We engaged Deloitte as our independent registered public accounting firm on December 10, 2015 to audit our consolidated financial statements as of December 31, 2015 and for the year then ended. Subsequent to their appointment, we engaged Deloitte to reaudit our consolidated financial statements as of December 31, 2014 and for the year then ended.

The reports of Freed Maxick on our consolidated financial statements did not contain any adverse opinion or disclaimer of opinion, nor were such reports qualified or modified as to uncertainty, audit scope, or accounting principles.

During the year ended December 31, 2014 and through July 26, 2015, Freed Maxick did not have any disagreement with us on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure, which disagreement, if not resolved to the satisfaction of Freed Maxick, would have caused it to make reference to the subject matter of the disagreement in connection with its report on our consolidated financial statements.

We did not consult with Deloitte on any financial or accounting reporting matters in the period before its appointment.

We delivered a copy of this disclosure to Freed Maxick and requested that they furnish us a letter addressed to the SEC stating whether they agree with the above statements. In their letter to the SEC dated November 3, 2016, attached as Exhibit 16.1 to the Registration Statement of which this prospectus is a part, Freed Maxick states that they agree with the statements above concerning their firm.

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WHERE YOU CAN FIND MORE INFORMATION

We have filed a registration statement on Form S-1 with the SEC under the Securities Act with respect to the common stock offered by this prospectus. This prospectus, which constitutes a part of the registration statement, does not contain all of the information set forth in the registration statement or the exhibits and schedules filed therewith. For further information with respect to us and our common stock, please see the registration statement and the exhibits and schedules filed with the registration statement. Statements contained in this prospectus regarding the contents of any contract or any other document that is filed as an exhibit to the registration statement are not necessarily complete, and each such statement is qualified in all respects by reference to the full text of such contract or other document filed as an exhibit to the registration statement. The registration statement, including its exhibits and schedules, may be inspected without charge at the public reference room maintained by the SEC, located at 100 F Street, N.E., Room 1580, Washington, D.C. 20549, and copies of all or any part of the registration statement may be obtained from such offices upon the payment of the fees prescribed by the SEC. Please call the SEC at 1-800-SEC-0330 for further information about the public reference room. The SEC also maintains an Internet website that contains reports, proxy and information statements and other information regarding registrants that file electronically with the SEC. The address of the site is www.sec.gov.

Upon completion of this offering, we will become subject to the information and periodic reporting requirements of the Exchange Act, and, in accordance therewith, will file periodic reports, proxy statements and other information with the SEC. Such periodic reports, proxy statements and other information will be available for inspection and copying at the public reference room and on the SEC website referred to above.

We also maintain a website at www.athenex.com. Upon completion of this offering, you may access these materials at our website free of charge as soon as reasonably practicable after they are electronically filed with, or furnished to, the SEC. Information contained on our website is not a part of this prospectus and the inclusion of our website address in this prospectus is an inactive textual reference only.

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GLOSSARY OF SCIENTIFIC TERMS

As used herein, the terms set forth below shall have the meanings, or are explained, as follows:

503B A section of the FDCA that allows a drug compounding entity to qualify as an “outsourcing facility,” which may qualify for exemptions from certain FDA approval requirements.

505(b)(2) A pathway for FDA approval, in reliance on previously produced clinical data, of a drug that is not new but makes changes to a previously approved drug, including to its recommended dose, its formulation, its route of administration, its strength, or the drugs with which it is combined.

absolute bioavailability A measure of the amount of drug available in the body achieved through a dosing route (such as oral) relative to the amount of drug available given through an intravenous route. Typically expressed as a percentage.

absorption biology Study of the body’s ability to modulate drugs distribution.

absorption enhancers Materials that affect the ability of a drug to distribute into the body.

actinic keratosis Actinic keratosis (AK), also called solar keratosis, are scaly, crusty growths (lesions) caused by damage from the sun’s ultraviolet (UV) rays. They typically appear on sun-exposed areas such as the face, bald scalp, lips, and the back of the hands, and are often elevated, rough in texture, and resemble warts

active chemotherapeutic agents The active component of drugs that lead to the destruction of cancerous cells.

active pharmaceutical ingredients Active component of pharmaceutical dosage form.

adaptive immune response The body’s attempt to protect itself by neutralizing a specific antigen that the body has previously responded to.

adjuvant therapy Additional cancer treatment given after the primary treatment to lower the risk that the cancer will come back. Adjuvant therapy may include chemotherapy, radiation therapy, hormone therapy, targeted therapy, or biological therapy.

adverse events An adverse event is any undesirable experience associated with the use of a medical product in a patient.

alanine transaminase A protein, found commonly in the liver, that can be measured and serve as a marker of liver health.

alopecia Hair loss.

anaphylactic Related to a life-threatening allergic response.

anorexia A lack or loss of appetite.

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anti-emetic A drug for treatment and/or prevention of nausea and vomiting.

antihistamines A class of drugs that target the histamine receptors in the body. Commonly used to treat allergic responses.

apoptosis The death of cells that occurs as a normal and controlled part of an organism’s growth or development.

area under the curve A measure of total drug exposure over time.

aspartate transaminase A protein, found commonly in the liver, that can be measured and serve as a marker of liver health.

assay A test to measure a metric of a material. Examples of metrics used in pharmaceuticals include potency, purity, or pharmacological responses.

azacitdine An injectable drug use to treat cancer. This drug targets DNA which results in the cell death. Trade name is Vidaza.

bioavailability The proportion or a drug relative to dose that is available to the body to elicit a pharmacological response.

biomarker A biological specimen that can be measured to monitor a physiological process or pharmacologic response to a drug.

camptothecins A class of chemotherapy drugs derived from the natural product camptothecin.

capecitabine An anti-cancer chemotherapeutic drug. Trade name is Xeloda

caspase 3 cleavage Caspase 3 is a protein associated with cell death. The cleavage of this protein can serve as a marker of cell death.

chemotherapy The use of chemical drugs to treat a disease, such as cancer, especially with cytotoxic agents.

cisplatin An injectable drug used to treat many different types of cancer. This drug targets DNA replication which results in death of proliferating cells.

concomitant chemotherapy The use of combinations of chemotherapeutic drugs to treat a disease, such as cancer.

codons A portion of the genetic code, composed of three nucleotides. Mutations in the codons of particular genes may be associated with response to targeted therapies.

cyclophosphamide An anti-cancer chemotherapeutic drug. This drug targets DNA replication which results in death of proliferating cells.

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cyclosporin A An immunosuppressive drug typically used in treating immune disorders. This drug is a substrate and inhibitor of P-glycoprotein (PGP) and is frequently used as a reference compound for PGP-mediated drug-drug interaction studies.

cytotoxic chemotherapies Cell-killing toxic drugs used to stop or slow the growth of cancer cells.

decitabine An anti-cancer chemotherapeutic drug. This drug targets DNA synthesis which results in death of proliferating cells. Trade name is Dacogen.

diclofenac A nonsteroidal anti-inflammatory drug used topically to treat diseases such as Actinic Keratosis.

doxorubicin An injectable drug used to treat many types of cancer. It interacts with DNA and interferes with the process of DNA replication resulting in death of replicating cells.

elacridar A P-glycoprotein inhibiting drug.

enterocyte A cell comprising the intestinal lining.

erythema A reddening of the skin, usually in patches, as a result of injury or irritation causing dilation of the blood capillaries.

fibroblasts A cell in connective tissue that produces collagen and other fibers.

fluorouracil (5-FU) A drug that interferes with DNA synthesis to block cell growth. Used topically to treat Actinic Keratosis. Also known as 5-FU. An example trade name is Efudex.

glial Non-neuronal cells that maintain homeostasis, form myelin, and provide support and protection for neurons in the central and peripheral nervous systems.

glioblastoma multiforme A highly malignant, rapidly growing type of brain tumor that arises from glial cells in the brain.

glioma See glioblastoma multiforme.

hormonal therapies Therapies designed to block the body’s ability to produce hormones or to interfere with how hormones behave in the body, in each case to stop or slow the growth of cancers that rely on hormones to grow.

HT29 A cancer cell line derived from human colon cancer.

imiquimod A drug that acts on the immune system used topically to treat Actinic Keratosis. An example trade name is Aldara.

immune-therapies Therapies that engage the immune system to treat disease.

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immuno-oncology The use of the therapies that engage the immune system to treat cancer.

in vitro Performed or taking place in a test tube, culture dish, or elsewhere outside a living organism.

in vivo Performed or taking place in a living organism.

ingenol mebutate A drug that induced cell death used topically to treat Actinic Keratosis. The current trade name is Picato.

irinotecan A drug used to treat many types of cancer. This drug interacts with the protein topoisomerase which results in cell damage and death. Trade name is Camptosar.

keratinocytes Skin cells.

kinase An enzyme that catalyzes the transfer of a phosphate group from one molecule to another. An ubiquitous family of proteins involved in many cellular processes including, most relevantly, cell growth and proliferation.

liquid tumor An informal name for cancers of the blood cells, bone marrow, or lymphatic system. Examples include leukemia and lymphoma.

lymphocytes A subset of white blood cells; cells that participate in immune responses.

malignant A malignant disease or tumor is one likely to progress and become worse; malignant tumors have the capability and tendency to spread.

microtubule polymerization The process by which microtubules form in cells; microtubules are key in ensuring cell structure and stability.

monoclonal antibody Antibodies that are produced by exact clones of a parent cell. These antibodies will bind specifically to one given substance; they can be used as markers of the presence of that substance.

MTD maximum tolerated dose

neoadjuvant An initial therapy given to a patient before the main treatment. e.g. chemotherapy before surgery is performed.

neuropathy A term referring to the damage of nerves. Often causes weakness, numbness or pain.

neutropenia A state characterized by a very low concentration of neutrophils (a type of white blood cell); these cells are the primary defense against infections.

non-small cell Used to describe the difference between the two major types of lung cancer: small cell and non-small cell. The different types of cancer are treated very differently. Non-small cell lung cancer comprises about 80% of all lung cancers.

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oligodendriogliomas A type of glioma found in the brain or central nervous system.

paclitaxel A prominent anticancer drug used as a treatment in many different types of cancers. The drug targets cellular microtubules and promotes arrest of cellular proliferation and eventual cell death. Traditionally administered intravenously with excipients know to have toxic side effects. An example trade name is Taxol*.

PARP cleavage The primary job of the enzyme PARP is to repair DNA that has been damaged (via metabolic, chemical, or radiation sources). If the DNA damage is severe, PARP can be inactivated by cleavage. When this occurs, the cell undergoes programmed cell death to release its energy to surrounding cells.

pharmacodynamics The branch of pharmacology concerned with the effects of drugs and the mechanism of their action. Referred to as the study of how a drug affects the body.

pharmacokinetics The branch of pharmacology concerned with the movement of drugs within the body. Referred to as the study of how the body affects the drug during its time within it.

photodynamic therapy A treatment that uses a combination of light and special drugs, called photosensitizing agents, to kill cancer cells. The drugs only work after they have been activated by light.

plasma membrane protein A class of proteins that are embedded in either the cell membrane or another lipid membrane.

prednisone A corticosteroid drug that is a potent immunosuppressant. It can be used with chemotherapy to prevent allergic reactions to other drugs, or to treat nausea and vomiting.

psoriasis An autoimmune disease which results in red, scaly patches on the skin.

ramucirumab Ramucirumab (trade name Cyramza) is a human monoclonal antibody developed for the treatment of solid tumors. It is approved by the FDA for single agent use or as a combination with paclitaxel, docetaxel or FOLFIRI. Ramucirumab prevents the formation of new blood vessels by blocking the action of the vascular endothelial growth factor receptor 2 (VEGFR2).

receptor antagonist A molecule that binds to a specific protein receptor, preventing the receptor from responding to a biological signal.

small cell Small cell carcinoma, or small-cell lung cancer, is a type of malignant cancer that most commonly arises within the lung. Compared to non-small cell carcinoma, small-cell carcinoma grows and spreads more quickly.

small molecule P-gp inhibitors Organic molecules with a low molecular weight that bind to the P-glycoprotein transporter and prevent its function.

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small molecule treatments A treatment comprised of a drug that is an organic molecule with low molecular weight.

Src Kinase / Src Kinase inhibition Src Kinase refers to a protein in humans that is involved in cell signaling, cell proliferation and cell growth. Increased expression of the Src gene is observed in many cancers, and is associated with increased tumor proliferation. Inhibition of Src Kinase proteins is a method to control tumor growth.

Src tyrosine kinase See Src Kinase / Src Kinase inhibition.

systemic Affecting or pervasive to the whole body.

target binding sites A region on a protein, or a piece of RNA or DNA, where a biologically active molecule or drug attaches reversibly. This binding has a biological effect on the protein, RNA, or DNA.

targeted therapy A type of cancer treatment using drugs that precisely identify and attack cancer cells, while doing little to no damage to normal cells.

tariquidar Tariquidar is a small molecule inhibitor of P-glycoprotein. It is currently undergoing research as an adjuvant treatment against multidrug resistance in cancer.

taxanes Taxanes are a class of diterpene small molecule drugs that are widely used as chemotherapy agents. Paclitaxel and docetaxel are examples of taxanes.

temozolomide Temozolomide is an oral chemotherapy drug used as a treatment for some brain cancers. Trade names include Temodar.

topical fluorouracil See fluorouracil.

topoisomerase inhibitor Topoisomerases are enzymes that facilitate the coiling or uncoiling of DNA, which alters whether or not enzymes or other molecules can interact with the DNA. Topoisomerase inhibitors prevent this function, and can be used for chemotherapy or as antibacterial agents.

topotecan Topotecan (trade name Hycamtin) is a chemotherapeutic agent that is a topoisomerase inhibitor. It is approved to treat a number of cancer types, including ovarian and lung cancer.

toxicokinetic A description of the rate at which a chemical will enter the body as well as a description of what will happen to the chemical once it is in the body.

toxicology A branch of pharmacology concerned with studying the adverse effects of chemicals or drugs on living organisms.

transporter proteins Proteins embedded within cell membranes which transport substances across the cell membrane.

transporters See transporter proteins.

237

tubulin polymerization / inhibition of tubulin polymerization The cellular process of formation, remodeling, and destruction of microtubules which are comprised primarily of the protein tubulin. These microtubules serve as part of the cell’s structure, transport system, and are involved in cell division.

uterine sarcoma cell Uterine sarcoma is a malignant cancer originating in the uterus.

vesicultation The formation of vesicles: small structures within cells composed of fluid contained by a roughly spherical lipid bilayer. Vesicles are useful for the processes of secretion, uptake, and transport within cells.

vesicultation / pustulation For vesiculation, see vesiculation above. Pustulation is the formation of a pustule: a lesion or bump filled with pus.

xenograft A tissue graft or transplant from a donor of a different species. An example is taking a human cancer cell line and implanting in a mouse to test prospective drugs for therapeutic efficacy.

238

INDEX TO FINANCIAL STATEMENTS
Consolidated Financial Statements of Athenex, Inc.
Report of Independent Registered Public Accounting Firm	F-2
Consolidated Balance Sheets	F-3
Consolidated Statements of Operations and Comprehensive Loss	F-4
Consolidated Statements of Stockholders’ Equity	F-5
Consolidated Statements of Cash Flows	F-6
Notes to Consolidated Financial Statements	F-7
Combined Financial Statements of Polymed Therapeutics, Inc. and Chongqing Taihao Pharmaceutical Co., Ltd.
Independent Auditor’s Report	F-38
Combined Balance Sheets as of December 31, 2014 and 2013	F-39
Combined Statements of Operations and Comprehensive Loss for the years ended December 31, 2014 and 2013	F-40
Combined Statements of Changes in Stockholders’ Equity for the years ended December 31, 2014 and 2013	F-41
Combined Statements of Cash Flow for the years ended December 31, 2014 and 2013	F-42
Notes to Combined Financial Statements	F-43
Combined Interim Financial Statements of Polymed Therapeutics, Inc. and Chongqing Taihao Pharmaceutical Co., Ltd.
Combined Balance Sheets as of March 31, 2015 and December 31, 2014	F-52
Combined Statements of Operations and Comprehensive Loss for the three months ended March 31, 2015 and 2014	F-53
Combined Cash Flows for the three months ended March 31, 2015 and 2014	F-54
Notes to Combined Interim Financial Statements	F-55

F-1

Report of Independent Registered Public Accounting Firm

To the Board of Directors of Athenex, Inc.

Buffalo, New York

We have audited the accompanying consolidated balance sheets of Athenex, Inc. and subsidiaries (the “Company”) as of December 31, 2015 and 2016, and the related consolidated statements of operations and comprehensive loss, stockholders’ equity, and cash flows for the years then ended. Our audits also included the financial statement schedules listed in the Index at Item 16. These consolidated financial statements and financial statement schedules are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements and financial statement schedules based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States) and in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated 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 consolidated financial statements, 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, such consolidated financial statements present fairly, in all material respects, the financial position of Athenex, Inc. and subsidiaries as of December 31, 2015 and 2016, and the results of their operations and their cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, such financial statement schedules, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly in all material respects the information set forth therein.

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, the Company’s recurring losses from operations and negative cash flows from operations raise substantial doubt about its ability to continue as a going concern. Management’s plans concerning these matters are also discussed in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/ Deloitte & Touche LLP

Williamsville, New York

May 1, 2017

F-2

ATHENEX, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share data)

	December 31,						Pro Forma December 31, 2016
	2015			2016
							(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	43,495		$	33,125
Marketable securities—current		12,271			8,628
Accounts receivable, net of allowance for doubtful accounts of $478 and $155, respectively		3,832			2,777
Inventories, net		3,256			4,240
Prepaid expenses and other current assets		2,340			3,153
Total current assets		65,194			51,923
Property and equipment, net		6,289			5,810
Investment		487			340
Marketable securities—long-term		1,868			—
Goodwill		37,996			37,552
Intangible assets, net		7,158			8,464
Other long-term assets		1,439			1,801
Total assets	$	120,431		$	105,890
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	6,271		$	7,174
Accrued expenses		3,627			18,956
Accrued legal liability		450			—
Current portion of contingent consideration		5,974			—
Current portion of long-term debt—related parties		1,064			1,123
Current portion of long-term debt		230			766
Total current liabilities		17,616			28,019
Long-term liabilities:
Deferred compensation		1,463			2,174
Deferred rent		255			904
Deferred income tax liability		697			206
Long-term debt—related parties		1,619			496
Long-term debt		737			—
Convertible bonds		—			14,498
Convertible bonds—related parties		—			16,129
Derivative liability		—			8,795
Total liabilities		22,387			71,221
Commitments and contingencies (Note 20)
Stockholders’ equity:
Common stock, par value $0.001 per share, 250,000,000 shares authorized at December 31, 2015 and 2016; 40,330,124, and 42,342,706 issued at December 31, 2015 and 2016, respectively; 39,907,796, and 40,685,786 shares outstanding at December 31, 2015 and 2016, respectively		40			42
Additional paid-in capital		206,679			237,581
Accumulated other comprehensive loss		(223	)		(1,304	)
Accumulated deficit		(107,391	)		(195,106	)
Less: treasury stock, at cost; 422,328 shares at December 31, 2015 and 1,656,920 shares at December 31, 2016		(1,545	)		(7,406	)
Total Athenex, Inc. stockholders’ equity		97,560			33,807
Non-controlling interests		484			862
Total stockholders’ equity		98,044			34,669
Total liabilities and stockholders’ equity	$	120,431		$	105,890

The accompanying notes are an integral part of these consolidated financial statements.

F-3

ATHENEX, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(In thousands, except share and per share data)

	Year Ended December 31,
	2015			2016
Revenue:
Product sales	$	12,816		$	19,394
License fees and consulting revenue		314			392
Grant revenue		814			765
Total revenue		13,944			20,551
Costs and operating expenses:
Cost of product sales		13,153			19,718
Research and development expenses		24,463			60,624
Selling, general, and administrative expenses		27,036			25,956
Total costs and operating expenses		64,652			106,298
Operating loss		(50,708	)		(85,747	)
Interest expense		1			1,891
Unrealized loss on derivative liability		—			533
Loss before income tax benefit		(50,709	)		(88,171	)
Income tax benefit		(54	)		(265	)
Net loss		(50,655	)		(87,906	)
Less: net loss attributable to non-controlling interests		(55	)		(191	)
Net loss attributable to Athenex, Inc.	$	(50,600	)	$	(87,715	)
Unrealized gain (loss) on investment, net of income taxes		91			(33	)
Foreign currency translation adjustment, net of income taxes		(397	)		(1,048	)
Comprehensive loss	$	(50,906	)	$	(88,796	)
Net loss per share attributable to Athenex, Inc. common stockholders, basic and diluted (Note 17)	$	(1.50	)	$	(2.19	)
Weighted-average shares used in computing net loss per share attributable to Athenex, Inc. common stockholders, basic and diluted (Note 17)		33,765,751			40,120,908
Pro forma net loss per share attributable to Athenex, Inc. common stockholders, basic and diluted (unaudited) (Note 17)				$
Pro forma weighted-average shares used in computing net loss per share attributable to Athenex, Inc. common stockholders, basic and diluted (unaudited) (Note 17)

The accompanying notes are an integral part of these consolidated financial statements.

F-4

ATHENEX, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands, except share data)

	Common Stock				Additional paid-in capital			Accumulated deficit			Accumulated other comprehensive income (loss)			Treasury Stock						Total Athenex, Inc. stockholders’ equity			Non- controlling interests			Total stockholders’ equity
	Shares		Amount											Shares			Amount
Balance at December 31, 2014		23,649,044	$	24	$	86,064		$	(56,791	)	$	83			(422,328	)	$	(1,545	)	$	27,835		$	—		$	27,835
Issuance of common stock		13,050,924		13		85,355			—			—			—			—			85,368			—			85,368
Issuance of common stock in connection with acquisition of Polymed		1,538,464		1		11,537			—			—			—			—			11,538			—			11,538
Issuance of common stock in connection with acquisition of CDE		1,651,264		1		14,860			—			—			—			—			14,861			—			14,861
Cost of equity raise		—				(13	)		—			—			—			—			(13	)		—			(13	)
Stock awarded to directors and officers		410,668		1		2,559			—			—			—			—			2,560			—			2,560
Stock-based compensation cost		—		—		8,932			—			—			—			—			8,932			—			8,932
Notes receivable from officers		—		—		(6,632	)		—			—			—			—			(6,632	)		—			(6,632	)
Vesting of restricted stock		—		—		4,035			—			—			—			—			4,035			—			4,035
Stock options exercised		29,760		—		61			—			—			—			—			61			—			61
Repurchase of stock options and warrants		—		—		(79	)		—			—			—			—			(79	)					(79	)
Non-controlling interests		—		—		—			—			—			—			—			—			539			539
Net loss		—		—		—			(50,600	)		—			—			—			(50,600	)		(55	)		(50,655	)
Other comprehensive loss, net of tax		—		—		—			—			(306	)		—			—			(306	)		—			(306	)
Balance at December 31, 2015		40,330,124		40		206,679			(107,391	)		(223	)		(422,328	)		(1,545	)		97,560			484			98,044
Issuance of common stock		1,133,332		1		8,499			—			—			—			—			8,500			—			8,500
Issuance of common stock in connection with satisfaction of contingent consideration		315,810		1		2,842			—			—			—			—			2,843			—			2,843
Stock-based compensation cost		—		—		10,977			—			—			—			—			10,977			—			10,977
Vesting of restricted stock		50,000		—		8,534			—			—			—			—			8,534			—			8,534
Repurchase of common stock		—		—		—			—			—			(1,234,592	)		(5,861	)		(5,861	)		—			(5,861	)
Stock options and warrants exercised		513,440		—		50			—			—			—			—			50			—			50
Non-controlling interests		—		—		—			—			—			—			—			—			569			569
Net loss		—		—		—			(87,715	)		—			—			—			(87,715	)		(191	)		(87,906	)
Other comprehensive loss, net of tax		—		—		—			—			(1,081	)		—			—			(1,081	)		—			(1,081	)
Balance at December 31, 2016		42,342,706	$	42	$	237,581		$	(195,106	)	$	(1,304	)		(1,656,920	)	$	(7,406	)	$	33,807		$	862		$	34,669

The accompanying notes are an integral part of these consolidated financial statements.

F-5

ATHENEX, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

	Year Ended December 31,
	2015			2016
Cash flows from operating activities:
Net loss	$	(50,655	)	$	(87,906	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		888			2,026
Stock-based compensation expense		15,527			19,511
Change in fair value of contingent consideration		491			53
Change in fair value of derivative liability		—			533
Amortization of debt discount		—			889
Deferred rent expense		—			649
Loss on disposal of assets and impairment changes		31			1,034
Deferred income taxes		(270	)		(491	)
Changes in operating assets and liabilities, net of effects of acquisitions:
Receivables, net		1,081			1,055
Prepaid expenses and other assets		(1,394	)		(359	)
Inventories, net		786			(984	)
Accounts payable and accrued expenses		(241	)		16,120
Net cash used in operating activities		(33,756	)		(47,870	)
Cash flows from investing activities:
Proceeds from sale of property and equipment		—			335
Purchase of property and equipment		(3,310	)		(1,487	)
(Payment) receipt of refundable deposit		(1,000	)		1,000
Payments for licenses		(50	)		(2,700	)
Acquisition of Polymed, net of cash acquired		(11,076	)		—
Acquisition of CDE, net of cash acquired		1,699			—
Purchases of marketable securities		(15,787	)		(9,750	)
Sale of marketable securities		12,615			15,261
Net cash (used in) provided by investing activities		(16,909	)		2,659
Cash flows from financing activities:
Proceeds from sale of stock		78,768			8,500
Proceeds from issuance of convertible bonds		—			38,000
Costs incurred related to the sale of stock		(1,013	)		(1,537	)
Proceeds from exercise of stock options		61			50
Investment from non-controlling interest		539			569
Payment of contingent consideration		—			(3,184	)
Repurchase of options and warrants		(79	)		—
Repayment of long-term debt		(724	)		(1,265	)
Purchase of treasury stock		(1,250	)		(5,861	)
Net cash provided by financing activities		76,302			35,272
Net increase (decrease) in cash and cash equivalents		25,637			(9,939	)
Cash and cash equivalents, beginning of period		17,521			43,495
Effect of exchange rate changes on cash and cash equivalents		337			(431	)
Cash and cash equivalents, end of period	$	43,495		$	33,125
Supplemental cash flow disclosures:
Interest paid	$	92		$	144
Income taxes paid	$	146		$	329
Non-cash investing and financing activities:
Stock issued in connection with the acquisition of QuaDPharma	$	—		$	343
Stock issued in connection with the acquisition of Polymed	$	11,538		$	2,500
Stock issued in connection with the acquisition of CDE	$	14,861		$	—
Accrued purchases of property and equipment	$	239		$	348
Fair value of acquisition-related contingent consideration	$	4,488		$	—
Notes payable assumed in connection with the acquisition of Polymed	$	3,275		$	—
Mortgage assumed in connection with the acquisition of CDE	$	1,099		$	—
Note receivable for restricted stock granted to officers	$	6,600		$	—
Cost of equity raise in accounts payable and accrued expenses	$	—		$	264

The accompanying notes are an integral part of these consolidated financial statements.

F-6

ATHENEX, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2015 AND 2016)

1. COMPANY AND NATURE OF BUSINESS

Description of Business

Athenex, Inc. (the “Company” or “Athenex”), originally under the name Kinex Pharmaceuticals LLC (“Kinex”), formed in November 2003, commenced operations on February 5, 2004, and operated as a limited liability company until it was incorporated in the State of Delaware under the name Kinex Pharmaceuticals, Inc. on December 31, 2012. The Company changed its name to Athenex, Inc. on August 26, 2015.

Athenex is a global biopharmaceutical company dedicated to the discovery, development and commercialization of novel therapies for the treatment of cancer. The Company’s mission is to improve the lives of cancer patients by creating more effective, safer and tolerable treatments. The Company has generated its clinical product candidates through its Orascovery and Src Kinase Inhibition research platforms, which are based on their understanding of human absorption biology and novel approaches to inhibiting kinase activity, respectively. The Company has assembled a leadership team and have established global operations in the U.S. and China across the pharmaceutical value chain to execute its mission to become a global leader in bringing innovative cancer treatments to the market and improve health outcomes. The Company’s primary activities since commencement have been conducting research and development internally and through corporate collaborators, in-licensing and out-licensing pharmaceutical compounds and technology, and conducting clinical trials.

On June 1, 2015, the Company acquired Polymed Therapeutics, Inc. and Chongqing Taihao Pharmaceutical Co Ltd (collectively, “Polymed”). Located in Texas, Polymed markets and sells Active Pharmaceutical Ingredients (“API”) and medical devices in North America, Europe, and India. Polymed, through its cGMP facility in Chongqing, China, also manufactures API and conducts research and development of novel drugs and therapies.

On July 17, 2015, the Company acquired Comprehensive Drug Enterprises Ltd (“CDE”). CDE primarily performs research and development activities related to the development of transmucosal drug delivery. CDE also manufactures and markets several patented and trademarked pharmaceuticals in China, Hong Kong, and Taiwan, including Promptol^TM and Averti^TM and has been approved to market an Antipruritic Hydrogel in China by The China Food and Drug Administration (“CFDA”).

Significant Risks and Uncertainties

The Company has incurred operating losses since its inception and, as a result, as of December 31, 2016 had an accumulated deficit of $195.1 million. Operations have been funded primarily through the sale of common stock and, to a lesser extent, from convertible bond financing grant funding. The Company will require significant additional funds in order to conduct clinical trials and to fund its operations. There can be no assurances, however, that additional funding will be available on favorable terms, or at all. If adequate funds are not available, the Company may be required to delay, modify, or terminate its research and development programs or reduce its planned commercialization efforts. The Company believes that it will be able to obtain additional working capital through equity financings or other arrangements to fund operations, including an initial public offering (IPO); however, there can be no assurance that such additional financing, if available, can be obtained on terms acceptable to the Company. If the Company is unable to obtain such additional financing, the Company will need to reevaluate future operating plans. Accordingly, there is substantial doubt regarding the Company’s ability to continue as a going concern.

These consolidated financial statements have been prepared on a going concern basis, which implies the Company will continue to realize its assets and discharge its liabilities in the normal course of the business. The Company’s recurring losses from operations and negative cash flows from operations have raised substantial

F-7

doubt regarding its ability to continue as a going concern. The consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of this uncertainty.

Athenex is subject to a number of risks similar to other biopharmaceutical companies, including, but not limited to, the lack of available capital, possible failure of preclinical testing or clinical trials, inability to obtain marketing approval of product candidates, competitors developing new technological innovations, market acceptance of the Company’s products, and protection of proprietary technology. If the Company does not successfully commercialize or partner any of its product candidates, it will be unable to generate sufficient product revenue to achieve profitability.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation and Principles of Consolidation

These consolidated financial statements reflect the accounts and operations of the Company and those of its subsidiaries in which the Company has a controlling financial interest. Intercompany transactions and balances have been eliminated.

Use of Estimates

These consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”). The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the consolidated financial statements and the reported amount of revenue and expenses during the reporting period. Such management estimates include those relating to assumptions used in contract research accruals, measurement of acquired assets and assumed liabilities in business combinations, allowance for doubtful accounts, inventory reserves, the valuation of derivative liability, income taxes, the estimated useful life and recoverability of long-lived assets, and the valuation of stock-based awards. Actual results could differ from those estimates.

Unaudited Pro Forma Balance Sheet and Stockholders’ Equity

The Company has presented an unaudited pro forma balance sheet including stockholders’ equity as of December 31, 2016 in order to show the assumed effect on the consolidated balance sheet of the obligation to issue common stock immediately prior to a qualified initial public offering (IPO) as discussed in Note 17. The unaudited pro forma stockholders’ equity does not give effect to any proceeds from the assumed IPO of the Company’s common stock.

Functional Currency

Assets and liabilities of subsidiaries that prepare financial statements in currencies other than the U.S. dollar are translated using rates of exchange as of the balance sheet date and the statements of operations and comprehensive loss are translated at the average rates of exchange for each reporting period. The Company recorded a foreign currency translation loss of $0.4 and $1.0 million for the years ended December 31, 2015 and 2016, respectively.

Cash, Cash Equivalents, and Marketable Securities

The Company considers all highly liquid investments with an original maturity of three months or less at the date of purchase to be cash equivalents. The Company deposits its cash primarily in checking, money market accounts, as well as certificates of deposit. The Company generally does not enter into investments for trading or speculative purposes, rather to preserve its capital for the purpose of funding operations.

F-8

Accounts Receivable, net

Accounts receivable are recorded at the invoiced amount. On a periodic basis, the Company evaluates its accounts receivable and establishes an allowance for doubtful accounts, based upon a history of past write-offs, the age of the receivables, and current credit conditions.

Inventories, net

Inventories for clinical trials are stated at the lower-of-cost-or-market, with approximate cost being determined on a first-in-first-out basis. Active pharmaceutical ingredient (“API”) inventory is stated at the lower-of-cost-or-market, with approximate cost being determined on a weighted average basis.

The Company provides inventory write-downs based on excess and obsolete inventories determined primarily by future demand forecasts. The write-down is measured as the difference between the cost of the inventory and market, based upon assumptions about future demand, and is charged to the provision for inventory, which is a component of cost of product sales. At the point of the loss recognition, a new, lower cost basis for that inventory is established, and subsequent changes in facts and circumstances do not result in the restoration or increase in that newly established cost basis.

Property and Equipment, net

Property and equipment are recorded at cost or acquisition date fair value in a business acquisition. Depreciation is recorded over the estimated useful lives of the related assets using the straight-line method. Leasehold improvements are amortized on a straight-line basis over the shorter of the useful life or term of the lease. Upon retirement or disposal, the cost and related accumulated depreciation are removed from the consolidated balance sheets and the resulting gain or loss is recorded to general and administrative expense in the consolidated statements of operations and comprehensive loss. Routine expenditures for maintenance and repairs are expensed as incurred.

Estimated useful lives for property and equipment are as follows:

Property and Equipment	Estimated Useful Life
Land	Not depreciated
Equipment	5 - 8 years
Furniture and fixtures	5 years
Computer hardware	3 years
Leasehold improvements	Lesser of estimated useful life or remaining lease term
Construction in process	Not depreciated

Fair Value of Financial Instruments

Financial instruments consist of cash and cash equivalents, marketable securities, an investment, accounts receivable, accounts payable, accrued liabilities, and debt. Marketable securities, the investment, and the embedded derivative liability are stated at fair value. Cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities, and debt, are stated at their carrying value, which approximates fair value due to the short time to the expected receipt or payment date of such amounts.

Investment

The Company’s investment is classified as an available-for-sale security which is reported at fair value with unrealized gains and losses, net of related income taxes, recorded as a separate component of accumulated other

F-9

comprehensive income (loss) in stockholders’ equity until realized. Unrealized losses that are considered to be other-than-temporary are expensed in the consolidated statements of operations and comprehensive loss as an impairment charge.

The Company considers available evidence in evaluating potential other-than-temporary impairments of its investment, including the duration and extent to which fair value is less than cost, and the Company’s ability and intent to hold the investment. Realized gains and losses on sales of the securities are included in the consolidated statement of operations and comprehensive loss as financial income or expenses. Unrealized gains and losses resulting from changes in the fair value of the securities are recognized in other comprehensive income.

Business Acquisitions

The Company accounts for acquired businesses using the acquisition method of accounting, which requires that assets acquired and liabilities assumed be recognized at their estimated fair values as of the acquisition date. Identifiable amortizing intangible assets are recorded on the consolidated balance sheet at fair value and amortized over their estimated useful lives. Acquisition-related costs are expensed as incurred. Any excess of the consideration transferred over the estimated fair values of the net assets acquired is recorded as goodwill.

Goodwill

The Company tests goodwill for impairment annually on October 1^st, the Company’s annual goodwill impairment measurement date, or more frequently if a triggering event occurs. The Company has three operating segments: Oncology Innovation Platform, Commercial Platform, and Global Supply Chain Platform which has two components: Polymed and QuaDPharma. Accordingly, the Company has four reporting units: Oncology Innovation Platform, Commercial Platform, Polymed, and QuaDPharma, all of which have discrete financial information that are reviewed by segment managers. Goodwill is assigned to three reporting units: Oncology Innovation Platform, Polymed, and QuaDPharma. Impairment is determined for goodwill using the two-step approach. The first step is the estimation of fair value of each reporting unit, which is compared to the carrying value. If step one indicates that impairment potentially exists, the second step is performed to measure the amount of impairment, if any. Goodwill impairment exists when the implied fair value of goodwill is less than its carrying value. The Company concluded that there was no impairment of goodwill for the years ended December 31, 2015 and 2016.

Intangible Assets, net

Intangible assets arising from a business acquisition are recognized at fair value as of the acquisition date. The Company amortizes intangible assets using the straight-line method. When the straight-line method of amortization is utilized, the estimated useful life of the intangible asset is shortened to assure the recognition of amortization expense corresponds with the expected cash flows. Other purchased intangibles, including certain licenses, are capitalized at cost and amortized on a straight-line basis over the license life, when a future economic benefit is probable and measurable. If a future economic benefit is not probable or measurable, the license costs are expensed as incurred within research and development expenses.

Impairment of Long-Lived Assets

The Company reviews the recoverability of its long-lived assets, excluding goodwill, when events or changes in circumstances occur that indicate that the carrying value of the asset may not be recoverable. The assessment of possible impairment is based on the ability to recover the carrying value of the assets from the expected future cash flows (undiscounted and without interest expense) of the related operations. If these cash flows are less than the carrying value of such assets, an impairment loss for the difference between the estimated fair value and carrying value is recorded. The Company concluded that there was no impairment of long-lived assets for the year ended December 31, 2015. An impairment charge of $0.3 million was recorded for the year ended December 31, 2016. See Note 5—Goodwill and Intangible Assets, net for additional details.

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Contingent Consideration

Contingent consideration arising from a business acquisition is included as part of the purchase price and is recorded at fair value as of the acquisition date. Subsequent to the acquisition date, the Company remeasures contingent consideration arrangements at fair value at each reporting period until the contingency is resolved. The changes in fair value are recognized within selling, general, and administrative expenses in the Company’s consolidated statement of operations and comprehensive loss. Changes in fair values reflect new information about the likelihood of the payment of the contingent consideration and the passage of time.

Derivative Liability

The Company has an outstanding derivative instrument related to certain features embedded within the Company’s outstanding convertible bonds. The embedded derivative is accounted for as a derivative liability and it is re-measured to fair value as of each balance sheet date. The related remeasurement adjustments are recognized in the consolidated statements of operations and comprehensive loss. The Company records adjustments to the fair value of the derivative liability until the conversion or repayment of the convertible bonds occurs as discussed further in Note 10—Debt.

Treasury Stock

The Company records treasury stock activities under the cost method whereby the cost of the acquired stock is recorded as treasury stock. The Company’s accounting policy upon the formal retirement of treasury stock is to deduct the par value from common stock and to reflect any excess of cost over par value as a reduction to additional paid-in capital (to the extent created by previous issuances of the stock) and then accumulated deficit.

Revenue Recognition

The Company recognizes product revenue when there is persuasive evidence of an arrangement, the price is fixed or determinable, collectability is reasonably assured, and upon shipment to or acceptance by customers. Service revenue is recognized in the period such services have been rendered.

The Company receives certain grant award funding to support its continuing research and development efforts. The Company considers these grants to be operating revenue as they support the Company’s primary operating activities. Revenue is recognized when earned and when realized or realizable. Revenue from grant awards is deemed to be earned when all eligibility criteria are met.

The Company recognizes revenue related to the license of certain intellectual properties and related consulting services when earned and when realized or realizable. Amounts received in advance are recorded as deferred revenue until earned.

Certain of the Company’s out-license agreements contain multiple elements and are accounted for in accordance with Accounting Standards Codification (“ASC”) 605-25 – Revenue Recognition – Multiple-Element Arrangements. The Company identifies the deliverables included within the arrangement and evaluates which deliverables represent separate units of accounting. The consideration received is then allocated among the separate units of accounting based on each unit’s relative selling price. The Company generally considers non-refundable milestone payments to be achieved as a result of the Company’s efforts to be substantive and recognizes them as revenue upon achievement of the milestone, assuming all other revenue recognition criteria are met. Revenue related to agreements with multiple elements or milestone payments were not significant in the periods presented.

Research and Development Expenses

Costs for research and development (“R&D”) of products, including payroll, contractor expenses, and supplies, are expensed as incurred. Clinical trial and other development costs incurred by third parties are expensed as the

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contracted work is performed. Where contingent milestone payments are due to third parties under research and development arrangements, the obligations are recorded when the milestone results are probable of being achieved.

Deferred Offering Costs

Deferred offering costs consist of qualified legal, accounting and other direct costs related to the efforts to raise capital through a public sale of the Company’s common stock. There were no such qualified offering costs deferred as of December 31, 2015, and $1.8 million deferred as of December 31, 2016.

Deferred Rent

Rent expense is recognized on a straight-line basis over the term of the lease. Lease incentives, including rent holidays provided by lessors and rent escalation provisions, are accounted for as deferred rent.

Comprehensive Income (Loss)

Comprehensive income (loss) is defined as the change in equity of a business enterprise during a period from transactions and other events and circumstances from non-owner sources. Changes in unrealized gains and losses on investments and foreign currency translation adjustments represent the differences between the Company’s net loss and comprehensive loss.

Stock-Based Compensation

Awards granted to employees

The Company recognizes stock-based compensation based on the grant date fair value of stock options granted to employees, officers, and directors. The Company used the Black-Scholes option pricing model to calculate the grant date fair value of stock options and warrants. The Black-Scholes option pricing model requires inputs for risk-free interest rate, dividend yield, volatility, fair value of common stock, and expected lives of the options. The risk-free rate for periods within the expected life of the option is based on the U.S. Treasury yield curve in effect at the time of the grant. No dividend yield is used, consistent with the Company’s history. Expected volatility is based on historical volatilities of the stock prices of peer biopharmaceutical companies. The fair value of common stock is based on the most recent sale price of the Company’s common stock. The Company uses the simplified method for determining the expected lives of options. The Company recognizes compensation expenses based on the grant date fair value of stock options on a straight-line basis over the requisite service period, which is generally the vesting period.

Stock grants

The Company grants common stock to key officers and directors and records the fair value of these grants, based on the fair value of the common stock on the grant date, as compensation expense throughout the requisite service period.

Awards granted to non-employees

The Company has accounted for equity instruments issued to non-employees in accordance with the provisions of ASC 718, Compensation—Stock Compensation, and ASC 505, Equity. All transactions in which goods or services are received in exchange for equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable. The expense is recognized in the same manner as if the Company had paid cash for the services provided by the non-employees.

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Income Taxes

The Company uses the asset and liability method of accounting for income taxes. Deferred income tax assets and liabilities are recognized for the estimated future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred income tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Deferred income tax expense or benefit is the result of changes in the deferred income tax assets and liabilities. Valuation allowances are established when necessary to reduce deferred income tax assets where, based upon the available evidence, management concludes that it is more-likely-than not that the deferred income tax assets will not be realized. In evaluating its ability to recover deferred income tax assets, the Company considers all available positive and negative evidence, including its operating results, ongoing tax planning and forecasts of future taxable income on a jurisdiction-by-jurisdiction basis. Because of the uncertainty of the realization of the deferred income tax assets, the Company has recorded a valuation allowance against its deferred income tax assets.

Reserves are provided for tax benefits for which realization is uncertain. Such benefits are only recognized when the underlying tax position is considered more likely than not to be sustained on examination by a taxing authority, assuming they possess full knowledge of the position and facts. Interest and penalties related to uncertain tax positions are recognized in income tax expense (benefit); however, the Company currently has no interest or penalties related to income taxes.

Segment and Geographic Information

The Company’s chief operating decision-maker, its Chief Executive Officer, reviews its operating results on an aggregate basis and at the operating segment level for purposes of allocating resources and evaluating financial performance. The Company has three business platforms which are the operating segments: (1) Oncology Innovation Platform, for the discovery and development of cancer supportive therapies, (2) Commercial Platform, the manufacturing and selling of commercial pharmaceutical products, and (3) Global Supply Chain Platform, the cGMP manufacturing and marketing of API, medical devices, and clinical products. Each operating segment has a segment manager who is held accountable for operations and operating results. Accordingly, the Company operates in three reportable segments.

Concentration of Credit Risk, Other Risks and Uncertainties

Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents and investments. Cash equivalents are deposited in interest-bearing money market accounts and certificates of deposit. Although the Company deposits the cash with multiple financial institutions, cash balances may occasionally be in excess of the amounts insured by the Federal Deposit Insurance Corporation. The Company also has significant assets and liabilities held in its overseas biomanufacturing facility in China, Taihao, and therefore is subject to foreign currency fluctuation. Also, due to government restrictions on transferring funds out of China, the total restricted net assets of the Company’s consolidated subsidiaries was $13.5 million and $15.7 million as of December 31, 2015 and 2016, respectively.

Recent Accounting Pronouncements Not Yet Adopted

In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (“ASU”) No. 2014-09, “Revenue from Contracts with Customers (Topic 606)”, which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The ASU will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. The new standard is effective for the Company on January 1, 2018 with early adoption permitted only for annual reporting periods beginning after December 15, 2016. The standard permits the use of either the retrospective or cumulative effect transition method. The Company’s evaluation of the effects of ASU 2014-09 and the selection

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of a transition method is ongoing and not yet complete. The Company anticipates that the standard may impact the accounting related to its out-license agreements, however, such agreements are not currently significant to the consolidated financial statements.

In July 2015, the FASB issued ASU No. 2015-11, “Inventory (Topic 330): Simplifying the Measurement of Inventory.” This ASU requires inventory to be measured at the lower of cost or net realizable value. The provisions of this ASU are effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. The amendment is required to be applied prospectively, and early adoption is permitted. The Company does not expect its pending adoption of ASU 2015-11 to have a material impact on its consolidated financial statements.

In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842)” which requires that lessees distinguish between finance and operating leases and recognize the assets and liabilities that arise from the leases on the balance sheet. This ASU is required to be adopted retrospectively and is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, and is required to be applied on a modified retrospective basis. The Company is evaluating the effect of this standard on its consolidated financial statements.

In March 2016, the FASB issued ASU No. 2016-09, “Compensation—Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting” which simplifies the accounting for share-based payment award transactions including: income tax consequences, classification of awards as either equity or liabilities and classification on the statement of cash flows. ASU 2016-09 is required to be adopted retrospectively and is effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. Early adoption is permitted. The adoption of this standard is not expected to have a material impact on the Company’s consolidated financial statements.

In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments,” which modifies the measurement of expected credit losses of certain financial instruments. ASU 2016-13 is required to be adopted retrospectively and is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The Company is evaluating the effect of this standard on its consolidated financial statements.

In November 2016, the FASB issued ASU 2016-18, “Statement of Cash Flows (Topic 230): Restricted Cash. The primary purpose of this ASU is to reduce the diversity in practice that exists in the classification and presentation of changes in restricted cash on the statement of cash flows. This ASU will require that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or cash equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. This ASU is effective for fiscal years beginning after December 15, 2017. This ASU is required to be applied retrospectively. Early adoption is permitted, including adoption in an interim period. The Company is evaluating the effect of this standard on its consolidated financial statements.

In January 2017, the FASB issued ASU 2017-04, “Intangibles—Goodwill and Other (Topic 350) Simplifying the Test for Goodwill Impairment.” The primary purpose of the ASU is to simplify the subsequent measurement of goodwill by eliminating Step 2 from the goodwill impairment test. The ASU also applies the same test of goodwill to all reporting units, now including those with a zero or negative carrying amount of net assets. This ASU is required to be adopted on a prospective basis and is effective for any goodwill impairment tests in fiscal years beginning after December 15, 2019, although early adoption is permitted. The Company is evaluating the effect of this standard on its consolidated financial statements.

F-14

Recently Adopted Accounting Pronouncements

In August 2014, the FASB issued ASU No. 2014-15, “Presentation of Financial Statements—Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern” which requires management to assess if there is substantial doubt about an entity’s ability to continue as a going concern and to provide related footnote disclosures in certain circumstances. In connection with each annual and interim period, management must assess if there is substantial doubt about an entity’s ability to continue as a going concern within one year after the financial statement issuance date. Disclosures are required if conditions give rise to substantial doubt. The amendment is effective for the first annual period ending after December 15, 2016 with early adoption permitted for annual or interim reporting periods for which the financial statements have not previously been issued. The Company adopted the guidance for the year ended December 31, 2016. The adoption resulted in expanded disclosure of the principal conditions that raise substantial doubt, management’s evaluation of those conditions, and management’s plans to mitigate these conditions.

In August 2016, the FASB issued ASU No. 2016-15, “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments,” which addresses the classification of certain cash transactions on the statement of cash flows. ASU 2016-15 is effective for fiscal years beginning after December 15, 2018, and interim periods within fiscal years beginning after December 15, 2019. The Company early adopted ASU 2016-15 as of January 1, 2016 and applied its provisions retrospectively through the earliest period presented, which did not have a significant impact on its consolidated financial statements.

3. INVENTORIES, NET

Inventories, net, consist of the following (in thousands):

	December 31,
	2015			2016
Raw materials and purchased parts	$	630		$	977
Work in progress		3,084			3,656
Finished goods		381			536
Inventories, gross		4,095			5,169
Less: inventory reserve		(839	)		(929	)
Total inventories, net	$	3,256		$	4,240

4. PROPERTY AND EQUIPMENT, NET

Property and equipment, net, consists of the following (in thousands):

	December 31,
	2015			2016
Land	$	1,214		$	1,120
Equipment		3,218			3,955
Furniture and fixtures		429			836
Computer hardware		228			338
Leasehold improvements		581			948
Construction in process		1,598			670
Property and equipment, gross		7,268			7,867
Less: accumulated depreciation		(979	)		(2,057	)
Property and equipment, net	$	6,289		$	5,810

Depreciation expense amounted to $0.5 million and $1.2 million for the years ended December 31, 2015 and 2016, respectively.

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5. GOODWILL AND INTANGIBLE ASSETS, NET

Goodwill

The changes in the carrying amount of goodwill for each reporting unit with goodwill for the years ended December 31, 2015 and 2016 are as follows (in thousands):

	QuaDPharma		Polymed			Oncology Innovation Platform			Total
Balance as of December 31, 2014	$	4,586	$	—		$	—		$	4,586
Goodwill acquired in connection with acquisitions		—		22,204			11,379			33,583
Effect of currency translation adjustment		—		(173	)		—			(173	)
Balance as of December 31, 2015		4,586		22,031			11,379			37,996
Effect of currency translation adjustment		—		(439	)		(5	)		(444	)
Balance as of December 31, 2016	$	4,586	$	21,592		$	11,374		$	37,552

Intangible Assets, Net

The Company’s identifiable intangible assets, net, consist of the following (in thousands):

	December 31, 2015
	Cost/Fair Value			Accumulated Amortization		Impairments		Net
Amortizable intangible assets:
Licenses	$	400		$	100	$	—	$	300
QuaDPharma customer list		204			39		—		165
Polymed customer list		1,593			157		—		1,436
Polymed technology		3,712			180		—		3,532
Indefinite-lived intangible assets:
CDE in-process research and development (IPR&D)		1,884			—		—		1,884
Effect of currency translation adjustment		(159	)		—		—		(159	)
Total intangible assets, net	$	7,634		$	476	$	—	$	7,158

	December 31, 2016
	Cost/Fair Value			Accumulated Amortization		Impairments		Net
Amortizable intangible assets:
Licenses	$	3,100		$	315	$	—	$	2,785
QuaDPharma customer list		204			58		146		—
Polymed customer list		1,593			414		—		1,179
Polymed technology		3,712			437		—		3,275
Indefinite-lived intangible assets:
CDE in-process research and development (IPR&D)		1,884			—		248		1,636
Effect of currency translation adjustment		(411	)		—		—		(411	)
Total intangible assets, net	$	10,082		$	1,224	$	394	$	8,464

As of December 31, 2016, licenses at cost include an Orascovery license of $0.4 million and a license purchased from Gland Pharma Ltd (“Gland”) of $2.7 million. The Orascovery license with Hanmi Pharmaceuticals Co. Ltd. (“Hanmi”) was purchased directly from Hanmi and is being amortized on a straight-line basis over a period of 12.75 years, the remaining life of the license agreement at the time of purchase. The license purchased from Gland is being amortized on a straight-line basis over a period of 5 years, the remaining life of the license agreement at the time of purchase.

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The remaining intangible assets were acquired in connection with the acquisitions of QuaDPharma, Polymed, and CDE, as further described in Note 11—Business Acquisitions. Intangible assets are amortized using an economic consumption model over their useful lives. The QuaDPharma customer list is amortized on a straight-line basis over 7 years. The Polymed customer list and technology are amortized on a straight-line basis over 6 and 12 years, respectively. The CDE IPR&D will not be amortized until the in-process research and development projects are completed. IPR&D will be tested annually for impairment, unless conditions exist causing an earlier impairment test (i.e. abandonment of an in-process project). No impairment charges were recorded during 2015. During the year ended December 31, 2016, impairment charges of $0.2 million and $0.1 million were recorded within research and development costs and selling, general, and administrative costs, respectively, in the 2016 consolidated statement of operations and comprehensive loss. The charge of $0.2 million was due to the impairment of CDE’s IPR&D. One drug development project included within IPR&D was abandoned and therefore, the related balance was written off as impaired. The charge of $0.1 million was due to the impairment of the QuaDPharma customer list. This was due to the business model change of QuaDPharma from a contract manufacturer to a facility primarily producing FDA shortage products under 503B regulations, which changed the Company’s anticipated use of the customer list. The weighted-average useful life for all intangible assets was 8.65 years.

The Company recorded $0.4 million and $0.8 million of amortization expense for the years ended December 31, 2015 and 2016, respectively.

The Company expects amortization expense related to its finite-lived intangible assets for the next 5 years and thereafter to be as follows as of December 31, 2016 (in thousands):

Year ending December 31:	Estimated Amortization Expense
2017		1,146
2018		1,146
2019		1,146
2020		1,146
2021		818
Thereafter		1,837
	$	7,239

6. FAIR VALUE MEASUREMENTS

ASC 820, Fair Value Measurements, establishes a framework for measuring fair value. That framework provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements). The three levels of the fair value hierarchy under the ASC 820 are described as follows:

Level 1—Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that the plan has the ability to access.

Level 2—Inputs to the valuation methodology include:

• Quoted prices for similar assets or liabilities in active markets;

• Quoted prices for identical or similar assets or liabilities in inactive markets;

• Inputs other than quoted prices that are observable for the asset or liability;

• Inputs that are derived principally from or corroborated by observable market data by correlation or other means; and

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• If the asset or liability has a specified (contractual) term, the level 2 input must be observable for substantially the full term of the asset or liability.

Level 3—Inputs to the valuation methodology are unobservable, supported by little or no market activity, and that are significant to the fair value measurement.

Transfers between levels, if any, are recorded as of the beginning of the reporting period in which the transfer occurs; there were no transfers between Levels 1, 2 or 3 of any financial assets or liabilities during 2015 or 2016.

The following tables represent the fair value hierarchy for those assets and liabilities that the Company measures at fair value on a recurring basis (in thousands):

	Fair Value Measurements at December 31, 2015 Using:
	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Money market funds	$	35,195	$	35,195	$	—	$	—
Marketable securities—certificates of deposit		14,139		14,139		—		—
Investment		487		487		—		—
Total assets	$	49,821	$	49,821	$	—	$	—
Liabilities:
Contingent consideration—QuaDPharma	$	1,133	$	—	$	—	$	1,133
Contingent consideration—Polymed		4,841		—		—		4,841
Total liabilities	$	5,974	$	—	$	—	$	5,974

	Fair Value Measurements at December 31, 2016 Using:
	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Money market funds	$	6,522	$	6,522	$	—	$	—
Marketable securities—certificates of deposit		8,628		8,628		—		—
Investment		340		340		—		—
Total assets	$	15,490	$	15,490	$	—	$	—
Liabilities:
Derivative liability	$	8,795	$	—	$	—	$	8,795
Total liabilities	$	8,795	$	—	$	—	$	8,795

The Company classifies its certificates of deposit and money market funds within Level 1 because it uses quoted market prices to determine their fair value.

The Company owns 68,000 shares of PharmaEssentia, a company publicly traded on the Taiwan OTC Exchange (“TWO”). As of December 31, 2015 and 2016, the Company’s investment in PharmaEssentia is valued at the closing price reported on the active market in which the security is traded. This investment is classified as a level 1 investment.

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The Company accounted for the acquisitions of QuaDPharma, Polymed, and CDE as business combinations under the acquisition method of accounting. All assets and liabilities were measured at fair value as of the acquisition date. As a result of the purchases, the Company became liable for contingent consideration (“earn-out”) payable to certain previous owners of QuaDPharma and Polymed. These earn-outs are measured at fair value using level 3 inputs. All business combinations are described in Note 11—Business Acquisitions and the fair value of the earn-outs are discussed further in Note 12—Contingent Consideration.

The Company bifurcated the embedded derivative feature from its convertible bonds and recorded such as a long-term liability. The derivative liability was measured at fair value as of the issuance date and remeasured at fair value at the end of the reporting period. The liability is measured at fair value using level 3 inputs. The derivative liability is discussed further in Note 10—Debt.

The following table sets forth a summary of the changes in the fair value of the Company’s Level 3 financial instruments (in thousands):

	Derivative Liability
Balance as of December 31, 2015	$	—
Issuance of convertible bonds with embedded derivative		8,262
Change in fair value		533
Balance as of December 31, 2016	$	8,795

7. ACCRUED EXPENSES

Accrued expenses consist of the following (in thousands):

	December 31,
	2015		2016
Accrued wages and benefits	$	444	$	1,828
Accrued clinical expenses		204		1,080
Accrued operating expenses		891		1,057
Deferred revenue		88		237
Accrued cost of equity raise		—		264
Accrued consulting costs		2,000		515
Accrued R&D licensing fees		—		12,988
Accrued interest		—		987
Total accrued expenses	$	3,627	$	18,956

In December 2016, the Company entered into a binding term sheet with Nang Kuang Pharmaceutical Co., LTD (“NK”), which requires the Company to pay $12.0 million in license fees. Such amount is recorded as accrued R&D licensing fees above and included within research and development expenses in the 2016 consolidated statement of operations and comprehensive loss.

8. INCOME TAXES

Income tax benefit was $0.1 million and $0.3 million for the years ended December 31, 2015 and 2016, respectively. Current year income tax benefit is attributable to changes in deferred income tax liabilities that were recognized in connection with the Company’s acquisitions. The Company and its other subsidiaries were in a cumulative loss position as of December 31, 2016.

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The components of loss before income tax benefit consist of the following (in thousands):

	Year Ended December 31,
	2015			2016
Domestic	$	(47,428	)	$	(83,714	)
Foreign		(3,281	)		(4,457	)
	$	(50,709	)	$	(88,171	)

The components of the income tax benefit consist of the following (in thousands):

	Year Ended December 31,
	2015			2016
Current:
Federal	$	—		$	—
State		80			61
Foreign		136			165
		216			226
Deferred:
Federal		(15,488	)		(26,386	)
State		(2,948	)		(4,165	)
Foreign		(529	)		(848	)
		(18,965	)		(31,399	)
Change in valuation allowance		18,695			30,908
	$	(54	)	$	(265	)

The income tax benefit differs from the federal statutory rate due to the following:

	Year Ended December 31,
	2015			2016
Statutory rate		34.0	%		34.0	%
State taxes, net of federal benefit		5.7			5.4
Foreign rate differential		(0.9	)		(0.8	)
Valuation allowance		(36.9	)		(35.1	)
Other		(1.8	)		(3.2	)
		0.1	%		0.3	%

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Deferred tax assets (liabilities) consist of the following (in thousands):

	December 31,
	2015			2016
Intangible assets	$	1,048		$	8,534
Property and equipment		19			28
Stock-based compensation		8,464			9,437
Net operating loss carryforwards		21,266			43,807
Other		1,341			1,840
Gross deferred income tax assets		32,138			63,646
Less valuation allowance		(31,400	)		(62,308	)
Net deferred income tax assets		738			1,338
Intangible assets		(1,281	)		(1,296	)
Property and equipment		(154	)		(248	)
Gross deferred income tax liabilities		(1,435	)		(1,544	)
Net deferred income tax liabilities	$	(697	)	$	(206	)

For the years ended December 31, 2015 and 2016, the primary difference between the income tax calculated at the statutory rate and the effective rate is the valuation allowance established against the Company’s net deferred tax assets.

As of December 31, 2016, there exists $106.7 million federal net operating losses and $93.3 million of state net operating losses, respectively, which may be carried forward to offset future years’ tax liabilities and expire beginning in 2027. In addition, there exists $9.0 million of foreign net operating losses as of December 31, 2016 which may be carried forward indefinitely.

The Company considers whether any positions taken on the Company’s income tax returns would be considered uncertain tax positions that may require the recognition of a liability. The Company has concluded that there are no material uncertain tax positions as of December 31, 2015 and 2016. The Company recognizes interest and penalties related to unrecognized tax benefits as a component of income benefit in the consolidated statement of operations and comprehensive loss. There were no amounts recognized for interest and penalties related to unrecognized tax benefits during the years ended December 31, 2015 and 2016. The income tax returns for the taxable years 2012 to 2015 in the U.S., China, and Hong Kong remain open and subject to income tax audits.

Provision has not been made for U.S. taxes on undistributed earnings of foreign subsidiaries. Those earnings have been and will continue to be indefinitely reinvested.

Under the provisions of Section 382 of the Internal Revenue Code (“IRC”), net operating loss and credit carryforwards and other tax attributes may be subject to limitation if there has been a significant change in ownership of the Company, as defined by the IRC. Future owner of equity shifts, including an initial public offering, could result in limitations on net operating loss carryforwards.

9. DEFERRED COMPENSATION

The Company has a non-qualified deferred compensation plan for certain key employees. In connection with the agreements between the Company and certain members of management, the employees have agreed to defer a portion of their salary to the future which is payable upon their retirement or separation of service with the Company. The deferred compensation accrues interest at 4% annually which is included with the total balance due. The Company incurred $0.5 million and $0.7 million of deferred compensation expense included within research and development expenses ($0.3 million and $0.4 million) and selling, general, and administrative

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expenses ($0.2 million and $0.3 million) during the years ended December 31, 2015 and 2016, respectively. The related liability as of December 31, 2015 and 2016 totaled $1.5 million and $2.2 million, respectively.

10. DEBT

The Company’s debt as of December 31, 2015 and 2016 amounted to $3.7 million and $41.8 million, respectively. This consisted of three seller promissory notes that were negotiated as part of the Polymed acquisition (for details of the acquisition, refer to Note 11—Business Acquisitions), a mortgage, convertible bonds issued in 2016 and a related derivative liability. As of December 31, 2015 and 2016, the balances of this debt are as follows (in thousands):

	December 31,
	2015		2016
Current portion of promissory notes to related parties	$	1,064	$	1,123
Current portion of mortgage		230		766
Long-term portion of promissory notes to related parties		1,619		496
Long-term portion of mortgage		737		—
Convertible bonds, net of debt discount of $3,502		—		14,498
Convertible bonds—related parties, net of debt discount of $3,871		—		16,129
Derivative liability		—		8,795
Total	$	3,650	$	41,807

The promissory notes have a 36 month maturity beginning on July 1, 2015 and ending on June 1, 2018 with a 6% stated interest rate. The mortgage payments extend through July 30, 2017. Future minimum principal payments on these promissory notes and mortgage consist of $1.9 and $0.5 million due in the years ending 2017 and 2018, respectively.

In 2016, the Company issued convertible bonds with an aggregate principal value of $38.0 million and a maturity date of October 1, 2018. Of the convertible bonds issued, an aggregate principal of $20.0 million were issued to related parties. The bonds will be converted into shares of common stock upon the completion of an IPO. If such event does not occur prior to the maturity date, the bonds will become due, including interest of 10% per annum. The conversion feature of these notes has been accounted for as an embedded derivative liability, which is measured at fair value and totaled $8.3 million on the borrowing date. This resulted in a debt discount in the same amount, which is amortized to interest expense over the term of the debt using the effective interest method. As of December 31, 2016, the fair value of the derivative liability is $8.8 million. The fair value measurement of the derivative liability is determined using unobservable Level 3 inputs. These inputs include (a) the estimated amount and timing of projected cash flows and (b) the probability and timing of the achievement of the factors on which the derivative is based. Significant increases (decreases) in any of those input could result in a lower or higher fair value measurement. The unrealized loss due to changes in the derivative liability amounted to $0.5 million for the year ended December 31, 2016.

11. BUSINESS ACQUISITIONS

Polymed

In June 2015, the Company finalized the acquisition of 100% of the outstanding shares of Polymed Therapeutics Inc. and Chongqing Taihao Pharmaceutical Co. Ltd. (collectively, “Polymed”). Polymed markets and sells API and medical devices in North America, Europe, and Asia from its locations in Texas and China. Polymed also develops new compounds, processing techniques, and manufactures API at Taihao, a cGMP facility in Chongqing, China. The Company believed that the acquisition was essential to control its supply chain, develop business globally, and to generate capital to fund operations.

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The total cash purchase price paid by the Company during 2015 amounted to $11.0 million. This included $9.2 million of cash paid, $2.2 million of debt paid on Polymed’s behalf, less $0.4 million of cash acquired. In addition, the Company issued promissory notes in the amount of $3.3 million to the sellers (refer to Note 10—Debt). Further, the Company issued 1,538,464 shares of common stock valued at $7.50 per share as part of the consideration paid, which was the fair value of the common stock at the acquisition date.

In accordance with the acquisition agreement, there are provisions for contingent consideration up to a maximum of $5.0 million upon achievement of certain consolidated net revenue goals. On the acquisition date, the Company recorded the fair value of this contingent consideration as a liability based on the probabilities of Polymed achieving the performance thresholds and the present value of such payments. Refer to Note 12—Contingent Consideration for further details.

The net assets acquired have been recorded at fair value. To estimate the fair value of the identifiable intangible assets acquired, the Company utilized the income method which requires assumptions of projected revenue and expenses and an estimated discount rate, among other inputs. The following table summarizes the purchase price and the initial estimates of the fair values of assets and liabilities acquired at the date of acquisition (in thousands):

Consideration:
Cash	$	9,285
Debt repaid		2,234
Promissory notes		3,275
Stock issued (1,538,464 shares at $7.50)		11,538
Contingent consideration		4,488
Purchase price	$	30,820
Net assets acquired:
Cash	$	443
Accounts receivable		4,527
Inventories		3,876
Other assets		199
Property and equipment		1,011
Customer list		1,593
Technology		3,712
Accounts payable and other accruals		(5,718	)
Deferred income tax liability		(987	)
Customer deposits		(40	)
Total identifiable net assets		8,616
Goodwill		22,204
Total purchase price allocation	$	30,820

Goodwill in the amount of $22.2 million was recorded for the excess of the purchase price over the fair value of the assets acquired and liabilities assumed. The goodwill and intangible assets acquired in connection with this acquisition are not deductible for income tax purposes. This acquisition was made to benefit the Company’s Global Supply Chain Platform and therefore is included as a component of such segment.

The operating results of Polymed have been included within the Company’s Global Supply Chain Platform operating segment from the date of acquisition. Polymed added $11.5 million and $18.8 million of revenue for the years ended December 31, 2015 and 2016, respectively. Polymed contributed a net loss of $1.3 million and net income of $0.1 million for the years ended December 31, 2015 and 2016, respectively.

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Comprehensive Drug Enterprises

On July 17, 2015, the Company executed a Sale and Purchase Agreement to purchase 100% of the shares of Comprehensive Drug Enterprises Ltd. (“CDE”). CDE is a Hong Kong-based biopharmaceutical company with a focus on the development of transmucosal drug delivery, with special emphasis on sublingual and nasal administration of pharmaceuticals. Additionally, CDE owns 100% of the shares of Maxinase Life Sciences Limited and owns 95% of the shares of MJ Medical Gel Systems (“HKMJ”). HKMJ has one wholly-owned subsidiary, Chongqing MJ Medical Sciences Co Ltd. and holds a majority interest (66.6%) in Chongqing MJ Medical Devices Co Ltd. For each of the entities in which the Company has a majority interest but is not wholly-owned, the Company consolidated the financial results of that company in its consolidated financial statements and records a non-controlling interest. The non-controlling interests are classified as equity in the consolidated balance sheets and totaled $0.5 million and $0.9 million as of December 31, 2015 and 2016, respectively. The Company believed that the acquisition of CDE was essential to expand its research efforts, add short-cycle symptom therapeutic drug candidates to the product portfolio, and add efficiencies to the manufacturing occurring in Chongqing, China.

This transaction was executed with a stock-for-stock exchange, with Athenex being the surviving parent company. For each share of CDE outstanding prior to the acquisition, the Company issued 0.023 shares of its common stock. Each Athenex share was valued as $9 and a total of 1,651,264 shares were issued as part of this transaction as the consideration transferred. The purchase price of CDE amounted to $14.9 million, however, as a cashless acquisition, the cash effect was the $1.7 million of cash acquired.

The net assets acquired have been recorded at fair value. To estimate the fair value of the identifiable intangible assets acquired, the Company utilized the cost method. The intangible asset, in-process research and development, is not amortized and is held as an indefinite-lived asset until the research and development projects are completed or abandoned. The following table summarizes the purchase price and the initial estimates of the fair values of assets and liabilities acquired at the date of acquisition (in thousands):

Consideration:
Stock issued (1,651,264 shares at $9)	$	14,861
Purchase price	$	14,861
Net assets acquired:
Cash	$	1,699
Accounts receivable		107
Inventories		166
Other assets		449
Property and equipment		1,803
In-process research & development		1,884
Investment		144
Accounts payable and other accruals		(1,671	)
Mortgage liability		(1,099	)
Total identifiable net assets		3,482
Goodwill		11,379
Total purchase price allocation	$	14,861

Goodwill in the amount of $11.4 million was recorded for the excess of the purchase price over the fair value of the assets acquired and liabilities assumed. The goodwill and intangible assets acquired in connection with this acquisition are not deductible for income tax purposes. This acquisition was made to benefit the Company’s R&D efforts and therefore, is included in the Oncology Innovation Platform.

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The operating results of CDE have been included within the Company’s Oncology Innovation Platform operating segment from the date of acquisition. CDE added $0.5 million and $0.7 million of revenue for the years ended December 31, 2015 and 2016, respectively. CDE contributed a net loss of $0.4 million and $1.8 million for the years ended December 31, 2015 and 2016.

Pro-forma Financial Information (Unaudited)

The pro forma results presented below include the effects of the Company’s 2015 acquisitions as if the acquisitions occurred on January 1, 2014. The pro forma net loss for the year ended December 31, 2015 includes the following adjustments: (1) additional amortization resulting from assets which arose during purchase accounting, (2) additional expenses for the change in the fair value of contingent consideration if the original measurement period was the beginning of the prior reporting period, (3) additional interest expense for loans that were used to fund the acquisitions, (4) removal of interest expense related to loans which were repaid in connection with the acquisitions, (5) removal of direct acquisition-related costs which would not have been incurred had the businesses been owned on the beginning of the prior reporting period, and (6) the deferred tax effect if the intangible assets and purchase accounting were recorded as of the beginning of the prior reporting period. The pro forma results do not include any anticipated synergies or other expected benefits of the acquisitions. The unaudited pro forma financial information is for informational purposes only and is not necessarily indicative of either future results of operations of the combined entity or results that might have been achieved had the acquisitions been consummated as of the beginning of the prior reporting period. The following table presents the unaudited pro forma consolidated financial information for 2015 (in thousands):

Unaudited pro forma financial information (Athenex, Polymed, and CDE consolidated)	Year Ended December 31,
	2015
Consolidated revenue	$	21,032
Consolidated net loss	$	(51,682	)

Acquisition-Related Costs

Acquisition-related costs, including legal and regulatory and consulting costs, amounted to $0.2 million and $0.6 million for the acquisitions of Polymed and CDE, respectively, and are included within selling, general, and administrative expenses in the Company’s 2015 consolidated statement of operations and comprehensive loss.

12. CONTINGENT CONSIDERATION

The fair value measurements of contingent consideration liabilities are determined using unobservable Level 3 inputs. These inputs include (a) the estimated amount and timing of projected cash flows; (b) the probability of the achievement of the factors on which the contingency is based; and (c) the risk-adjusted discount rate used to present value the probability-weighted cash flows. Significant increases (decreases) in any of those inputs could result in a lower or higher fair value measurement.

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QuaDPharma

The following table represents a reconciliation of the contingent consideration liability related to the acquisition of QuaDPharma in 2014 measured on a recurring basis using level 3 inputs as of December 31, 2015 and 2016 (in thousands):

Balance as of December 31, 2014	$	995
Adjustment to fair value		138
Balance as of December 31, 2015		1,133
Adjustment to fair value		(106	)
Satisfied through issuance of common stock		(343	)
Paid in cash		(684	)
Balance as of December 31, 2016	$	—

The increase of the contingent consideration related to QuaDPharma was due to the time value of money from the initial measurement date (QuaDPharma acquisition date) to the final date of the payout. This adjustment to the contingent consideration liability is included within selling, general, and administrative expenses in the Company’s consolidated statements of operations and comprehensive loss. As of December 31, 2015, the QuaDPharma contingent consideration was classified as a current liability, as the Company was required to pay this obligation in 2016. On March 31, 2016, the Company exercised its option, to pay up to 50% of the earn-out liability in common stock, and issued 38,033 shares of common stock at $9.00 per share. Subsequently in 2016, cash payments totaling $0.7 million were made, satisfying the contingent consideration liability in full.

Polymed

The following table represents a reconciliation of the contingent consideration liability related to the acquisition of Polymed measured on a recurring basis using level 3 inputs as of December 31, 2015 and December 31, 2016:

Acquisition date fair value of contingent consideration	$	4,488
Adjustment to fair value		353
Balance as of December 31, 2015		4,841
Adjustment to fair value		159
Satisfied through issuance of common stock		(2,500	)
Paid in cash		(2,500	)
Balance as of December 31, 2016	$	—

The increase of the contingent consideration related to Polymed was due to the time value of money from the initial measurement date (Polymed acquisition date) to the final date of the payout. This adjustment to the contingent consideration liability is included within selling, general, and administrative expenses in the Company’s consolidated statements of operations and comprehensive loss. As of December 31, 2015, the Polymed contingent consideration was classified as a current liability as the Company was required to pay this obligation in 2016. On March 31, 2016, the Company exercised its option to pay up to 50% of the earn-out liability in common stock, and issued 277,777 shares of common stock at $9.00 per share. In April 2016, the remaining liability of $2.5 million was paid in cash.

13. RELATED PARTY TRANSACTIONS

During the years ended December 31, 2015 and 2016, the Company entered into transactions with individuals and other companies that have financial interests in the Company. Related party transactions included the following:

a. The Company sold 2,520,000 shares of restricted stock to the executives of the Company: 1,200,000 in 2015 and 1,320,000 in 2014. To fund these stock purchases, the executives signed promissory notes in the amount

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of $6.6 million in 2015 and $6.0 million in 2014. The notes in 2015 purchased 1,200,000 shares at $5.50 share and the notes in 2014 purchased 1,320,000 shares at $4.55 per share. In an effort to retain the executives, it was negotiated that, based on the continued employment of those executives, the Company will forgive the notes over a three year period. Accordingly, the restricted shares vest and become non-restricted equally over the three year period. The Company has accounted for this related party transaction as a restricted stock offering, recognizing as an expense the value of the vested shares and the forgiveness of the notes over the 3-year period, contingent on the continued employment of the executive. The notes are reported as a reduction to additional paid-in capital. The Company accelerated the forgiveness of these promissory notes in 2016 and forgave the notes in full. The stock-based compensation expense recognized from these transactions was $4.0 million and $6.9 million and for the years ended December 31, 2015 and 2016, respectively. Further, certain family members of executives hold unvested, restricted shares resulting from consulting services performed in years prior to 2015.

b. Prior to the acquisition of CDE, certain directors, stockholders, and officers of the Company had a financial interest in CDE. Consequently, the Company’s board established a Special Committee of disinterested directors with authority to review, evaluate, negotiate, and approve or reject the terms and conditions of the transaction and to retain its own financial and legal advisors to assist in connection therewith. Following negotiation of the transaction between the committee and its advisors and representatives of CDE, the committee determined that the proposed terms of the transaction were fair from a financial point of view to the Company and approved the Company’s execution of the definitive agreements and consummation of the transactions contemplated thereby.

c. In 2015, CDE signed an agreement with Avalon BioMedical (Management) (“Avalon”) under which Avalon will receive certain administrative services and will occupy space at CDE’s research location. Avalon reimburses CDE for these administrative services as incurred and pays CDE 30% of the total rent payment for the Hong Kong research and development facility (See Note 20—Commitments and Contingencies). Certain members of the Company’s board and management collectively have a controlling interest in Avalon. The Company does not hold any interest in Avalon and does not have any obligations to absorb losses or any rights to receive benefits from Avalon. As of December 31, 2015 and December 31, 2016, Avalon held 678,880 shares of the Company’s common stock, which represents 1.7% of the Company’s total issued shares. Balances due from Avalon recorded on the consolidated balance sheets were not significant.

d. The Company receives consulting and licensing revenue from PharmaEssentia, a company in which Athenex has an investment classified as available-for-sale (see Note 6—Fair Value Measurements). Revenue recorded from PharmaEssentia amounted to $0.1 million and $0 for the years ended December 31, 2015 and 2016, respectively.

e. The Company purchases certain pharmaceutical ingredients from Chongqing Taisheng Biotechnology Co., Ltd. (“Taisheng”), a company which is owned by a member of Athenex’s management. Purchases from Taisheng amounted to $0.1 million and $0.2 million for the years ended December 31, 2015 and 2016, respectively, and amounts owed to Taisheng were $0.2 million, $0.3 million, and $0 as of the Polymed acquisition date, December 31, 2015, and December 31, 2016, respectively.

f. The Company receives certain clinical development services from ZenRx Limited and subsidiaries (“ZenRx”), a company for which one of our executive officers serves on the board of directors. In connection with such services, the Company made payments to ZenRx of $0.2 million and less than $0.1 million for the years ended December 31, 2015 and 2016, respectively. In April 2013, the Company entered into a license agreement with ZenRx pursuant to which the Company granted an exclusive, sublicensable license to use certain of our intellectual property to develop and commercialize Oratecan and Oraxol in Australia and New Zealand, and a non-exclusive license to manufacture a certain compound, but only for use in Oratecan and Oraxol. ZenRx is responsible for all development, manufacturing and commercialization, and the related costs and expenses, of any product candidates resulting from the agreement. No revenue was earned from this license agreement in the periods presented in these consolidated financial statements.

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g. The Company receives certain consulting services from RSJ Consulting LLC (“RSJ”), a limited liability company for which one of our executive officers serves as the principal. Services incurred from RSJ amounted to $0.1 million and $0.2 million for the years ended December 31, 2015 and 2016, respectively.

h. The Company issued $20.0 million in convertible bonds in September 2016 to related parties. One of the holders of more than 5% of our outstanding common stock as of December 31, 2016, and an entity affiliated with one of our directors, were each issued $10.0 million in convertible bonds.

14. BUSINESS AND ECONOMIC COLLABORATIVE AGREEMENTS

New York State

On May 1, 2015, the Company executed an agreement for a medical technology research, development, innovation, and commercialization alliance with Fort Schuyler Management Corporation (“FSMC”), a not-for-profit corporation existing under the laws of the State of New York (the “State”). The Company expects that $25 million will be invested by the State to build new corporate offices including a formulation lab with related equipment for the Company.

The Company, through its partnership with FSMC, Empire State Development (“ESD”), and The State University of New York (“SUNY”) Polytechnic, plans to execute a major expansion and establish a 315,000 square foot, ISO Class 5 high potency oral and sterile injectable pharmaceutical manufacturing facility in Dunkirk, New York. The Company expects that $200 million will be invested by the State to build the manufacturing plant. The Company does not have significant construction period risks and the State will fund a majority of the construction costs and hold ownership of the manufacturing and office facilities. As of December 31, 2016, construction on these facilities had not yet been completed.

Chongqing Government Department of Economic Development

In October 2015, the Company completed and executed an agreement with the Banan District in Chongqing, China to construct one GMP API and one GMP pharmaceutical manufacturing plant on Banan sites identified and selected by the Company’s management. Under the terms of the agreement, Banan will provide the funding for the land and construction of the manufacturing plants according to Athenex specifications and the Company will equip the plant. This agreement allows the Company to expand its existing high potency oncology active pharmaceutical ingredient manufacturing capacity as well as its drug manufacturing capacity in China. The Company does not have significant construction period risks and the Banan District will fund a majority of the construction costs and hold ownership of the facilities. As of December 31, 2016, construction on these facilities had not yet been completed.

In connection with these arrangements with FSMC and the Banan District we have committed to certain operational milestones. If we are unable to comply with such, we may lose access to these properties.

15. STOCKHOLDERS’ EQUITY

Common Stock

As of December 31, 2015 and 2016, 250 million common shares, par value $0.001, were authorized by the Company’s Board of Directors. The common shares are entitled to one vote per share and to receive dividends as declared.

During 2015, the Company issued 2,400,000 shares of common stock at $5.00 per share, 3,399,232 shares at $5.50 per share, 307,689 shares at $6.50 per share, 8,845,132 shares at $7.50 per share, 1,699,267 shares at $9.00 per share, and 29,760 shares from the exercise of options for a cumulative increase to equity of $114.3 million. During 2016, the Company issued 1,133,332 shares of common stock at $7.50 per share, 315,810 shares at $9.00 per share, 513,440 shares from the exercise of warrants and options, and 50,000 shares from the vesting of restricted stock units for cumulative increase to equity of $19.9 million.

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Treasury Stock

During 2016, the Company purchased 587,925 shares of common stock at a cost of $5.9 million. In 2016, the Company also purchased 646,667 shares of common stock for a de minimis amount as the result of the cancellation of shares issued in connection with a restricted stock agreement.

Cost of Equity Raise

Costs incurred in raising equity, whether paid with cash or through the issuance of securities, are charged against the equity raised. These costs include legal fees and amounts paid to consultants and amounted to $0.1 million and $0 for the years ended December 31, 2015 and 2016, respectively. During 2016, the Company incurred $1.8 million of legal and consulting fees related to a potential initial public offering. These costs were deferred and included within other long-term assets on the consolidated balance sheet as of December 31 and will be charged against the corresponding equity raised.

Common Stock Option Plans

The Company has three common stock option plans adopted in 2013, 2007 and 2004 (the “Plans”) which authorize the grant of up to 11,800,000 common stock options to employees, directors and consultants. Management has valued the options at their grant date using the Black-Scholes option pricing model. See Note 16—Stock-Based Compensation for more information.

16. STOCK-BASED COMPENSATION

Options granted have a contractual term of 10 years and generally vest over a 2-4 year period. A limited number of options vest immediately in certain circumstances. The following table summarizes the status of the Company’s stock option activity granted under the Plans to employees, directors, and consultants (in thousands, except stock option amounts):

	Stock Options			Weighted- Average Exercise price		Weighted- Average Remaining Contractual Term		Aggregate Intrinsic Value
Outstanding at December 31, 2014		5,355,316		$	4.48		7.47	$	5,485
Granted		5,028,328			7.44		—
Exercised		(29,760	)		2.05		—
Forfeited		(594,200	)		5.38		—
Expired		(2,000	)		1.88		—
Outstanding at December 31, 2015		9,757,684			5.96		7.95		29,687
Granted		1,109,400			9.34		—
Exercised		(13,440	)		3.71		—
Forfeited		(257,084	)		2.67		—
Cancelled		(1,280,000	)		7.50		—
Expired		(35,871	)		2.09		—
Outstanding at December 31, 2016		9,280,689		$	6.26		7.26	$	43,994
Vested and exercisable at December 31, 2016		6,845,754		$	5.62		6.73	$	36,798

The total fair-value of stock options vested and recorded as compensation expense during the years ended December 31, 2015 and 2016 was $8.9 million and $11.0 million, respectively. As of December 31, 2015 and 2016, $16.2 million and $11.0 million of unrecognized cost related to non-vested stock options is expected to be recognized over a weighted-average period of approximately 2.1 years and 1.6 years, respectively. The total intrinsic value of options exercised was approximately $0.2 and $0.1 million for the years ended December 31, 2015 and 2016, respectively.

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The Company determines the fair value of stock-based awards on the grant date using the Black-Scholes option pricing model, which is impacted by assumptions regarding a number of highly subjective variables. The following table summarizes the weighted-average assumptions used as inputs to the Black-Scholes model during the periods indicated:

	Year Ended December 31,
	2015			2016
Weighted average grant date fair value	$	4.25		$	5.53
Expected dividend yield		—	%		—	%
Expected stock price volatility		62	%		65	%
Risk-free interest rate		1.56	%		1.29	%
Expected life of options (in years)		5.9			6.0

Employee Stock Grants

The Company also grants common stock to key officers and directors as additional compensation in certain circumstances. The fair value of these grants is recorded as compensation expense throughout the requisite service period (See Note 13—Related Party Transactions for further detail on these grants). Compensation cost recorded for the restricted stock grants amounted to $4.0 million and $8.5 million for the years ended December 31, 2015 and 2016, respectively. For all other grants to officers and directors, the Company recorded compensation cost of $2.6 million and $0 during the years ended December 31, 2015 and 2016, respectively.

Restricted Stock

The following table summarizes restricted stock activity:

	Shares of Restricted Stock			Weighted Average Fair Value
Nonvested at January 1, 2015		965,554		$	4.55
Granted		1,200,000			5.50
Vested		(806,667	)		5.00
Nonvested at December 31, 2015		1,358,887			5.13
Granted		711,982			9.00
Vested		(1,408,887	)		5.27
Nonvested at December 31, 2016		661,982		$	9.00

Warrants

The Company has granted warrants to purchase common stock. The Company determined the fair value of the warrants on the grant date using the Black-Scholes option pricing model, consistent with the valuations of stock options described above. During August 2015, the Company repurchased 106,668 warrants for $0.4 million. All warrants are fully vested and 844,000 and 344,000 were outstanding as of December 31, 2015 and 2016, respectively.

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Stock-Based Compensation Cost

The components of stock-based compensation and the amounts recorded within research and development expenses and selling, general, and administrative expenses in the Company’s consolidated statements of operations and comprehensive loss consisted of the following for the years ended December 31, 2015 and 2016 (in thousands):

	Year Ended December 31,
	2015		2016
Stock options	$	8,932	$	10,977
Vesting of restricted stock grants		4,035		8,534
Stock awarded to directors and officers		2,560		—
Total stock-based compensation expense	$	15,527	$	19,511
Research and development expenses	$	5,600	$	8,573
Selling, general, and administrative expenses		9,927		10,938
Total stock-based compensation expense	$	15,527	$	19,511

17. NET LOSS AND PROFORMA NET LOSS PER SHARE ATTRIBUTABLE TO ATHENEX, INC. COMMON STOCKHOLDERS

Net Loss Per Share Attributable to Common Stockholders

Basic net loss per share is calculated by dividing net loss attributable to common stockholders by the weighted-average number of common shares issued, outstanding, and vested during the period. Diluted net loss per share is computed by dividing net loss attributable to common stockholders by the weighted-average number of common share and common shares equivalents for the period using the treasury-stock method. For the purposes of this calculation, warrants for common stock and stock options are considered to be common stock equivalents and are only included in the calculation of diluted net loss per share when their effect is dilutive.

The following outstanding shares of common stock equivalents were excluded from the calculation of diluted net loss per share attributable to common stockholders for the periods presented because including them would have been antidilutive:

	Year Ended December 31,
	2015		2016
Stock options and other common stock equivalents		10,601,684		9,624,689
Unvested restricted shares		1,162,221		948,484
Total potential dilutive shares		11,763,905		10,573,173

As described in Note 10—Debt, the Company issued bonds that, upon the completion of an IPO, will be converted into shares of common stock. Upon this event, the number of outstanding shares will increase significantly and will consequently effect net loss per share.

Unaudited Pro Forma Basic and Diluted Net Loss Per Share

The denominator of the pro forma basic and diluted net loss per share attributable to common stockholders reflects the (i) issuance of additional shares of common stock that the Company would be required to issue at an IPO price of $        per share in accordance with a licensing agreement (see below); and (ii) the issuance of additional shares of common stock upon the achievement of a performance condition within employment contracts that will be achieved upon the completion of an IPO; and (iii) the issuance of additional shares of common stock upon an IPO as the result of the vesting of certain restricted stock.

F-31

The numerator of the pro forma basic and diluted net loss per share attributable to common stockholders includes the stock-based compensation expense associated with the vesting of the stock options upon the achievement of a performance condition and excludes the cost related to the issuance of the common stock associated with licensing agreements upon the completion of an IPO. The pro forma basic and diluted net loss per share attributable to common stockholders does not include the shares expected to be sold and related proceeds to be received from the IPO.

In 2011, the Company entered into a license agreement with Hanmi Pharmaceutical Ltd. (“Hanmi”), a publicly traded company existing under the laws of South Korea for the right to use certain intellectual property (the “Orascovery program”) in various jurisdictions. Under this agreement, the Company may be obligated to issue Hanmi shares of common stock upon the occurrence of (1) regulatory approval of a drug under the Orascovery program and (2) an IPO. If an IPO occurs prior to a regulatory approval, the Company will issue common stock to Hanmi in the amount of $5.0 million as an “exit bonus.” Subsequently, when regulatory approval is achieved, the Company will issue common stock to Hanmi in the amount of $24.0 million as a “regulatory bonus.” Conversely, if regulatory approval of a drug under the Orascovery program occurs prior to an IPO, the Company will issue common stock to Hanmi in the amount of $24.0 million as a regulatory bonus. Subsequently, when an IPO occurs, the Company will issue common stock to Hanmi in the amount of $4.0 million to $10.0 million as an exit bonus, with the amount being determined on a sliding scale derived from the pre-money valuation of the Company immediately prior to the IPO. The occurrence of these events has not yet been deemed to be probable and therefore, no liability has been recorded as of December 31, 2015 and 2016.

The following table sets forth the computation of the Company’s unaudited pro forma basic and diluted net loss per share attributable to common stockholders for the following periods (in thousands, except share and per share data):

	Year Ended December 31,
	2016
	(unaudited)
Numerator:
Net loss attributable to common stockholders	$
Expense associated with the vesting of stock options and restricted stock upon the completion of an IPO per employment agreements and restricted stock agreements
Net loss attributable to common stockholders used in computing pro forma net loss per share attributable to common stockholders, basic and diluted	$
Denominator:
Weighted-average shares used in computing net loss per share attributable to common stockholders, basic and diluted
Weighted-average pro forma adjustment to reflect issuance of common shares in connection with employment and license agreements
Weighted-average pro forma adjustment to reflect issuance of common shares resulting from vesting of restricted stock upon IPO
Weighted-average pro forma adjustment to reflect issuance of common shares in connection with the convertible bonds
Weighted-average shares used in computing pro forma net loss per share attributable to common stockholders, basic and diluted
Pro forma net loss per share attributable to common stockholders, basic and diluted	$

F-32

18. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

The components and changes of accumulated other comprehensive income (loss), net of related income tax effects, are as follows (in thousands):

Balance as of December 31, 2014	$	83
Foreign currency translation adjustment		(397	)
Unrealized gains on investment		91
Balance as of December 31, 2015		(223	)
Foreign currency translation adjustment		(1,048	)
Unrealized gains on investment		(33	)
Balance as of December 31, 2016	$	(1,304	)

19. BUSINESS SEGMENT, GEOGRAPHIC, AND CONCENTRATION RISK INFORMATION

The Company has three operating segments, which are organized based mainly on the nature of the business activities performed and regulatory environments in which they operate. The Company also considers the types of products from which the reportable segments derive their revenue (only applicable to two reportable segments). Each operating segment has a segment manager who is held accountable for operations and has discrete financial information that is regularly reviewed by the Company’s chief operating decision-maker. The Company’s operating segments are as follows:

Oncology Innovation Platform—This primary operating segment performs research and development on certain of the Company’s proprietary drugs, from the preclinical development of its chemical compounds, to the execution and analysis of its several clinical trials. This segment focuses specifically on the oral absorption cancer drug platform, the Src Kinase inhibitors, and the transmucosal drug delivery system. This segment performs research in the United States, Taiwan, Hong Kong, and mainland China.

Global Supply Chain Platform—This operating segment includes QuaDPharma and Polymed. QuaDPharma is a contract manufacturing company that provides small to mid-scale cGMP manufacturing of clinical and commercial products for pharmaceutical and biotech companies. QuaDPharma also performs microbiological and analytical testing for raw material and formulated products and is expanding to manufacture and sell pharmaceutical products under 503B regulations set forth by the U.S. Food and Drug Administration (“FDA”). Polymed markets and sells API and medical devices in North America, Europe, and Asia from its locations in Texas and China. Polymed also develops new compounds, processing techniques, and manufactures API at Taihao, a cGMP facility in Chongqing, China. A majority of the Company’s revenue is generated by this segment. The pharmaceutical manufacturing facilities being built in the Banan District in Chongqing, China (see Note 14—Business and Economic Collaborative Agreements) will be included within this segment and the Company anticipates that this segment will support the Oncology Innovation Platform segment when drugs in development are approved for market.

Commercial Platform—This operating segment includes Athenex Pharmaceutical Division, a newly-formed component that is focused on the manufacturing, distribution, and sales of generic pharmaceuticals. This segment is expected to provide services and products to external customers based mainly in the United States.

The segments operate in North America and Asia. The Company’s Oncology Innovation Platform segment operates and holds long-lived assets located in the United States, Taiwan, Hong Kong, and mainland China. The Commercial Platform segment operates and holds long-lived assets located in the United States. The Global Supply Chain Platform segment operates and holds long-lived assets located in the United States and China. For geographic segment reporting, product sales have been attributed to countries based on the location of the customer.

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Segment information is as follows:

	Year Ended December 31,
	2015			2016
Net loss attributable to Athenex, Inc.:
Oncology Innovation Platform	$	(50,257	)	$	(64,837	)
Global Supply Chain Platform		(343	)		(11	)
Commercial Platform		—			(22,867	)
Total consolidated net loss attributable to Athenex, Inc.	$	(50,600	)	$	(87,715	)

	Year Ended December 31,
	2015			2016
Total revenue:
Oncology Innovation Platform	$	973		$	998
Global Supply Chain Platform		17,998			26,581
Commercial Platform		—			—
Total revenue for reportable segments		18,971			27,579
Intersegment revenue		(5,027	)		(7,028	)
Total consolidated revenue	$	13,944		$	20,551

	Year Ended December 31,
	2015		2016
Total revenue by product group:
API sales	$	9,179	$	15,331
Medical device sales		1,966		2,338
Contract manufacturing revenue		1,464		1,497
Commercial product sales		224		228
License fees		297		392
Grant revenue		814		765
Total consolidated revenue	$	13,944	$	20,551

Intersegment revenue is recorded by the selling segment when it is realized or realizable and all revenue recognition criteria are met. Upon consolidation, all intersegment revenue and related cost of sales are eliminated from the selling segment’s ledger.

	Year Ended December 31,
	2015		2016
Total depreciation and amortization:
Oncology Innovation Platform	$	101	$	195
Global Supply Chain Platform		787		1,644
Commercial Platform		—		187
Total consolidated depreciation and amortization	$	888	$	2,026

F-34

	December 31,
	2015		2016
Total assets:
Oncology Innovation Platform	$	73,837	$	53,022
Global Supply Chain Platform		46,594		48,560
Commercial Platform		—		4,308
Total consolidated assets	$	120,431	$	105,890

	Year Ended December 31,
	2015		2016
Total revenue:
United States	$	3,270	$	3,573
India		4,914		7,803
Austria		2,323		5,197
China		2,366		2,338
Taiwan		84		—
Other foreign countries		987		1,640
Total consolidated revenue	$	13,944	$	20,551

	December 31,
	2015		2016
Total property and equipment, net:
United States	$	2,621	$	2,177
China		3,668		3,633
Total consolidated property and equipment, net	$	6,289	$	5,810

Customer revenue and accounts receivable concentration amounted to the following for the identified periods. All customers relate to the Global Supply Chain Platform Segment.

	Year Ended December 31,
	2015			2016
Percentage of total revenue by customer:
Customer A		29	%		38	%
Customer B		17	%		24	%

	December 31,
	2015			2016
Percentage of total accounts receivable by customer:
Customer A		46	%		50	%
Customer B		12	%		9	%
Customer C		11	%		0	%

20. COMMITMENTS AND CONTINGENCIES

Rental and lease commitments

In August 2015, the Company entered into a lease agreement with FSMC to occupy a portion of the Conventus Center for Collaborative Medicine in Buffalo, NY. A deferred rent liability for this agreement of $0.3 million and $0.9 million is recorded as of December 31, 2015 and December 31, 2016, respectively. Total rent expense related to this location, recognized on a straight-line basis, for the years ended December 31, 2015 and 2016 were $0.4 and $1.0 million, respectively.

F-35

In July 2015, CDE entered into an agreement to lease facilities in Hong Kong. Under the rental agreement, CDE will make monthly payments of less than $0.1 million for three years beginning on July 1, 2015. Total rent expense related to this location, recognized on a straight-line basis, amounted to $0.2 million and $0.3 million for the years ended December 31, 2015 and 2016.

In October 2016, the Company’s Commercial Platform entered into an agreement to lease office space in Chicago, IL. Under the lease agreement, the Company will make monthly payments based on an escalating scale over ten years. Total rent expense related to this location, recognized on a straight-line basis, amounted to less than $0.1 million for the year ended December 31, 2016 and the Company has recorded a deferred rent liability of less than $0.1 million as of December 31, 2016. In lieu of a security deposit, the Company issued an irrevocable letter of credit to the landlord in the amount of $0.3 million.

Future minimum payments under the non-cancelable leases consists of the following as of December 31, 2016 (in thousands):

Year ending December 31:	Minimum payments
2017	$	801
2018		1,162
2019		1,512
2020		1,518
2021		1,525
Thereafter		5,959
	$	12,477

Legal Proceedings

The Company is not a party to any pending or known threatened legal proceedings that, in the opinion of the Company, would have a material impact on the Company’s consolidated financial statements.

21. SUBSEQUENT EVENTS

The Company evaluated subsequent events through May 1, 2017, the date on which the December 31, 2016 consolidated financial statements were issued.

In January and February 2017, the Company issued additional convertible bonds with an aggregate value of $10.0 million and a maturity date of October 1, 2018, of which $4.0 million were issued to related parties. The bonds will be converted into shares of common stock upon the completion of an IPO. If such event does not occur prior to the maturity date, interest will be payable based on a 10% annual stated interest rate.

In February 2017, the Company entered into a definitive agreement with Amphastar Pharmaceuticals, Inc., or Amphastar, to acquire 14 ANDAs and inventory for certain APIs. The agreement requires payments of up to $6.4 million, of which $1.0 million was paid upon execution of the agreement, $1.0 million is due within thirty days following May 1, 2017, $3.0 million is due within thirty days of receiving FDA approval of site transfer to sell Prochlorperazine Edisylate Injection USP, and $1.4 million is due within thirty days of receiving FDA approval of site transfer of a second product. If the conditions relating to the third and fourth payments described above are not met by December 31, 2017, the Company shall make such payments within 30 days of December 31, 2017 regardless of whether such conditions are ever met. In addition to the payments described above, the Company has agreed to pay Amphastar a royalty fee equal to 2% of its net sales relating to the 14 ANDAs and API inventory transferred to it by Amphastar for a period of 10 years from the execution of the agreement.

In February 2017, the Company entered into an additional binding term sheet with Gland Pharma Limited, pursuant to which we expect to enter into a definitive agreement for a non-exclusive license to market an

F-36

additional 6 of Gland’s products. Gland has obtained FDA approval for 4 of such products and has filed an ANDA in North America for the Remaining 2 products. For each of the licensed products we will pay a license fee to Gland. The maximum amount of such licenses is $3.15 million, of which $312,500 is contingent on regulatory approval for 2 products for which Gland has filed ANDAs. We will pay a portion of such $312,500 upon regulatory approval of each of these 2 licensed drugs. Additionally, during the term of the agreement we have a profit sharing arrangement pursuant to which we will pay to Gland between 25% and 40% of the net profits from sales of each of the licensed products, depending on the product. The initial term the Gland license agreement is five years from the launch of each product licensed pursuant to the agreement, subject to automatic renewal for additional two year terms, unless terminated by either party upon provision to the other party at least 90 days’ notice in advance of a renewal date.

In March 2017, the Company signed an amendment to its license agreement with Hanmi, under which the Company received the rights to develop and sell drugs under the Orascovery program in additional territories, including Japan. This license amendment required an upfront fee of $7.0 million payable to Hanmi upon the execution of the agreement. In lieu of the payment, the Company issued a convertible bond to Hanmi with a par value of $7.0 million. This bond carries an interest rate of 10% per annum and a maturity date of October 1, 2018. Hanmi has the option to convert the bond to shares of common stock at discounted rates from 20.0% to 22.5% at various dates up to the maturity date. This amendment includes additional regulatory milestone payments and royalties based on sales. The occurrence of any milestone triggering events have not been deemed to be probable as no sales have occurred.

In April 2017, the Company issued additional convertible bonds with an aggregate value of $20.0 million and a maturity date of April 20, 2019. The bonds will be converted into shares of common stock upon the completion of an IPO. If such event does not occur prior to the maturity date, interest will be payable based on a 10% annual stated interest rate. The Company has not yet received funds from issuance of the convertible loan.

******

F-37

INDEPENDENT AUDITOR’S REPORT

To the Board of Directors

Athenex, Inc.

Buffalo, New York

Report on the Financial Statements

We have audited the accompanying combined financial statements of Polymed Therapeutics, Inc. and Chongqing Taihao Pharmaceutical Co., Ltd. (collectively “the Company”), which comprise the combined balance sheets as of December 31, 2014 and 2013, the related combined statements of operations and comprehensive loss, changes in stockholders’ equity and cash flows for the years then ended, and the related notes to the combined financial statements (collectively, the financial statements).

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these combined financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express an opinion on these combined financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the combined financial statements referred to above present fairly, in all material respects, the financial position of Polymed Therapeutics, Inc. and Chongqing Taihao Pharmaceutical Co., Ltd. as of December 31, 2014 and 2013, and the results of their operations and their cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America.

/s/  Freed Maxick CPAs, P.C.

Buffalo, New York

December 13, 2016

F-38

POLYMED THERAPEUTICS, INC. AND CHONGQING TAIHAO PHARMACEUTICAL CO., LTD.

COMBINED BALANCE SHEETS

(In thousands, except share data)

	December 31,
	2014			2013
Assets
Current assets:
Cash and cash equivalents	$	465		$	95
Accounts receivable, net of allowance for doubtful accounts of $50 and $50, respectively		4,125			960
Receivables from related parties		232			223
Inventories		2,499			1,593
Prepaid expenses		179			250
Other receivable		241			215
Total current assets		7,741			3,336
Property and equipment, net		1,296			1,273
Deferred tax asset		646			575
Total assets	$	9,683		$	5,184
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	4,586		$	4,218
Accrued expenses		439			1,166
Line of credit		750			360
Notes payable		1,303			745
Total current liabilities		7,078			6,489
Long-term liabilities:
Loans from related parties		1,705			1,706
Total liabilities		8,783			8,195
Commitments and contingencies (Note 7)
Stockholders’ equity
Common stock—Polymed, no par value, 1,000,000 shares authorized, 100,000 issued and outstanding at December 31, 2014 and 2013.		100			100
Owners’ equity—Taihao		1,876			1,390
Additional paid-in capital—Taihao		4,226			65
Receivable from stockholder—Taihao		(288	)		(123	)
Accumulated deficit		(5,036	)		(4,438	)
Accumulated other comprehensive income (loss)		22			(5	)
Total stockholders’ equity		900			(3,011	)
Total liabilities and stockholders’ equity	$	9,683		$	5,184

The accompanying notes are an integral part of these combined financial statements.

F-39

POLYMED THERAPEUTICS, INC. AND CHONGQING TAIHAO PHARMACEUTICAL CO., LTD.

COMBINED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(In thousands)

	Year Ended December 31,
	2014			2013
Revenue:
Product sales	$	10,218		$	9,772
Total revenue		10,218			9,772
Costs and operating expenses:
Cost of product sales		7,222			6,171
General and administrative expenses		2,229			3,533
Selling and marketing expenses		360			436
Research and development expenses		894			—
Total costs and operating expenses		10,705			10,140
Operating loss		(487	)		(368	)
Interest expense		183			110
Loss before income taxes		(670	)		(478	)
Income tax expense (benefit)		(72	)		32
Net loss		(598	)		(510	)
Foreign currency translation adjustment, net of tax effect of zero		27			(39	)
Comprehensive loss	$	(571	)	$	(549	)

The accompanying notes are an integral part of these combined financial statements.

F-40

POLYMED THERAPEUTICS, INC. AND CHONGQING TAIHAO PHARMACEUTICAL CO., LTD.

COMBINED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(In thousands)

	Common stock - Polymed		Owners’ equity - Taihao		Additional paid-in capital - Taihao		Receivable from shareholder - Taihao			Accumulated deficit			Accumulated other comprehensive income (loss), net of tax effect			Total stockholders’ equity
Balance at December 31, 2012	$	100	$	1,390	$	65	$	—		$	(3,928	)	$	34		$	(2,339	)
Net loss		—		—		—		—			(510	)		—			(510	)
Receivable from stockholder		—		—		—		(123	)		—			—			(123	)
Other comprehensive loss, net of tax		—		—		—		—			—			(39	)		(39	)
Balance at December 31, 2013		100		1,390		65		(123	)		(4,438	)		(5	)		(3,011	)
Capital contribution		—		486		4,161		—			—			—			4,647
Net loss		—		—		—		—			(598	)		—			(598	)
Receivable from stockholder		—		—		—		(165	)		—			—			(165	)
Other comprehensive income, net of tax		—		—		—		—			—			27			27
Balance at December 31, 2014	$	100	$	1,876	$	4,226	$	(288	)	$	(5,036	)	$	22		$	900

The accompanying notes are an integral part of these combined financial statements.

F-41

POLYMED THERAPEUTICS, INC. AND CHONGQING TAIHAO PHARMACEUTICAL CO., LTD.

COMBINED STATEMENTS OF CASH FLOW

(In thousands)

	Year Ended December 31,
	2014			2013
Cash flows from operating activities
Net loss		(598	)		(510	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		300			312
Deferred income taxes		(72	)		32
Changes in operating assets and liabilities:
Receivables, net		(3,165	)		(471	)
Receivables from related parties		(175	)		(346	)
Prepaid expenses and other current assets		45			(128	)
Inventories, net		(906	)		439
Accounts payable and accrued expenses		(359	)		(248	)
Net cash used in operating activities		(4,930	)		(920	)
Cash flows from investing activities
Purchase of property and equipment		(327	)		(446	)
Net cash used in investing activities		(327	)		(446	)
Cash flows from financing activities
Proceeds from capital contributions		4,647			—
Proceeds from related party loans		—			611
Proceeds from line of credit		390			360
Payment of notes payable		(739	)		(569	)
Proceeds from notes payable		1,313			725
Net cash provided by financing activities		5,611			1,127
Net increase (decrease) in cash and cash equivalents		354			(239	)
Cash and cash equivalents, beginning of year		95			394
Effect of exchange rate changes on cash and cash equivalents		16			(60	)
Cash and cash equivalents, end of year	$	465		$	95
Supplemental cash flow disclosures:
Interest paid	$	110		$	183
Income taxes paid	$	32		$	—
Non-cash investing activities:
Accrued purchases of property and equipment	$	49		$	34

The accompanying notes are an integral part of these combined financial statements.

F-42

POLYMED THERAPEUTICS, INC. AND CHONGQING TAIHAO PHARMACEUTICAL CO., LTD.

NOTES TO COMBINED FINANCIAL STATEMENTS

AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013

1. COMPANY AND NATURE OF BUSINESS

Description of Business

Polymed Therapeutics, Inc (“Polymed”) and Chongqing Taihao Pharmaceutical Co Ltd (“Taihao”) (collectively “the Company”) commenced operations in 2004. Though operated independently, they were related under common control during the years ended December 31, 2013 and 2014, as well as subsequently until the Company was acquired by Athenex, Inc. in June 2015 (See Note 11—Subsequent Events). Located in Texas, United States, Polymed is an S-corporation that markets and sells Active Pharmaceutical Ingredients (“API”) and medical devices in North America, Europe, and India. Taihao is an API manufacturing company located in Chongqing, China. Taihao owns and operates a current Good Manufacturing Practices (“cGMP”) facility where it manufactures API to be sold in China and abroad. Polymed facilitates the sale of Taihao’s product to their customers outside of China.

Significant Risks and Uncertainties

The Company incurred losses during the years ended December 31, 2014 and 2013 and had an accumulated deficit of $5.0 million as of December 31, 2014. Operations have been funded primarily through stockholders’ investments, borrowings, and the sale of the Company’s products.

The Company is subject to the risks inherent in conducting business globally and under the laws, regulations, and customs of various jurisdictions. These risks include, but are not limited to, changes in laws, regulations, and practices affecting the pharmaceutical and healthcare industries, adverse changes in the economies in which the Company or its partners and suppliers operate, fluctuation in exchange rates for transactions conducted in currencies other than the functional currency, differing local product preferences and product requirements, supply disruptions and increases in energy, insurance, and transportation costs, and compliance with a variety of national and local laws of countries in which the Company does business, including the restrictions on the import and export of certain intermediates, drugs, and technologies. If any or all of these events occur, the Company could struggle to generate sufficient product revenue and achieve profitability.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation and Principles of Combination

These combined financial statements reflect the accounts and operations of Polymed and Taihao, which were related under common control as of and for the years ended December 31, 2014 and 2013. During the years ended December 31, 2014 and 2013, Polymed owned between 20 and 25% of the outstanding capital of Taihao and one of the shareholders of Polymed owned between 50 and 75% of the outstanding capital of Taihao. Intercompany transactions and balances have been eliminated.

Use of Estimates

These combined financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”). The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the combined financial statements and the reported amount of revenue and expenses during the reporting period. Such management estimates include those relating to assumptions used in allowances for doubtful accounts, income taxes, and the estimated useful life and recoverability of long-lived assets. Actual results could differ from those estimates.

F-43

Functional Currency

Assets and liabilities of Taihao, which prepares financial statements in currencies other than the U.S. dollar (Chinese Yuan is considered the functional currency of Taihao), are translated using exchange rates as of the balance sheet date and the statements of operations are translated at the average exchange rates for each reporting period. The Company recorded a foreign currency translation gain/loss of less than $0.1 million in the years ended December 31, 2014 and 2013.

Cash and Cash Equivalents

The Company considers all highly liquid investments with an original maturity of three months or less at the date of purchase to be cash equivalents. The Company deposits its cash primarily in checking or money market accounts. The Company generally does not enter into investments for trading or speculative purposes, rather to preserve its capital for the purpose of funding operations.

Accounts Receivable, net

Accounts receivable are recorded at the invoiced amount net of an allowance for doubtful accounts, if necessary. On a periodic basis, the Company evaluates its accounts receivable and establishes an allowance for doubtful accounts, based upon a history of past write-off, the age of the receivables, and current credit conditions.

Inventories

Inventory is stated at the lower-of-cost-or-market, with cost being determined on a weighted average basis.

Property and Equipment, net

Property and equipment are initially recorded at cost. Depreciation is recorded over the estimated useful lives of the related assets using the straight-line method. Leasehold improvements are amortized on a straight-line basis over the shorter of the useful life or term of the lease. Upon retirement or disposal, the cost and related accumulated depreciation are removed from the combined balance sheets and the resulting gain or loss is recorded to general and administrative expense in the combined statements of operations. Routine expenditures for maintenance and repairs are expensed as incurred.

Estimated useful lives for property and equipment are as follows:

Property and Equipment	Estimated Useful Life
Plant and Machinery		5 - 10 years
Office Equipment		5 - 10 years
Leasehold improvements		Lesser of 5 years or remaining lease term

Impairment of Long-Lived Assets

The Company reviews the recoverability of its long-lived assets when events or changes in circumstances occur that indicate that the carrying value of the asset may not be recoverable. The assessment of possible impairment is based on the ability to recover the carrying value of the assets from the expected future cash flows (undiscounted and without interest expense) of the related operations. If these cash flows are less than the carrying value of such assets, an impairment loss for the difference between the estimated fair value and carrying value is recorded. There was no impairment loss recognized during the years ended December 31, 2014 and 2013.

F-44

Fair Value of Financial Instruments

Financial instruments consist of cash and cash equivalents, accounts receivable, accounts payable, accrued liabilities, and debt. Cash equivalents are stated at fair value. Accounts receivable, accounts payable, accrued liabilities, and debt are stated at their carrying value, which approximates fair value due to the short time to the expected receipt or payment date of such amounts.

Revenue Recognition

The Company recognizes product revenue when there is persuasive evidence of an arrangement, the price is fixed or determinable, collectability is reasonably assured, and upon delivery to and acceptance by customers.

Comprehensive Income (Loss)

Comprehensive income (loss) is defined as the change in equity of a business enterprise during a period from transactions and other events and circumstances from non-owner sources. Foreign currency translation adjustments represent the differences between the Company’s net loss and comprehensive loss.

Income Taxes

Taihao

Taihao uses the asset and liability method of accounting for income taxes. Deferred income tax assets and liabilities are recognized for the estimated future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred income tax assets and liabilities are measured using enacted tax rates expected to apply in the years in which those temporary differences are expected to be recovered or settled. Deferred income tax expense or benefit is the result of changes in the deferred income tax assets and liabilities. Valuation allowances are established when necessary to reduce deferred income tax assets where, based upon the available evidence, management concludes that it is more-likely-than not that the deferred income tax assets will not be realized. In evaluating its ability to recover deferred income tax assets, Taihao considers all available positive and negative evidence, including its operating results, ongoing tax planning and forecasts of future taxable income on a jurisdiction-by-jurisdiction basis.

Reserves are provided for tax benefits for which realization is uncertain. Such benefits are only recognized when the underlying tax position is considered more likely than not to be sustained on examination by a taxing authority, assuming they possess full knowledge of the position and facts. Interest and penalties related to uncertain tax positions are recognized in income tax (benefit) expense; however, Taihao currently has no interest or penalties related to income taxes. Taihao files income tax returns in the People’s Republic of China.

Polymed

Polymed has elected to have its income taxed as an S Corporation. The tax regulations provide that, in lieu of corporation income taxes, the S Corporation stockholders are taxed on their proportionate share of Polymed’s taxable income; consequently, no federal income taxes have been provided on S Corporation current income.

In accordance with US GAAP, the Company adopted the provisions of Accounting for Uncertainty in Income Taxes. As a result of implementation, the Company recognizes no increase in a liability for unrecognized tax expense and as a result recognized no interest or penalties. Polymed files income tax returns in the U.S. federal and state jurisdictions, whereas Taihao files income tax returns in China.

F-45

Concentration of Credit Risk, Other Risks and Uncertainties

Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents. Cash and cash equivalents are deposited in interest-bearing money market accounts. Although the Company deposits the cash with multiple financial institutions, cash balances may occasionally be in excess of the amounts insured by the Federal Deposit Insurance Corporation. The Company also has significant assets and liabilities held in its overseas biomanufacturing facility in China and therefore is subject to foreign currency fluctuation.

The Company had certain customers whose revenue individually represented 10% or more of the Company’s total revenue, or whose accounts receivable balances individually represented 10% or more of the Company’s total accounts receivable, as follows:

For the years ended December 31, 2014 and 2013, one customer accounted for 35% and three customers accounted for 63% of revenue, respectively. One customer accounted for 27% and two customers accounted for 33% of accounts receivable as of December 31, 2014 and 2013, respectively.

The Company has one major vendor that accounted for 32% and 12% of cost of product sales for the years ended December 31, 2014 and 2013, respectively. This vendor accounted for 15% and 27% of accounts payable as of December 31, 2014 and 2013, respectively.

Recent Accounting Pronouncements Not Yet Adopted

In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (“ASU”) No. 2014-09, “Revenue from Contracts with Customers (Topic 606)”, which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The ASU will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. The new standard is effective for the Company on January 1, 2018 with early adoption permitted only for annual reporting periods beginning after December 15, 2016. The standard permits the use of either the retrospective or cumulative effect transition method. The Company is evaluating the effect of this standard on its combined financial statements. The Company has not yet selected a transition method nor has it determined the effect of the standard on its ongoing financial reporting.

In July 2015, the FASB issued ASU No. 2015-11, “Inventory (Topic 330): Simplifying the Measurement of Inventory.” This ASU requires inventory to be measured at the lower of cost or net realizable value. The provisions of this ASU are effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. The amendment is required to be applied prospectively, and early adoption is permitted. The Company is evaluating the effect of this standard on its combined financial statements.

In August 2014, the FASB issued ASU No. 2014-15, “Presentation of Financial Statements—Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern” which requires management to assess if there is substantial doubt about an entity’s ability to continue as a going concern and to provide related footnote disclosures in certain circumstances. In connection with each annual and interim period, management must assess if there is substantial doubt about an entity’s ability to continue as a going concern within one year after the financial statement issuance date. Disclosures are required if conditions give rise to substantial doubt. The amendment is effective for the Company on January 1, 2017 with early adoption permitted for annual or interim reporting periods for which the financial statements have not previously been issued. The Company is evaluating the effect of this standard on its combined financial statements.

In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842)” which requires that lessees distinguish between finance and operating leases and recognize the assets and liabilities that arise from the leases on the company’s balance sheet. This ASU is effective for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020. The Company is evaluating the effect of this standard on its combined financial statements.

F-46

Recently Adopted Accounting Pronouncements

In November 2015, the FASB issued ASU No. 2015-17, “Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes” which requires that deferred tax liabilities and assets be classified as noncurrent in a classified balance sheet. This ASU is effective for financial statements issued for annual periods beginning after December 15, 2017, and interim periods within annual periods beginning after December 15, 2018. Earlier application is permitted as of the beginning of an interim or annual reporting period. The Company early adopted ASU 2015-17 as of December 31, 2014 and applied its provisions retrospectively, which did not have a significant impact on its combined financial statements.

3. INVENTORIES

Inventories as of December 31, 2014 and 2013 consisted of the following (in thousands):

	December 31,
	2014		2013
Raw materials and purchased parts	$	226	$	93
Work in progress		1,959		1,486
Finished goods		314		14
Inventories	$	2,499	$	1,593

4. PROPERTY AND EQUIPMENT, NET

Property and equipment as of December 31, 2014 and 2013 consisted of the following (in thousands):

	December 31,
	2014			2013
Plant and machinery	$	2,401		$	2,292
Office equipment		252			193
Leasehold improvements		424			275
Property and equipment, gross		3,077			2,760
Less: accumulated depreciation		(1,781	)		(1,487	)
Property and equipment, net	$	1,296		$	1,273

Depreciation expense amounted to $0.3 million for each of the years ended December 31, 2014 and 2013.

5. ACCRUED EXPENSES

Accrued expenses as of December 31, 2014 and 2013 consisted of the following (in thousands):

	December 31,
	2014		2013
Accrued wages, benefits, and personnel expenses	$	64	$	56
Accrued operating taxes and government fees		8		52
Accrued marketing and selling expenses		141		222
Advances from customers		89		291
Accrued material purchases		30		521
Other accrued expenses		107		24
	$	439	$	1,166

F-47

6. INCOME TAXES

The components for the income tax expense (benefit) are as follows (in thousands):

	Year Ended December 31,
	2014			2013
Current:
Federal	$	—		$	—
State		—			—
Foreign		—			—
		—			—
Deferred:
Federal		—			—
State		—			—
Foreign		(72	)		32
		(72	)		32
Total income tax (benefit) expense	$	(72	)	$	32

The components for loss before income taxes are as follows (in thousands):

	Year Ended December 31,
	2014			2013
(Loss) income before income taxes:
Domestic	$	(110	)	$	(671	)
Foreign		(560	)		193
Total loss before income taxes:	$	(670	)	$	(478	)

The income tax benefit differs from the “expected” tax benefit computed by applying the U.S. federal corporate tax rate of 34% to the income or loss before income taxes primarily as a result of Polymed being taxed as a flow-through entity in the U.S. and statutory foreign tax rate differences.

	December 31,
	2014		2013
Gross deferred income tax assets	$	646	$	575
Less: valuation allowance		—		—
Total net deferred income tax assets	$	646	$	575

Deferred income tax assets result principally from net operating losses and an impairment of intangible assets. A valuation allowance is established for any deferred income tax assets for which realization is uncertain. There is no valuation allowance established for the years ended December 31, 2014 or 2013.

As of December 31, 2014 and 2013, the Company had a net operating loss carry forwards of approximately $0.2 million and $0.1 million, respectively, which will begin to expire in the year 2017. The Company files income tax returns in the U.S. federal and state jurisdictions and China.

The Company recognizes interest and penalties accrued related to unrecognized tax benefits in tax expense. No accrual was made for the payment of interest and penalties at December 31, 2014 or 2013.

F-48

7. DEBT, COMMITMENTS, AND CONTINGENCIES

Debt

The Company’s debt amounted to $3.8 million and $2.8 million as of December 31, 2014 and 2013, respectively. This consisted of several borrowings held by Polymed and Taihao.

Polymed had a line of credit with a financial institution that had an outstanding balance of $0.8 million and $0.4 million as of December 31, 2014 and 2013, respectively. This line of credit was classified as short term, as it had a 12 month maturity beginning on June 10, 2013. On June 9, 2014, the maturity of the line of credit was extended by 12 months, ending on June 9, 2015. The line of credit had a variable interest rate and included several restrictive covenants. The interest rate was calculated as 1.50 percentage points over the selected interest rate index, which was 3.250% per annum at the time of the line of credit origination. As of December 31, 2014 and 2013, Polymed failed to meet certain of the financial covenants and these violations were not waived. However, no penalty was incurred and the line of credit was repaid subsequent to December 31, 2014. During 2015 the Company repaid $0.1 million. In connection with the acquisition by Athenex (Note 11—Subsequent Events), the remaining $0.7 million was repaid and the line of credit was closed.

Taihao had three promissory notes with financial institutions throughout the course of 2014 and 2013. These notes had total outstanding balances of $1.3 million and $0.7 million as of December 31, 2014 and 2013, respectively. The first note was drawn in 2008, had no stated interest rate and was repaid in full in 2014. This note had an outstanding balance of $0.1 million as of December 31, 2013. The second note had a 12 month maturity beginning on March 29, 2013 and ending on March 29, 2014 with an 18% stated interest rate. This note had an outstanding balance of $0.7 million as of December 31, 2013 and was repaid in full in 2014. The last note had a 12 month maturity beginning on January 20, 2014 and ending on January 20, 2015 with an 11% stated interest rate. This note had an outstanding balance of $1.3 million as of December 31, 2014 and was repaid in full in 2015.

Polymed had two loans, one from each of its two stockholders, which had a combined outstanding balance of $1.5 million as of December 31, 2014 and 2013. These loans had no specified maturity and a 0% stated interest rate. These loans were forgiven as part of the purchase agreement in connection with the acquisition by Athenex (Note 11—Subsequent Events). These amounts are included within Loans from related parties on the combined balance sheets and amounted to $1.5 million as of December 31, 2014 and 2013.

Taihao had a loan from its primary stockholder (whom also owned 50% of Polymed) with an outstanding balance of $0.2 million as of December 31, 2014 and 2013. This loan had no specified maturity and a 0% stated interest rate. This loan remained outstanding at the time of the acquisition by Athenex (Note 11—Subsequent Events).

Rental and lease commitments

In November 2012, Polymed entered into a lease agreement to occupy their office space. This is a non-cancelable lease with a term ending January 2019. The Company records rent expense on a straight-line basis. Rent payments were $0.2 million for the years ended December 31, 2014 and 2013. Future minimum lease payments amount to $0.2 million annually for the years ending December 31, 2015 through 2018 and less than $0.1 million for the year ending December 31, 2019.

Contingencies

From time to time, the Company may be subject to litigation in the normal course of business, which may result in contingent liabilities. During the years ended and as of December 31, 2014 and 2013, the Company was not a party to any pending or known threatened legal proceedings.

F-49

8. RELATED PARTY TRANSACTIONS

During the years ended December 31, 2014 and 2013, the Company entered into transactions with individuals and other companies that have financial interests in the Company. Related party transactions included the following:

a. Polymed received loans from certain stockholders. These loans are more fully described in Note 7—Debt, Commitments, and Contingencies.

b. Taihao held a liability due to its primary stockholder (whom also owned 50% of Polymed), which was outstanding as of December 31, 2014 and 2013. No interest was incurred in connection with this liability during the years ending December 31 2014 and 2013. See Note 7—Debt, Commitments, and Contingencies for further details. This amount is included within Loans from Related Parties on the combined balance sheets and amounted to $0.2 million as of December 31, 2014 and 2013.

c. Taihao purchases certain pharmaceutical ingredients from Chongqing Taisheng Biotechnology Co., Ltd. (“Taisheng”), a company which is owned by the common stockholder of Polymed and Taihao. Purchases from Taisheng amounted to $0.5 million and $0.2 million for the years ended December 31, 2014 and 2013, respectively. Amounts owed to Taisheng were $0.4 million and $0.2 million as of December 31, 2014 and 2013, respectively. These amounts are included within Accounts Payable on the combined balance sheets.

d. During 2014 and 2013, Taihao made payments to third parties on behalf of the common stockholder of Polymed and Taihao. Taihao recorded receivables in the amount of $0.5 million and $0.3 million that were outstanding as of December 31, 2014 and 2013, respectively. Subsequent to December 31, 2014 but prior to the acquisition by Athenex (see Note 11—Subsequent Events), $0.2 million was repaid by the stockholder and the remaining unpaid balance is shown as a reduction to equity.

e. During 2013, the Company made prepayments totaling $1.475 million to a vendor owned by a previous owner of Taihao, whom did not have an ownership interest during the years ended December 31, 2013 or 2014, anticipating future delivery of product purchases. However, the vendor was not able to deliver and was only able to repay $0.2 million of these prepayments during 2014. The Company expensed the balance of this prepayment in the amount of $1.275 million during the year ended December 31, 2013 within general and administrative expenses on the combined statements of operations.

9. STOCKHOLDERS’ EQUITY

Taihao Stockholders’ Equity

As a Chinese Limited Liability Company, Taihao’s Board of Directors authorized a specified amount in Chinese Yuan as owners’ equity. Each stockholders’ ownership percentage is proportionate to their share of the owners’ equity. Stockholders may be required to invest in excess of the authorized owners’ equity; this is recorded as additional paid-in capital.

As of December 31, 2014 and 2013, Taihao’s authorized owners’ equity amounted to $1.9 million and $1.4 million, respectively. During 2014, the Company authorized an increase of the owners’ equity by $0.5 million, which was issued to a new stockholder that invested $0.5 million of owners’ equity and $4.1 million of additional paid-in capital during 2014. Additional paid-in capital amounted to $4.2 million and $0.1 million as of December 31, 2014 and 2013, respectively. Total capital contributed to Taihao, excluding contributions from Polymed Therapeutics, Inc., which eliminate upon combination, amounted to $6.1 million and $1.5 million as of December 31, 2014 and 2013, respectively.

F-50

10. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

The components and changes of accumulated other comprehensive income (loss) as of and for the years ended December 31, 2014 and 2013, net of related income tax effects, are as follows (in thousands):

Balance as of January 1, 2013	$	34
Foreign currency translation adjustment, net of tax effect of zero		(39	)
Balance as of December 31, 2013		(5	)
Foreign currency translation adjustment, net of tax effect of zero		27
Balance as of December 31, 2014	$	22

11. SUBSEQUENT EVENTS

In June 2015, all of the outstanding shares of Polymed and Taihao were purchased by Athenex, Inc. for total consideration of $30.8 million. Through December 13, 2016, both companies remain wholly owned subsidiaries of Athenex, Inc.

The Company has evaluated events through December 13, 2016, the date the combined financial statements were complete and approved for issuance.

******

F-51

POLYMED THERAPEUTICS, INC. AND CHONGQING TAIHAO PHARMACEUTICAL CO., LTD.

COMBINED BALANCE SHEETS

(In thousands, except share data)

(Unaudited)

	March 31,			December 31,
	2015			2014
				(Note 2)
Assets
Current assets:
Cash and cash equivalents	$	544		$	465
Accounts receivable, net of allowance for doubtful accounts of $50 and $50, respectively		2,731			4,125
Receivables from related parties		233			232
Inventories		3,680			2,499
Prepaid expenses		86			179
Other receivables		537			241
Total current assets		7,811			7,741
Property and equipment, net		1,273			1,296
Deferred tax asset		743			646
Total assets	$	9,827		$	9,683
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	4,202		$	4,586
Accrued expenses		1,660			439
Line of credit		750			750
Notes payable		—			1,303
Total current liabilities		6,612			7,078
Long-term liabilities:
Loans from related parties		2,705			1,705
Total liabilities		9,317			8,783
Commitments and contingencies
Stockholders’ equity:
Common stock—Polymed, no par value, 1,000,000 shares authorized, 100,000 issued and outstanding at March 31, 2015 and December 31, 2014.		100			100
Owners’ equity—Taihao		1,876			1,876
Additional paid-in capital—Taihao		4,226			4,226
Receivable from stockholder—Taihao		(288	)		(288	)
Accumulated deficit		(5,427	)		(5,036	)
Accumulated other comprehensive income (loss)		23			22
Total stockholders’ equity		510			900
Total liabilities and stockholders’ equity	$	9,827		$	9,683

The accompanying notes are an integral part of these combined financial statements.

F-52

POLYMED THERAPEUTICS, INC. AND CHONGQING TAIHAO PHARMACEUTICAL CO., LTD.

COMBINED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(In thousands)

(Unaudited)

	Three Months Ended March 31, 2015			Three Months Ended March 31, 2014
Revenue:
Product sales	$	3,007		$	2,101
Total revenue		3,007			2,101
Costs and operating expenses:
Cost of product sales		2,263			1,537
General and administrative expenses		610			691
Selling and marketing expenses		114			77
Research and development expenses		482			—
Total costs and operating expenses		3,469			2,305
Operating loss		(462	)		(204	)
Interest expense		23			37
Loss before income taxes		(485	)		(241	)
Income tax benefit		(94	)		(24	)
Net loss		(391	)		(217	)
Foreign currency translation adjustment, net of tax effect of zero		1			11
Comprehensive loss	$	(390	)	$	(206	)

The accompanying notes are an integral part of these combined financial statements.

F-53

POLYMED THERAPEUTICS, INC. AND CHONGQING TAIHAO PHARMACEUTICAL CO., LTD.

COMBINED STATEMENTS OF CASH FLOW

(In thousands)

(Unaudited)

	Three Months Ended March 31,
	2015			2014
Cash flows from operating activities
Net loss		(391	)		(217	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization		57			64
Deferred income taxes		(94	)		(24	)
Changes in operating assets and liabilities:
Receivables, net		1,393			(575	)
Receivables from related parties		(1	)		617
Prepaid expenses and other current assets		(203	)		49
Inventories, net		(1,181	)		(499	)
Accounts payable and accrued expenses		838			(427	)
Net cash provided by (used in) operating activities		418			(1,012	)
Cash flows from investing activities
Purchase of property and equipment		(24	)		(13	)
Net cash used in investing activities		(24	)		(13	)
Cash flows from financing activities
Payment of related party loans		—			(83	)
Proceeds from related party loans		1,000			—
Proceeds from line of credit		—			390
Payment of notes payable		(1,303	)		—
Proceeds from notes payable		—			968
Net cash (used in) provided by financing activities		(303	)		1,275
Net increase in cash and cash equivalents		91			250
Cash and cash equivalents, beginning of period		465			95
Effect of exchange rate changes on cash and cash equivalents		(12	)		39
Cash and cash equivalents, end of period	$	544		$	384
Supplemental cash flow disclosures:
Interest paid	$	12		$	30
Income taxes paid	$	—		$	—
Non-cash investing activities:
Accrued purchases of property and equipment	$	31		$	26

The accompanying notes are an integral part of these combined financial statements.

F-54

POLYMED THERAPEUTICS, INC. AND CHONGQING TAIHAO PHARMACEUTICAL CO., LTD.

NOTES TO COMBINED FINANCIAL STATEMENTS

AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 2015 AND 2014

1. COMPANY AND NATURE OF BUSINESS

Description of Business

Polymed Therapeutics, Inc (“Polymed”) and Chongqing Taihao Pharmaceutical Co Ltd (“Taihao”) (collectively “the Company”) commenced operations in 2004. Though operated independently, they were related under common control during the years ended December 31, 2013 and 2014, as well as subsequently until the Company was acquired by Athenex, Inc. in June 2015 (See Note 8—Subsequent Events). Located in Texas, United States, Polymed is an S-corporation that markets and sells Active Pharmaceutical Ingredients (“API”) and medical devices in North America, Europe, and India. Taihao is an API manufacturing company located in Chongqing, China. Taihao owns and operates a current Good Manufacturing Practices (“cGMP”) facility where it manufactures API to be sold in China and abroad. Polymed facilitates the sale of Taihao’s product to their customers outside of China.

Significant Risks and Uncertainties

The Company incurred losses during the three months ended March 31, 2015 and 2014 and had an accumulated deficit of $5.4 million as of March 31, 2015. Operations have been funded primarily through stockholders’ investments, borrowings, and the sale of the Company’s products.

The Company is subject to the risks inherent in conducting business globally and under the laws, regulations, and customs of various jurisdictions. These risks include, but are not limited to, changes in laws, regulations, and practices affecting the pharmaceutical and healthcare industries, adverse changes in the economies in which the Company or its partners and suppliers operate, fluctuation in exchange rates for transactions conducted in currencies other than the functional currency, differing local product preferences and product requirements, supply disruptions and increases in energy, insurance, and transportation costs, and compliance with a variety of national and local laws of countries in which the Company does business, including the restrictions on the import and export of certain intermediates, drugs, and technologies. If any or all of these events occur, the Company could struggle to generate sufficient product revenue and achieve profitability.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation and Principles of Combination

These combined financial statements reflect the accounts and operations of Polymed and Taihao, which were related under common control as of and for the three months ended March 31, 2015 and 2014. These statements are prepared only for the quarterly periods presented and therefore do not include all of the information and disclosures required by U.S. GAAP for a complete set of financial statements. These unaudited condensed combined financial statements and notes thereto should be read in conjunction with the audited combined financial statements and notes thereto as of and for the years ended December 31, 2014 and 2013. The condensed combined balance sheet as of December 31, 2014 has been derived from the audited financial statements at that date. The unaudited financial information for the interim periods presented herein reflects all adjustments, which, in the opinion of management, are necessary for a fair presentation of the financial condition and results of operations for the periods presented, with such adjustments consisting only of normal recurring adjustments. Results of operations for interim periods covered by these quarterly financial statements may not necessarily be indicative of results of operations for the full fiscal year or any other interim period.

The unaudited condensed combined financial statements include the accounts of Polymed and Taihao. All intercompany transactions and balances have been eliminated in the unaudited condensed combined financial statements.

F-55

The complete disclosure of accounting principles is included within the audited financial statements as of and for the years ended December 31, 2014 and 2013. There were no changes of accounting principles during the three months ended March 31, 2015.

Use of Estimates

These combined financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”). The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the combined financial statements and the reported amount of revenue and expenses during the reporting period. Such management estimates include those relating to assumptions used in allowances for doubtful accounts, income taxes, and the estimated useful life and recoverability of long-lived assets. Actual results could differ from those estimates.

Fair Value of Financial Instruments

Financial instruments consist of cash and cash equivalents, accounts receivable, accounts payable, accrued liabilities, and debt. Cash equivalents are stated at fair value. Accounts receivable, accounts payable, accrued liabilities, and debt are stated at their carrying value, which approximates fair value due to the short time to the expected receipt or payment date of such amounts.

Concentration of Credit Risk, Other Risks and Uncertainties

Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents. Cash and cash equivalents are deposited in interest-bearing money market accounts. Although the Company deposits the cash with multiple financial institutions, cash balances may occasionally be in excess of the amounts insured by the Federal Deposit Insurance Corporation. The Company also has significant assets and liabilities held in its overseas biomanufacturing facility in China and therefore is subject to foreign currency fluctuation.

The Company had certain customers whose revenue individually represented 10% or more of the Company’s total revenue, or whose accounts receivable balances individually represented 10% or more of the Company’s total accounts receivable, as follows:

For the three months ended March 31, 2015 and 2014, two customers accounted for 53% and 65% of revenue, respectively. Two customers accounted for 44% accounts receivable as of March 31, 2015.

The Company has one major vendor that accounted for 19% and 26% of cost of product sales for the three months ended March 31, 2015 and 2014, respectively. This vendor accounted for 11% of accounts payable as of March 31, 2015.

3. INVENTORIES

Inventories as of March 31, 2015 and December 31, 2014 consisted of the following (in thousands):

	March 31, 2015		December 31, 2014
Raw materials and purchased parts	$	622	$	226
Work in progress		2,644		1,959
Finished goods		414		314
Inventories	$	3,680	$	2,499

F-56

4. ACCRUED EXPENSES

Accrued expenses as of March 31, 2015 and December 31, 2014 consisted of the following (in thousands):

	March 31, 2015		December 31, 2014
Accrued wages, benefits, and personnel expenses	$	52	$	64
Accrued operating taxes and government fees		12		8
Accrued marketing and selling expenses		176		141
Advances from customers		80		89
Accrued material purchases		1,340		30
Other accrued expenses		—		107
	$	1,660	$	439

5. INCOME TAXES

The components for the income tax expense (benefit) are as follows (in thousands):

	Three Months Ended March 31,
	2015			2014
Current:
Federal	$	—		$	—
State		—			—
Foreign		—			—
		—			—
Deferred:
Federal		—			—
State		—			—
Foreign		(94	)		(24	)
		(94	)		(24	)
Total income tax (benefit) expense	$	(94	)	$	(24	)

The components for loss before income taxes are as follows (in thousands):

	Three Months Ended March 31,
	2015			2014
(Loss) income before income taxes:
Domestic	$	133		$	(81	)
Foreign		(618	)		(160	)
Total loss before income taxes:	$	(485	)	$	(241	)

6. DEBT, COMMITMENTS, AND CONTINGENCIES

Debt

Polymed had a line of credit with a financial institution that had an outstanding balance of $0.8 million as of March 31, 2015 and December 31, 2014. This line of credit was classified as short term, as it had a 12 month maturity beginning on June 10, 2013. On June 9, 2014, the maturity of the line of credit was extended by 12 months, ending on June 9, 2015. The line of credit had a variable interest rate and included several restrictive

F-57

covenants. The interest rate was calculated as 1.50 percentage points over the selected interest rate index, which was 3.250% per annum at the time of the line of credit origination. As of December 31, 2014, Polymed failed to meet certain of the financial covenants and these violations were not waived. However, no penalty was incurred and the line of credit was repaid subsequent to March 31, 2015. Between April 1, 2015 and May 31, 2015, the Company repaid $0.1 million. In connection with the acquisition by Athenex (Note 8—Subsequent Events), the remaining $0.7 million was repaid and the line of credit was closed.

Taihao held a promissory note which had a 12 month maturity beginning on January 20, 2014 and ending on January 20, 2015 with an 11% stated interest rate. This note had an outstanding balance of $1.3 million as of December 31, 2014 and was repaid in full during January 2015.

Polymed had two loans, one from each of its two stockholders, which had a combined outstanding balance of $1.5 million as of December 31, 2014 and 2013. These loans had no specified maturity and a 0% stated interest rate. Polymed took another loan from a stockholder with an interest rate stated at 6% in the amount of $1.0 million during the three months ended March 31, 2015. These loans were forgiven as part of the purchase agreement in connection with the acquisition by Athenex (Note 8—Subsequent Events). These amounts are included within Loans from related parties on the combined balance sheets and amounted to $2.5 million and $1.5 million as of March 31, 2015 and December 31, 2014, respectively.

Taihao had a loan from its primary stockholder (whom also owned 50% of Polymed) with an outstanding balance of $0.2 million as of March 31, 2015 and December 31, 2014. This loan had no specified maturity and a 0% stated interest rate. This loan remained outstanding at the time of the acquisition by Athenex (Note 8—Subsequent Events).

Rental and lease commitments

In November 2012, Polymed entered into a lease agreement to occupy their office space. This is a non-cancelable lease with a term ending January 2019. The Company records rent expense on a straight-line basis. Rent payments were $0.2 million for the years ended December 31, 2014 and 2013 and $0.1 million for the three months ended March 31, 2015. Future minimum lease payments amount to $0.2 million annually for the years ending December 31, 2015 through 2018 and less than $0.1 million for the year ending December 31, 2019.

Contingencies

From time to time, the Company may be subject to litigation in the normal course of business, which may result in contingent liabilities. During the three months ended March 31, 2015 and the year ended December 31, 2014, the Company was not a party to any pending or known threatened legal proceedings.

7. RELATED PARTY TRANSACTIONS

During the three months ended March 31, 2015 and 2014, the Company entered into transactions with individuals and other companies that have financial interests in the Company. Related party transactions included the following:

a. Polymed received loans from certain stockholders. These loans are more fully described in Note 5—Debt, Commitments, and Contingencies.

b. During 2014, Taihao made payments to third parties on behalf of the common stockholder of Polymed and Taihao. Taihao recorded a receivable in the amount of $0.5 million that was outstanding as of March 31, 2015 and December 31, 2014. Subsequent to March 31, 2015 but prior to the acquisition by Athenex (see Note 8—Subsequent Events), $0.2 million was repaid by the stockholder and the remaining unpaid balance is shown as a reduction to equity.

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8. STOCKHOLDERS’ EQUITY

Taihao Stockholders’ Equity

As a Chinese Limited Liability Company, Taihao’s Board of Directors authorized a specified amount in Chinese Yuan as owners’ equity. Each stockholders’ ownership percentage is proportionate to their share of the owners’ equity. Stockholders may be required to invest in excess of the authorized owners’ equity; this is recorded as additional paid-in capital.

As of March 31, 2015 and December 31, 2014, Taihao’s authorized owners’ equity amounted to $1.9 million. During 2014, the Company authorized an increase of the owners’ equity by $0.5 million, which was issued to a new stockholder that invested during 2014. Additional paid-in capital amounted to $4.2 million as of March 31, 2015 and December 31, 2014. Total capital contributed to Taihao, excluding contributions from Polymed Therapeutics, Inc., which eliminate upon combination, amounted to $6.1 million as of March 31, 2015 and December 31, 2014. No additional capital investments were made during the three months ended March 31, 2015.

9. SUBSEQUENT EVENTS

In June 2015, all of the outstanding shares of Polymed and Taihao were purchased by Athenex, Inc. for total consideration of $30.8 million. Through December 13, 2016, both companies remain wholly owned subsidiaries of Athenex, Inc.

The Company has evaluated events through December 13, 2016, the date the combined financial statements were complete and approved for issuance.

******

F-59

            Shares

Common Stock

Prospectus

Credit Suisse		J.P. Morgan
	Deutsche Bank Securities

                    , 2017

Until            (the 25^th day after the date of this prospectus), all dealers that effect transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the dealers’ obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

Item 13. Other Expenses of Issuance and Distribution

The following table sets forth the costs and expenses, other than underwriting discounts and commissions, payable in connection with the sale and distribution of the securities being registered. All amounts are estimated except the SEC and FINRA registration fees. All of the expenses below will be paid by us.

Item
SEC Registration fee	$	*
FINRA filing fee		*
NASDAQ Global Market listing fee		*
Printing and mailing expenses		*
Legal fees and expenses		*
Accounting fees and expenses		*
Transfer agent and registrar fees and expenses		*
Miscellaneous		*
Total	$	*

* To be filed by amendment

Item 14. Indemnification of Directors and Officers

Under Section 145 of the Delaware General Corporation Law, we can indemnify our directors and officers against liabilities they may incur in such capacities, including liabilities under the Securities Act of 1933, as amended, or the Securities Act. Our amended and restated certificate of incorporation to be in effect upon the closing of this offering (Exhibit 3.2 to this registration statement) provides that we will indemnify our directors and officers to the fullest extent permitted by law and require us to pay expenses incurred in defending or other participating in any proceeding in advance of its final disposition upon our receipt of an undertaking by the director or officer to repay such advances if it is ultimately determined that the director or officer is not entitled to indemnification. Our certificate of incorporation further provides that rights conferred under such certificate of incorporation do not exclude any other right such persons may have or acquire under the certificate of incorporation, the bylaws, any statute, agreement, vote of stockholders or disinterested directors or otherwise.

The amended and restated certificate of incorporation also provides that, pursuant to Delaware law, our directors shall not be liable for monetary damages for breach of the directors’ fiduciary duty of care to us and our stockholders. This provision in the amended and restated certificate of incorporation does not eliminate the duty of care, and in appropriate circumstances equitable remedies such as injunctive or other forms of non-monetary relief will remain available under Delaware law. In addition, each director will continue to be subject to liability for breach of the director’s duty of loyalty to us for acts or omissions not in good faith or involving intentional misconduct, or knowing violations of law, for actions leading to improper personal benefit to the director, and for payment of dividends or approval of stock repurchases or redemptions that are unlawful under Delaware law. The provision also does not affect a director’s responsibilities under any other law, such as the federal securities laws or state or federal environmental laws. We also maintain directors’ and officers’ liability insurance.

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In addition, we have agreements to indemnify our directors and certain of our officers in addition to the indemnification provided for in the amended and restated certificate of incorporation. These agreements, among other things, indemnify our directors and some of our officers for certain expenses (including attorney’s fees), judgments, fines and settlement amounts incurred by such person in any action or proceeding, including any action by or in our right, on account of services by that person as a director or officer of our company or as a director or officer of our subsidiary, or as a director or officer of any other company or enterprise that the person provides services to at our request.

The underwriting agreement (Exhibit 1.1 to this registration statement) provides for indemnification by the underwriters of us and our officers and directors, and by us of the underwriters, for certain liabilities arising under the Securities Act or otherwise in connection with this offering.

Item 15. Recent Sales of Unregistered Securities

During the last three years we have issued unregistered securities as described below. The share and per share amounts below reflect shares of preferred stock on an as-converted to common stock basis:

Issuances of preferred stock

1. From January 2014 through April 2014, we issued and sold an aggregate of 4,259,310 shares and 1,000,000 shares of our Series A preferred stock to accredited investors at a per share price of $4.55 per share and $5.00 per share, respectively, for aggregate cash consideration of $19,815,046.

2. On March 26, 2014, we issued and sold an aggregate of 1,320,000 shares of our Series A preferred stock to our executive officers at a purchase price of $4.55 per share for aggregate consideration of $6,000,000.

Issuances of common stock

3. On June 20, 2014, we issued and sold an aggregate of 720,000 shares of our common stock at a purchase price of $5.50 per share for an aggregate consideration of $3,960,000.

4. From August 2014 through April 2015, we issued and sold an aggregate of 4,000,000, 157,776 and 6,200,000 shares of our common stock at purchase prices of $5.00, $5.50 and $7.50, respectively, per share for aggregate consideration of $67,367,768.

5. On September 8, 2014, in connection with our acquisition of QuaDPharma, we issued an aggregate of 181,820 shares of our common stock at a purchase price of $5.50 per share for an aggregate consideration of $1,000,010.

6. In January through February 2015, we issued an aggregate of 1,496,000 shares of our common stock as stock compensation to certain of our officers and directors, with a value of $5.50 per share for an aggregate amount of $8,228,000.

7. In April and May of 2015, in connection with our acquisition of Polymed, we issued an aggregate of 1,538,464 shares of our common stock to the sellers, at a value of $7.50 per share, for an aggregate consideration of $11,538,480.

8. In May 2015, we issued and sold an aggregate of 960,000 shares of our common stock at a purchase price of $7.50 per share for an aggregate consideration of $7,200,000.

9. On June 5, 2015, we issued and sold an aggregate of 1,200,000 shares of our common stock at a purchase price of $5.50 per share for an aggregate consideration of $6,600,000.

10. On June 5, 2015, we issued and sold an aggregate of 80,000 shares of our common stock at a purchase price of $7.50 per share for an aggregate consideration of $600,000.

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11. In July 2015, we issued to certain of our employees as stock compensation an aggregate of 66,668 shares and 48,000 shares of our common stock with values of $7.50 per share and $9.00 per share, respectively, for an aggregate amount of $932,010.

12. On July 17, 2015, we issued and sold 545,456 shares of our common stock at a purchase price of $5.50 per share and 307,692 shares of our common stock at a purchase price of $6.50, for an aggregate consideration of $5,000,006 pursuant to an earlier contractual agreement to issue such share upon achievement of certain milestones.

13. On July 17, 2015, we issued to certain seller affiliated parties in connection with our acquisition of CDE an aggregate of 1,651,264 shares of our common stock at a purchase price of $9.00 per share for an aggregate consideration of $14,861,376.

14. On March 1, 2016, we issued and sold an aggregate of 666,667 shares of our common stock at a purchase price of $7.50 per share for an aggregate consideration of $5,000,003.

15. On March 31, 2016, we issued to certain seller affiliated parties in connection with the earnouts from the QuaDPharma and Polymed acquisitions an aggregate of 315,810 shares of our common stock at a purchase price of $9.00 per share for an aggregate consideration of $2,842,290.

16. On May 26, 2016, we issued and sold an aggregate of 466,666 shares of our common stock at a purchase price of $7.50 per share for an aggregate consideration of $3,499,995.

Issuances of warrants

17. From March 2014 through January 2015, we issued a series of warrants to purchase an aggregate of 500,000 shares of our common stock, with an exercise price of less than $0.01 per share.

Grants of stock options and issuances of common stock upon exercise of options

18. Since January 1, 2014, we have granted stock options to purchase an aggregate of 7,358,804 shares of our common stock with exercise prices of $4.55, $5.50, $7.50, $9.00 and $11.00 per share to our employees, directors and consultants pursuant to our 2013 Plan. Since January 1, 2014, we have issued an aggregate of 60,000 shares of our common stock upon exercise of stock options granted pursuant to our 2004 Common Unit Option Plan, 2007 Common Unit Option Plan and 2013 Plan for aggregate consideration of $154,060 in cash.

Issuances of Convertible Loan Agreements

19. In September and October 2016 and January, February, March and April 2017, we issued and sold notes convertible into shares of our common stock with an aggregate principal amount of $75.0 million.

We deemed the offers, sales and issuances of the securities described in paragraphs 1 through 18 and 20 above to be exempt from registration under the Securities Act, in reliance on Section 4(a)(2) of the Securities Act, including Regulation D and Rule 506 promulgated thereunder, relative to transactions by an issuer not involving a public offering. All purchasers of securities in transactions exempt from registration pursuant to Regulation D represented to us that they were accredited investors and were acquiring the shares for investment purposes only and not with a view to, or for sale in connection with, any distribution thereof and that they could bear the risks of the investment and could hold the securities for an indefinite period of time. The purchasers received written disclosures that the securities had not been registered under the Securities Act and that any resale must be made pursuant to a registration statement or an available exemption from such registration.

We deemed the grants of stock options and issuances of common stock upon exercise of stock options described in paragraph 19 above, except to the extent described above as exempt pursuant to Section 4(2) of the Securities Act, to be exempt from registration under the Securities Act in reliance on Rule 701 of the Securities

II-3

Act as offers and sales of securities under compensatory benefit plans and contracts relating to compensation in compliance with Rule 701. Each of the recipients of securities in any transaction exempt from registration either received or had adequate access, through employment, business or other relationships, to information about us.

All of the foregoing securities are deemed restricted securities for purposes of the Securities Act. The certificates representing the securities issued in the transactions described in this Item 15 included appropriate legends setting forth that the securities had not been offered or sold pursuant to a registration statement and describing the applicable restrictions on transfer of the securities. There were no underwriters employed in connection with any of the transactions set forth in this Item 15.

Item 16. Exhibits and Financial Statement Schedules

(a) Exhibits

The exhibits to the registration statement are listed in the Exhibit Index attached hereto and incorporated by reference herein.

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(b) Financial Statement Schedules

SCHEDULE I

CONDENSED FINANCIAL INFORMATION OF REGISTRANT (PARENT COMPANY ONLY)

CONDENSED BALANCE SHEETS

(In thousands, except share and per share data)

	December 31,
	2015			2016
Assets
Current assets:
Cash and cash equivalents	$	41,756		$	28,677
Marketable securities—current		12,271			8,628
Accounts receivable, net		3,327			2,620
Inventories, net		495			466
Prepaid expenses and other current assets		1,715			2,117
Total current assets		59,564			42,508
Property and equipment, net		4,836			4,039
Investment		487			340
Marketable securities—long-term		1,868			—
Goodwill		32,643			32,638
Intangible assets, net		3,725			5,542
Investment in subsidiary		10,589			14,289
Due from subsidiary		4,812			5,725
Other long-term assets		1,439			1,801
Total assets	$	119,963		$	106,882
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable (intercompany payable of $906 and $1,027, respectively)	$	5,021		$	5,641
Accrued expenses		3,628			18,848
Accrued legal liability		450			—
Current portion of contingent consideration		5,974			—
Current portion of long-term debt—related parties		1,064			1,123
Current portion of long-term debt		230			766
Total current liabilities		16,367			26,378
Long-term liabilities:
Deferred compensation		1,463			2,174
Deferred rent		255			904
Deferred income tax liability		457			215
Long-term debt—related parties		1,619			496
Long-term debt		737			—
Convertible bonds		—			14,498
Convertible bonds—related parties		—			16,129
Derivative liability		—			8,795
Total liabilities		20,898			69,589
Stockholders’ equity:
Common stock, par value $0.001 per share, 250,000,000 shares authorized at December 31, 2015 and 2016; 40,330,124, and 42,342,706 issued at December 31, 2015 and 2016, respectively; 39,907,796, and 40,685,786 shares outstanding at December 31, 2015 and 2016, respectively		40			42
Additional paid-in capital		206,679			237,581
Accumulated other comprehensive loss		167			41
Accumulated deficit		(106,760	)		(193,827	)
Less: treasury stock, at cost; 422,328 shares at December 31, 2015 and 1,656,920 shares at December 31, 2016		(1,545	)		(7,406	)
Total Athenex, Inc. stockholders’ equity		98,581			36,431
Non-controlling interests		484			862
Total stockholders’ equity		99,065			37,293
Total liabilities and stockholders’ equity	$	119,963		$	106,882

This statement should be read in conjunction with the notes to the consolidated financial statements included in the Company’s Form S-1

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SCHEDULE I

CONDENSED FINANCIAL INFORMATION OF REGISTRANT (PARENT COMPANY ONLY)

CONDENSED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(In thousands, except share and per share data)

	Year Ended December 31,
	2015			2016
Revenue:
External revenue	$	6,015		$	8,799
Earnings from subsidiary		6,187			10,348
Total revenue		12,202			19,147
Costs and operating expenses:
Cost of product sales		12,412			20,590
Research and development expenses		23,878			60,058
Selling, general, and administrative expenses		25,737			23,501
Total costs and operating expenses		62,027			104,149
Operating loss		(49,825	)		(85,002	)
Interest expense		193			1,904
Unrealized loss on derivative liability		—			533
Loss before income tax benefit		(50,018	)		(87,439	)
Income tax expense (benefit)		6			(182	)
Net loss		(50,024	)		(87,257	)
Less: net loss attributable to non-controlling interests		(55	)		(191	)
Net loss attributable to Athenex, Inc.	$	(49,969	)	$	(87,066	)
Unrealized gain (loss) on investment, net of income taxes		91			(33	)
Foreign currency translation adjustment, net of income taxes		—			(85	)
Comprehensive loss	$	(49,878	)	$	(87,184	)

This statement should be read in conjunction with the notes to the consolidated financial statements included in the Company’s Form S-1

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SCHEDULE I

CONDENSED FINANCIAL INFORMATION OF REGISTRANT (PARENT COMPANY ONLY)

CONDENSED STATEMENTS OF CASH FLOWS

(In thousands)

	Year Ended December 31,
	2015			2016
Cash flows from operating activities:
Net cash used in operating activities	$	(31,219	)	$	(47,172	)
Cash flows from investing activities:
Proceeds from sale of property and equipment		—			335
Purchase of property and equipment		(2,688	)		(623	)
(Payment) Receipt of refundable deposit		(1,000	)		1,000
Payments for licenses		(50	)		(2,700	)
Acquisition of Polymed, net of cash acquired		(11,076	)		—
Acquisition of CDE, net of cash acquired		1,699			—
Investments in and advances to subsidiary		(4,734	)		(4,613	)
Purchases of marketable securities		(15,787	)		(9,750	)
Sale of marketable securities		12,615			15,261
Net cash used in investing activities		(21,021	)		(1,090	)
Cash flows from financing activities:
Proceeds from sale of stock		78,768			8,500
Proceeds from issuance of convertible bonds		—			38,000
Costs incurred related to the sale of stock		(1,013	)		(1,538	)
Proceeds from exercise of stock options		61			50
Investment from non-controlling interest		539			569
Payment of contingent consideration		—			(3,184	)
Repurchase of options and warrants		(79	)		—
Repayment of long-term debt		(724	)		(1,264	)
Purchase of treasury stock		(1,250	)		(5,861	)
Net cash provided by financing activities		76,302			35,272
Net increase (decrease) in cash and cash equivalents		24,062			(12,990	)
Cash and cash equivalents, beginning of period		17,295			41,756
Effect of exchange rate changes on cash and cash equivalents		399			(89	)
Cash and cash equivalents, end of period	$	41,756		$	28,677

This statement should be read in conjunction with the notes to the consolidated financial statements included in the Company’s Form S-1

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Schedule II—Valuation and Qualifying Accounts

Activity in the following valuation and qualifying accounts consisted of the following (in thousands):

			Col. C - Additions
Col. A Description	Col. B Balance at Beginning of Period		Charged to Costs & Expenses			Charged to Other Accounts -  Describe			Col. D Deductions -  Describe			Col. E Balance at End of Period
December 31, 2016
Allowance for doubtful accounts	$	478	$	267	(1)	$	—		$	(590	)(1)	$	155
Reserve for excess and obsolete inventory	$	839	$	175		$	—		$	(85	)(2)	$	929
Deferred tax asset valuation allowance	$	31,400	$	—		$	30,908	(3)	$	—		$	62,308
December 31, 2015
Allowance for doubtful accounts	$	199	$	279	(1)	$	—		$	—		$	478
Reserve for excess and obsolete inventory	$	—	$	839		$	—		$	—		$	839
Deferred tax asset valuation allowance	$	12,512	$	—		$	18,888	(3)	$	—		$	31,400

(1) Increases in the allowance for doubtful accounts consist of our provision for bad debts, which is included within selling, general, and administrative expenses on the consolidated statements of operations and comprehensive loss. Decreases in the allowances for doubtful accounts consist of the write-off of specific accounts and the recovery of previously reserved receivables.

(2) Increases in the reserve for excess and obsolete inventory are charged to expense within cost of product sales on the consolidated statements of operations and comprehensive loss and are based on the difference, if any, between the cost of the inventory and market, based upon assumptions about future demand. Decreases in the reserve for excess and obsolete inventory consist of the write-off of specific items and the recovery of previously reserved inventory.

(3) Increases in the valuation allowance for deferred income tax assets offset the increase in our gross deferred tax assets, based on the expected realization of those future tax benefits.

Item 17. Undertakings

The registrant hereby undertakes to provide to the underwriters at the closing specified in the underwriting agreement certificates in such denominations and registered in such names as required by the underwriters to permit prompt delivery to each purchaser.

Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit, or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.

The undersigned registrant hereby undertakes that:

(1) For purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus as filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h)

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under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective.

(2) For the purpose of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and this offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

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SIGNATURES

Pursuant to the requirements of the Securities Act, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the city of Buffalo, State of New York, on                     , 2017.

ATHENEX, INC.
By:
	Johnson Y.N. Lau
	Chief Executive Officer and Board Chairman

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, the undersigned hereby constitute and appoint J. Nicholas Riehle and Teresa Bair and each of them, his true and lawful attorney-in-fact and agent, each with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this registration statement, or any related registration statement filed pursuant to Rule 462(b) under the Securities Act, and to file the same, with exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite or necessary to be done in connection therewith, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that each of said attorneys-in-fact and agents, or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

IN WITNESS WHEREOF, each of the undersigned has executed this power of attorney as of the date indicated.

Pursuant to the requirements of the Securities Act, this Registration Statement on Form S-1 has been signed by the following persons in the capacities indicated on                     , 2017:

Signature	Title
Johnson Y.N. Lau	Chief Executive Officer and Board Chairman (Principal Executive Officer)
J. Nicholas Riehle	Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)
Kim Campbell	Director
Manson Fok	Director
Antony Leung	Director

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Signature	Title
Jinn Wu	Director
Song-Yi Zhang	Director

II-11

EXHIBIT INDEX

Exhibit Number	Description
1.1*	Form of Underwriting Agreement
3.1**	Amended and Restated Certificate of Incorporation of the Company
3.1.1**	Certificate of Amendment of Amended and Restated Certificate of the Company
3.1.2**	Certificate of Amendment of Amended and Restated Certificate of the Company
3.2*	Form of Amended and Restated Certificate of Incorporation of the Company, to be in effect upon closing of the Company’s initial public offering
3.3**	Amended and Restated Bylaws of the Company
3.4*	Form of Amended and Restated Bylaws of the Company, to be in effect upon closing of the Company’s initial public offering
4.1**	Specimen Common Stock Certificate
5.1*	Opinion of Sidley Austin LLP
10.1+	Form of Director and Officer Indemnification Agreement
10.2+**	First Amended and Restated 2004 Unit Option Plan and Form of Unit Option Agreement
10.3+**	First Amended and Restated 2007 Unit Option Plan and Form of Unit Option Agreement
10.4+**	2013 Common Stock Option Plan and Form of Stock Option Agreement
10.5+*	2017 Omnibus Incentive Plan
10.6+*	2017 Employee Stock Purchase Plan
10.7^**	License Agreement dated as of December 16, 2011, by and between Kinex Pharmaceuticals, LLC and Hanmi Pharmaceutical Ltd.
10.7.1**	Amendment No. 1 to License Agreement by and between Kinex Pharmaceuticals, LLC and Hanmi Pharmaceutical Ltd., effective as of November 9, 2012
10.7.2**	Amendment No. 2 to License Agreement by and between Kinex Pharmaceuticals, LLC and Hanmi Pharmaceutical Ltd., effective as of October 21, 2013
10.7.3	Amendment No. 3 to License Agreement by and between Kinex Pharmaceuticals, LLC and Hanmi Pharmaceutical Ltd., effective as of March 3, 2015
10.7.4^	Amendment No. 4 to License Agreement and Convertible Loan Agreement by and between Athenex, Inc. and Hanmi Pharmaceutical Ltd., effective as of March 7, 2017
10.8^**	License Agreement dated as of June 28, 2013, by and between Kinex Therapeutics (HK) Limited, Hanmi Pharmaceutical Co., Ltd. and Kinex Pharmaceuticals, Inc.
10.9^**	License Agreement dated as of April 2011, by and between Kinex Pharmaceuticals, LLC and Hanmi Pharmaceutical Ltd.
10.10^**	License Agreement dated as of December 8, 2011, by and between Kinex Pharmaceuticals, LLC and PharmaEssentia Corporation
10.10.1**	First Amendment to License Agreement by and between Athenex, Inc. and PharmaEssentia Corp., effective as of December 23, 2016
10.11^**	License Agreement dated as of December 16, 2013, by and between Kinex Pharmaceuticals, Inc. and PharmaEssentia Corporation

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Exhibit Number	Description
10.11.1**	First Amendment to License Agreement by and between Athenex, Inc. and PharmaEssentia Corp., effective as of December 23, 2016
10.12^**	License Agreement dated as of April 25, 2013, by and between Kinex Pharmaceuticals, Inc. and ZenRx Limited
10.13^**	License Agreement dated as of May 6, 2012, by and between Kinex Pharmaceuticals, LLC and Guangzhou Xiangxue New Drug Discovery and Development Company Limited
10.14^**	Binding Term Sheet for License effective as of August 1, 2016, by and between Athenex Pharmaceutical Division, LLC and Gland Pharma Limited
10.14.1^**	Binding Term Sheet for License effective as of August 26, 2016, by and between Athenex Pharmaceutical Division, LLC and Gland Pharma Limited
10.14.2^	Binding Term Sheet for License effective as of February 22, 2017, by and between Athenex Pharmaceutical Division, LLC and Gland Pharma Limited
10.15^**	Joint Venture Agreement dated as of September 22, 2016, by and between SunGen Pharma LLC and Athenex Pharmaceutical Division, LLC
10.15.1^	Addendum to Joint Venture Agreement by and between SunGen Pharma LLC and Athenex Pharmaceutical Division, LLC, effective November 29, 2016
10.15.2	Limited Liability Company Agreement of Peterson Athenex Pharmaceuticals, LLC
10.16^**	Service Agreement dated as of August 9, 2016 by and between Dohmen Life Science Services, LLC and Athenex Pharmaceutical Division, LLC
10.17^	Clinical Trial Collaboration and Supply Agreement, dated as of October 24, 2016, by and among Athenex, Inc., Eli Lilly and Company and ImClone LLC
10.18	Agreement for Medical Technology Research, Development, Innovation, and Commercialization Alliance, dated May 1, 2015, by and between Fort Schuyler Management Corporation and Kinex Pharmaceuticals, Inc.
10.18.1	First Amendment to Agreement for Medical Technology Research, Development, Innovation, and Commercialization Alliance, by and between Fort Schuyler Management Corporation and Kinex Pharmaceuticals, Inc., effective as of July 21, 2015
10.18.2	Second Amendment to Agreement for Medical Technology Research, Development, Innovation, and Commercialization Alliance, by and between Fort Schuyler Management Corporation and Athenex, Inc., effective as of June 22, 2016
10.19	Sublease Agreement, dated July 21, 2015, by and between Fort Schuyler Management Corporation and Kinex Pharmaceuticals, Inc.
10.20	Chongqing Public-Private Partnership Agreement (English translation of original foreign language agreement)
10.21^	Binding Term Sheet for License dated December 29, 2016, by and between Athenex API Limited, Nang-Kuang Pharmaceutical Co., LTD and CANDA NK-2, LLC
10.22	Asset Purchase Agreement, dated February 1, 2017, by and between Athenex, Inc. and Amphastar Pharmaceuticals, Inc.
10.23+**	Amended and Restated Employment Agreement by and between Johnson Lau and Kinex Pharmaceuticals, Inc., effective as of June 1, 2015
10.24+**	Employment Agreement by and between Kinex Polymed Hong Kong Ltd. and William Zuo, PhD, effective as of June 1, 2015

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Exhibit Number	Description
10.25+	Employment Agreement by and between Athenex, Inc. and Rudolf Min-Fun Kwan, effective as of February 21, 2017
10.26+	Employment Agreement by and between Athenex, Inc. and Simon Pedder, effective as of February 20, 2017
10.27+	Employment Agreement by and between Athenex, Inc. and J. Nick Riehle, effective as of February 21, 2017
10.28+	Employment Agreement by and between Athenex, Inc. and Jeffrey Yordon, effective as of February 21, 2017
10.29+	Letter Agreement by and between Athenex, Inc. and Flint Besecker, dated December 8, 2016
10.29.1+	Amendment to Letter Agreement by and between Athenex, Inc. and Flint Besecker, dated April 17, 2017
16.1**	Letter Regarding Change in Certifying Accountant
21.1	Subsidiaries of Athenex, Inc.
23.1*	Consent of Deloitte & Touche LLP, Independent Registered Public Accounting Firm
23.2*	Consent of Freed Maxick CPAs, P.C.
23.3*	Consent of Sidley Austin LLP (included in Exhibit 5.1)
24.1*	Power of Attorney (included on signature pages hereto)
99.1	Consent of Michael Cannon to be named as a director nominee
99.2	Consent of Sheldon Trainor-Degirolamo to be named as a director nominee
99.3	Consent of James Zukin to be named as a director nominee

* To be filed by amendment.

** Previously submitted.

+ Indicates management contract or compensatory plan.

^ Confidential treatment is requested for certain confidential portions of this exhibit pursuant to Rule 406 under the Securities Act. In accordance with Rule 406, these confidential portions have been omitted from this exhibit and filed separately with the Commission.

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EX-10

Exhibit 10.1

INDEMNIFICATION AGREEMENT

This Indemnification Agreement (this “Agreement”) is made as of                     , by and between Athenex, Inc., a Delaware corporation (the “Company”), and the individual whose name appears below the word “Indemnitee” on the signature page (the “Indemnitee”), a director and/or officer of the Company.

BACKGROUND

A. WHEREAS, the Indemnitee has been selected to serve or is currently serving as a director and/or officer of the Company and in such capacity is expected to render or has rendered valuable services to the Company.

B. WHEREAS, the Board of Directors of the Company (the “Board”) has determined that enhancing the ability of the Company to retain and attract as directors and officers the most capable persons is in the best interests of the Company.

C. WHEREAS, in order to induce and encourage highly experienced and capable persons, such as the Indemnitee, to serve or to continue to serve as a director and/or officer of the Company and to provide Indemnitee with protection against personal liability in Indemnitee’s capacity as a director and/or officer of the Company pursuant to express contract rights (intended to be enforceable irrespective of, among other things, any amendment to the Company’s certificate of incorporation or bylaws, any change in the composition of the Board or any change in control or business combination transaction relating to the Company), the Board has determined, after due consideration of the terms and provisions of this Agreement, that this Agreement is reasonable and prudent and in the best interests of the Company and its stockholders.

AGREEMENT

NOW THEREFORE, in consideration of the foregoing and in order to induce the Indemnitee to serve or to continue to serve as a director and/or officer of the Company, the Company and the Indemnitee agree as follows:

SECTION 1. DEFINITIONS

1.1 Definitions. As used in this Agreement:

(a) “Affiliate” means, with respect to any Person, any other Person who directly or indirectly controls or is controlled by, or is under common control with, the first Person.

(b) “Associate” means, with respect to any Person, (i) any corporation or organization (other than the Company or any Subsidiary) of which such Person is an officer, partner or manager or is, directly or indirectly, the Beneficial Owner of 10% or more of any class of voting securities, (ii) any trust or other estate in which such Person has a substantial beneficial interest or as to which such Person serves as trustee or in a similar fiduciary capacity (other than an Employee Plan Trustee, (iii) any Relative of such Person, or (iv) any officer or director of any corporation controlling or controlled by such Person.

(c) “Beneficial Ownership” has the meaning ascribed to such term in Rule 13d-3 promulgated under the Exchange Act (or any successor rule or statutory provision) or if such Rule 13d-3 shall be rescinded and there shall be no successor rule or statutory provision thereto, pursuant to Rule 13d-3 as in effect on the date hereof; provided, however, that a Person shall, in any event, also be deemed to be the Beneficial Owner of any Voting Securities (i) of which any of its Affiliates or Associates is, directly or indirectly, the Beneficial Owner, and (ii) of which any other Person is, directly or indirectly the Beneficial Owner if such first mentioned Person or any of its Affiliates or Associates acts with such other Person as a partnership, syndicate or other group pursuant to any agreement, arrangement or understanding for the purpose of acquiring, holding, voting or disposing of any Voting Securities of the Company; provided, further, that no trustee of any employee stock ownership or similar plan of the Company or any Subsidiary (an “Employee Plan Trustee”) or any Associate or Affiliate of any such trustee shall, solely by reason of being an Employee Plan Trustee or Associate or Affiliate thereof, be deemed for any purposes hereof to be the Beneficial Owner of any Voting Securities held by or under any such plan.

(d) “Change in Control” means any of the following events:

(i) An acquisition (other than directly from the Company) of any Voting Securities by any Person (other than any Person who is, as of the date hereof the Beneficial Owner of 20% or more of the then outstanding Voting Securities) immediately after which such Person has Beneficial Ownership of 20% or more of the combined voting power of the then outstanding Voting Securities; provided, however, that a Non-Control Acquisition shall not constitute a Change in Control;

(ii) During any period of two consecutive years since execution of this Agreement (or, if this Agreement was executed less than two years prior to the date of determination, during the period between the execution of this Agreement and the date of determination), individuals who, at the beginning of such period, were members of the Board (the “Incumbent Board Members”), cease for any reason to constitute at least a majority of the Board; provided, however, that if the election, or nomination for election by the Company’s stockholders, of any new director was approved by a vote of at least a majority of the directors then still in office who were either directors at the beginning of such period or whose election or nomination was so approved), such new director shall, for purposes of this Agreement, be considered an Incumbent Board Member; or

(iii) Approval by the stockholders of the Company of:

(1) A merger, consolidation or reorganization involving the Company other than a Non-Control Transaction;

(2) A complete liquidation or dissolution of the Company; or

(3) The sale or other disposition of all or substantially all of the assets of the Company to any Person (other than a transfer to a Subsidiary).

(iv) Notwithstanding subclauses (d)(i), (d)(ii) or (d)(iii) above, a Change in Control shall not be deemed to occur solely due to a reduction in the aggregate number of outstanding Voting Securities.

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(e) The term “D&O Insurance” means any valid directors’ and officers’ liability insurance policy maintained by the Company for the benefit of Indemnitee.

(f) The term “Delaware Court” means the Court of Chancery of the State of Delaware or, if such court does not have subject matter jurisdiction, any other state or federal court of the State of Delaware.

(g) The term “Disinterested Director” means, with respect to any claim for indemnification hereunder, a director of the Company who is not and was not a party to the Proceeding in respect of which indemnification is sought by Indemnitee.

(h) The term “Employee Benefit Plan” means any pension, profit-sharing, employee stock ownership or other employee benefit plan.

(i) The term “Exchange Act” means the Securities Exchange Act of 1934, as amended from time to time.

(j) The term “Excluded Claim” shall mean any claim by Indemnitee for indemnification that is covered by Section 3.7 or is otherwise not required to be paid by the Company under this Agreement.

(k) The term “Expenses” means any and all reasonable out-of-pocket fees, costs and expenses, including, without limitation, attorneys’ fees, accounting and witness fees, travel and deposition costs, and other disbursements or expenses incurred in connection with investigating, defending or being a witness in or participating in or otherwise preparing to defend, be a witness in or participate in, any Proceeding relating to an Indemnifiable Event. The term “Expenses” shall also include (i) Expenses incurred in connection with any appeal resulting from any Proceeding relating to an Indemnifiable Event, including without limitation, any premium, security for, and other costs relating to any cost bond, supersedeas bond or other appeal bond or its equivalent, and (ii) for purposes of Section 3.6(b) only, Expenses incurred in connection with the interpretation, enforcement or defense of Indemnitee’s rights under this Agreement, by litigation or otherwise. The term “Expenses” does not include any judgments, fines or amounts paid in settlement, or any penalties or ERISA excise taxes levied against the Indemnitee.

(l) The term “Indemnified Costs” means all Expenses, judgments, fines, amounts paid in settlement, penalties and ERISA excise taxes (including all interest, assessments and other charges paid or payable in connection therewith).

(m) The term “Indemnifiable Event” means any event or occurrence, whether occurring prior to, on or after the date of this Agreement, related to the fact that Indemnitee is or was a director, officer, employee, agent, trustee or fiduciary of the Company or any Subsidiary, or is or was serving at the request of the Company as a director, officer, employee, general partner, manager, agent, trustee or fiduciary of any other corporation, limited liability company,

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partnership, joint venture, Employee Benefit Plan, trust or other entity or by reason of any action or inaction by the Indemnitee in any such capacity (whether or not the Indemnitee was serving in such capacity at the time any Indemnified Cost is incurred for which indemnification is sought under this Agreement), including without limitation, any breach of duty, neglect, error, misstatement, omission or other act committed or alleged to be committed by Indemnitee.

(n) The term “Independent Counsel” means a law firm, or a member of a law firm, that is experienced in matters of corporation law and neither presently performs, nor in the past five (5) years has performed, services for either (i) the Company or Indemnitee (other than in connection with matters concerning Indemnitee under this Agreement or other indemnitees under similar agreements), or (ii) any other party to the Proceeding giving rise to the claim for indemnification hereunder. Notwithstanding the foregoing, the term “Independent Counsel” shall not include any person who, under the applicable standard of professional conduct then prevailing, would have a conflict of interest in representing either the Company or Indemnitee in an action to determine Indemnitee’s rights under this Agreement.

(o) The term “Non-Control Acquisition” means an acquisition by (1) any Employee Benefit Plan maintained by the Company or any Subsidiary (or a trust forming a part thereof) or any trustee or fiduciary with respect to such Employee Benefit plan acting in such capacity, (2) the Company or any Subsidiary, or (3) any Person in connection with a Non-Control Transaction.

(p) The term “Non-Control Transaction” means any merger, consolidation or reorganization involving the Company where:

(A) the Beneficial Owners of Voting Securities of the Company immediately before such merger, consolidation or reorganization, own, directly or indirectly, immediately following such merger, consolidation or reorganization, more than 80% of the combined voting power of the outstanding Voting Securities of the entity resulting from such merger or consolidation or reorganization (the “Surviving Corporation”) or a corporation beneficially owning, directly or indirectly, a majority of the Voting Securities of the Surviving Corporation (a “Parent Corporation”) in substantially the same proportion as their ownership of the Voting Securities immediately before such merger, consolidation or reorganization, and

(B) the individuals who were members of the Board immediately prior to the execution of the agreement providing for such merger, consolidation or reorganization constitute at least a majority of the members of the board of directors of the Surviving Corporation (or the Parent Corporation if there was a Parent Corporation created by such merger, consolidation or reorganization), and

(C) no Person (other than the Company, any Subsidiary, any Employee Benefit Plan (or any trust forming a part thereof) maintained by the Company, the Surviving Corporation or any Subsidiary, or any Person who, immediately prior to such merger, consolidation or reorganization had Beneficial Ownership of 20% or more of the combined voting power of the then outstanding Voting Securities) owns, directly or indirectly, 20% or more of the combined voting power of the Surviving Corporation’s then outstanding Voting Securities (or of the Parent Corporation’s then outstanding Voting Securities if there was a Parent Corporation created by such merger, consolidation or reorganization).

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(q) The term “Person” shall have the meaning ascribed to such term for purposes of Section 13(d) or 14(d) of the Exchange Act.

(r) The term “Proceeding” means:

(i) any threatened, pending or completed action, claim, suit or proceeding (including appeals thereof) relating to an Indemnifiable Event, whether brought by or in the name of the Company or otherwise and whether of a civil, criminal or administrative, arbitral or investigative nature or otherwise, excluding any Enforcement Proceeding; or

(ii) any inquiry, hearing or investigation that the Indemnitee in good faith believes might lead to the institution of any such action, claim, suit or proceeding.

(s) The term “Relative” means, with respect to any Person, such Person’s spouse, parent, children, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law or sister-in-law.

(t) The term “Securities Act” means the Securities Act of 1933, as amended from time to time.

(u) The term “Subsidiary” means any corporation or other Person of which a majority of its voting power or its equity securities or equity interest is owned directly or indirectly by the Company.

(v) The term “Voting Securities” shall mean any securities of the Company that vote generally in the election of directors.

SECTION 2. SERVICES TO THE COMPANY

2.1 Services by Indemnitee. Indemnitee agrees to [serve/continue to serve] as a director or officer of the Company for so long as Indemnitee is duly elected or appointed or until Indemnitee tenders [his/her] resignation or is no longer serving in such capacity. This Agreement shall not be deemed an employment agreement between the Company (or any of its Subsidiaries or any other entity) and Indemnitee. Indemnitee specifically acknowledges that [his/her] [employment with/service to] the Company or any of its Subsidiaries or any other entity at the request of the Company is at will and the Indemnitee may be discharged at any time for any reason, with or without cause, except as may be otherwise provided in any written employment agreement between Indemnitee and the Company (or any such Subsidiaries or entity), other applicable formal severance policies duly adopted by the Board or, with respect to service as a director or officer of the Company, by the Company’s Certificate of Incorporation and Bylaws or Delaware law.

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SECTION 3. INDEMNIFICATION

3.1 Indemnification in Third Party Actions. Subject to the terms and conditions of this Agreement, in the event that the Indemnitee is a party to, is threatened to be made a party to, is a witness or other participant in, or is threatened to be made a witness or other participant in, or is otherwise involved or threatened to be otherwise involved in any Proceeding by reason of, relating to or otherwise arising in whole or in part out of, an Indemnifiable Event (other than a Proceeding by or in the name of the Company to procure a judgment in its favor which is addressed in Section 3.2 below), the Company shall indemnify the Indemnitee against all Indemnified Costs actually and reasonably incurred by Indemnitee in connection with such Proceeding, to the fullest extent permitted by applicable law (whether or not such Proceeding proceeds to a judgment or is settled or is otherwise brought to final disposition) if the Indemnitee acted in good faith and in a manner the Indemnitee reasonably believed to be in or not opposed to the best interests of the Company and, with respect to any criminal proceeding, had no reason to believe that his or her conduct was unlawful.

3.2 Indemnification in Proceedings By or In the Name of the Company. Subject to the terms and conditions of this Agreement, in the event that the Indemnitee is a party to, is threatened to be made a party to, is a witness or other participant in, or is threatened to be a witness or other participant in, or is otherwise involved or threatened to be otherwise involved in any Proceeding by or in the name of the Company to procure a judgment in its favor by reason of, relating to or otherwise arising in whole or in part out of, an Indemnifiable Event, the Company shall indemnify the Indemnitee against all Expenses actually and reasonably incurred by Indemnitee in connection with such Proceeding, to the fullest extent permitted by applicable law (whether or not such Proceeding proceeds to a judgment or is settled or is otherwise brought to final disposition) if the Indemnitee acted in good faith and in a manner the Indemnitee reasonably believed to be in or not opposed to the best interests of the Company; provided, however that no indemnification against such Expenses shall be made in respect of any claim, issue or matter in such Proceeding as to which the Indemnitee shall have been adjudged liable to the Company unless and to the extent that a court of competent jurisdiction determines that, despite such judgment, the Indemnitee is entitled to indemnification hereunder.

3.3 Partial Indemnification. If the Indemnitee is entitled under any provision of this Agreement to indemnification by the Company for some or a portion of, but not the total amount of, the Indemnified Costs, the Company shall nevertheless indemnify the Indemnitee for the portion of the Indemnified Costs to which the Indemnitee is entitled.

3.4 Indemnification Hereunder Not Exclusive. The indemnification provided by this Agreement is not exclusive of any other rights to which the Indemnitee may be entitled under the Company’s Certificate of Incorporation, its Bylaws, any agreement, any vote of stockholders or Disinterested Directors, applicable law, or otherwise, both as to action in the Indemnitee’s official capacity and as to action in another capacity on behalf of the Company.

3.5 Indemnification of Expenses of Successful Party. Notwithstanding any other provisions of this Agreement, to the extent that the Indemnitee has been successful in defense of any Proceeding or in defense of any claim, issue or matter in a Proceeding, on the merits or otherwise, including, but not limited to, the dismissal of a Proceeding (or any claim, issue or

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matter in a Proceeding) without prejudice, the Indemnitee shall be indemnified against all Expenses actually and reasonably incurred by Indemnitee in connection with the Proceeding, claim, issue or matter (as the case may be) that is successfully resolved to the fullest extent permitted by applicable law.

3.6 Advances of Expenses; Enforcement Proceedings.

(a) The Indemnitee shall have the right to advancement by the Company, prior to the final disposition of any Proceeding by final adjudication as to which there are no further rights of appeal and without the need for any Standard of Conduct Determination prior to such advancement, of any and all Expenses actually and reasonably paid or incurred by Indemnitee in connection with such Proceeding to the fullest extent permitted by applicable law. Subject to the terms of this Agreement and any restrictions of applicable law, the advances to be made will be paid by the Company to the Indemnitee within thirty (30) days following delivery to the Company of written request therefor from the Indemnitee which is accompanied by substantiating documentation reasonably satisfactory to the Company. Execution and delivery of this Agreement by the Indemnitee constitutes an undertaking by the Indemnitee to repay any amounts paid, advanced or reimbursed by the Company in respect of Expenses pursuant to this Section 3.6 (“Advanced Expenses”) relating to, arising out of or resulting from, any Proceeding with respect to which it shall be determined, following final disposition of such Proceeding, that Indemnitee is not entitled to indemnification hereunder. No other form of undertaking shall be required hereunder other than execution of this Agreement. Advances shall be unsecured and interest free and shall be made without regard to the Indemnitee’s ability to repay the Advanced Expenses. The Company acknowledges the potentially severe damage to Indemnitee should the Company fail timely to make such advances to Indemnitee.

(b) To the fullest extent allowable under applicable law, the Company shall also indemnify the Indemnitee against, and, if requested by the Indemnitee, advance to the Indemnitee, subject to and in accordance with Section 3.6(a), any Expenses actually and reasonably paid or incurred by Indemnitee in connection with any action, claim, suit or proceeding brought by Indemnitee to enforce Indemnitee’s right to indemnification or reimbursement (or advancement) of Indemnified Costs under any provision of this Agreement (any such action, claim, suit or proceeding, an “Enforcement Proceeding”) unless the Delaware Court determines that each of the material claims and/or defenses of the Indemnitee in the Enforcement Proceeding was made in bad faith or was frivolous; provided, however, that in the event that Indemnitee is ultimately determined not to be entitled to indemnification or reimbursement (or advancement) of the Indemnified Costs that were the subject of the Enforcement Proceeding, then all amounts advanced to indemnify or reimburse Indemnitee for Expenses incurred in connection with the Enforcement Proceeding shall repaid by the Indemnitee to the Company.

3.7 Limitations on Indemnification. (a) Notwithstanding anything in this Agreement to the contrary, no payments pursuant to this Agreement shall be made by the Company to:

(i) indemnify, hold harmless or advance Indemnified Costs to the Indemnitee with respect to any Proceeding (or any claim, issue or matter in a Proceeding)

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initiated or brought voluntarily by the Indemnitee (including any Proceeding, or claim, issue or matter in a Proceeding, against the Company or any of its directors, officers, employees or other indemnitees) and not by way of defense, except for Expenses for which the Company is required to indemnify the Indemnitee in connection with Enforcement Proceedings pursuant to and in accordance with Section 3.6(b); provided, however, that indemnification or advancement of Indemnified Costs may be provided by the Company with respect to a Proceeding (or any claim, issue or matter in a Proceeding) initiated or brought voluntarily by the Indemnitee and not by way of defense if (i) the Board has consented to the initiation of such Proceeding (or such claim, issue or matter in a Proceeding) prior to its initiation, or (ii) such indemnification is expressly required to be made by applicable law.

(ii) indemnify the Indemnitee for any Indemnified Costs sustained in any Proceeding for an accounting of profits made from the purchase or sale by the Indemnitee of securities of the Company pursuant to the provisions of Section 16(b) of the Exchange Act, the rules and regulations promulgated thereunder and amendments thereto or similar provisions of any federal, state or local statutory law;

(iii) indemnify the Indemnitee for any Indemnified Costs on account of conduct that is established by a final judgment of a court of competent jurisdiction to constitute (i) willful misconduct by the Indemnitee or a breach of Indemnitee’s duty of loyalty to the Company, (ii) bad faith by the Indemnitee or (iii) fraud or deliberate dishonesty of the Indemnitee;

(iv) indemnify the Indemnitee for any Indemnified Costs in connection with any Proceeding (or claim, issue or matter in a Proceeding) based upon or attributable to Indemnitee gaining any personal profit or advantage to which Indemnitee is not entitled or for the return by Indemnitee of any remuneration paid to Indemnitee to which Indemnitee is determined not to be entitled; or

(iv) indemnify the Indemnitee under this Agreement if a court of competent jurisdiction shall finally determine that such payment is not permitted by applicable law.

(b) Notwithstanding anything herein to the contrary, the Company shall not be obligated pursuant to the terms of this Agreement to indemnify or hold harmless Indemnitee in violation of, or to otherwise act in violation of, any undertaking appearing in and required by the rules and regulations promulgated under the Securities Act, or in any registration statement filed with the SEC under the Securities Act. Indemnitee acknowledges that paragraph (h) of Item 512 of Regulation S-K currently generally requires the Company to undertake in connection with any registration statement filed under the Securities Act to submit the issue of the enforceability of Indemnitee’s rights under this Agreement in connection with any liability under the Securities Act on public policy grounds to a court of appropriate jurisdiction and to be governed by any final adjudication of such issue. Indemnitee specifically agrees that any such undertaking shall supersede the provisions of this Agreement and to be bound by any such undertaking.

(c) Indemnitee hereby expressly undertakes and agrees to reimburse the Company for all Indemnified Costs paid by the Company to or on behalf of Indemnitee in connection with any Proceeding in the event and only to the extent that it is finally determined by a court of competent jurisdiction in a decision from which there is no further right of appeal that Indemnitee is not entitled to be indemnified by the Company for such Indemnified Costs because such Indemnified Costs relate to an Excluded Claim.

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SECTION 4. STANDARD OF CONDUCT DETERMINATIONS

4.1 Standard of Conduct Determination. To the extent that the provisions of Section 3.5 are inapplicable to any Proceeding, any determination of whether the Indemnitee has satisfied the applicable standard of conduct that is a required condition to indemnification hereunder with respect to such Proceeding (any such determination, a “Standard of Conduct Determination”) and any determination that Advanced Expenses must be repaid to the Company shall be made as follows:

(a) if no Change in Control has occurred, such determination shall be made (1) by a majority vote of Disinterested Directors, even if less than a quorum of the Board, or (2) by a committee of Disinterested Directors designated by a majority vote of the Disinterested Directors, even though less than a quorum; provided, however, that if there are no such Disinterested Directors, such determination shall be made by Independent Counsel in a written opinion addressed to the Board, a copy of which shall be delivered to Indemnitee.

(b) if a Change in Control has occurred, such determination shall be made (1) if the Indemnitee so requests in writing, by a majority vote of Disinterested Directors, though less than a quorum of the Board, or (2) otherwise by Independent Counsel in a written opinion addressed to the Board, a copy of which shall be delivered to Indemnitee.

4.2 Timing of Standard of Conduct Determination. The Company shall use its reasonable best efforts to cause any Standard of Conduct Determination required by Section 4.1 to be made as promptly as practicable. If the person or persons designated to make such Standard of Conduct Determination shall not have made the determination within sixty (60) days after (i) receipt by the Company of a written request from Indemnitee for indemnification pursuant to Section 6 (the date of such receipt, the “Notification Date”) if the Standard of Conduct Determination is to be made by Disinterested Directors, or (ii) the selection of an Independent Counsel if the Standard of Conduct Determination is to be made by Independent Counsel, then Indemnitee shall be deemed to have satisfied the applicable standard of conduct, provided that such sixty (60)-day time period may be extended for a reasonable period of time, not to exceed thirty (30) additional days, if the person or persons making such Standard of Conduct Determination in good faith require such additional time to obtain or evaluate information relating thereto. Notwithstanding anything herein to the contrary, no determination as to the entitlement of Indemnitee to indemnification under this Agreement shall be required to be made prior to the final disposition of any Proceeding.

4.3. Presumptions; Defenses. No determination by the Company (including by its directors or any Independent Counsel) that Indemnitee has not satisfied any applicable standard of conduct shall create a presumption that Indemnitee is not entitled to indemnification

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hereunder. Any Standard of Conduct Determination that is adverse to Indemnitee may be challenged by Indemnitee in the Delaware Court. It shall be a defense to any Enforcement Proceeding brought by Indemnitee (other than an action brought to enforce a claim for Expenses incurred in defending against a Proceeding in advance of its final disposition) that it is not permissible under applicable law for the Company to indemnify Indemnitee for the amount claimed. In connection with any such Enforcement Action or any related Standard of Conduct Determination under Section 4.1, the burden of proving that Indemnitee is not entitled to indemnification shall be on the Company. For purposes of this Agreement, the termination of any Proceeding by judgment, order, settlement (whether with or without court approval) or conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that Indemnitee did not meet any particular standard of conduct or have any particular belief or that a court has determined that indemnification is not permitted by applicable law.

4.4 Payment. If, in regard to any Indemnified Costs:

(a) Indemnitee shall be entitled to indemnification pursuant to Section 3.5;

(b) no Standard of Conduct Determination is legally required as a condition to indemnification of Indemnitee hereunder; or

(c) Indemnitee has been determined or deemed, pursuant to Section 4.1 or 4.2 above, to have satisfied the applicable Standard of Conduct;

then, without duplication of any such Indemnified Costs that have been advanced to Indemnitee pursuant to Section 3.6, the Company shall pay to Indemnitee, within thirty (30) days after the later of (A) written request for such Indemnifiable Costs made by Indemnitee to the Company which is accompanied by substantiating documentation reasonably satisfactory to the Company, and (B) the earliest date on which the applicable criterion specified in clause (a), (b) or (c) is satisfied, an amount equal to such Indemnified Costs.

SECTION 5. Selection of Independent Counsel. If the determination of entitlement to indemnification is to be made by Independent Counsel pursuant to Section 4.1 hereof, the Independent Counsel shall be selected by the Board by written notice to Indemnitee. Indemnitee may, within ten (10) days after such written notice of selection shall have been given to Indemnitee, deliver to the Company a written objection to such selection; provided, however, that such objection may be asserted only on the ground that the Independent Counsel so selected does not meet the requirements of “Independent Counsel” as defined in the definition thereof, and the objection shall set forth with particularity the factual basis of such assertion. Absent a proper and timely objection, the person so selected shall act as Independent Counsel. If a written objection is timely and properly made and substantiated, the Independent Counsel selected may not serve as Independent Counsel unless and until such objection is withdrawn or the Delaware Court has determined that such objection is without merit. Any Independent Counsel that has been selected by the Board without timely and proper objection from the Indemnitee or with respect to which any timely and proper objection by the Indemnitee has been withdrawn, is referred to herein as an “Approved Independent Counsel”. If there is no Approved Independent Counsel by 5:00 p.m. eastern time on the date that is twenty (20) days after

10

submission by Indemnitee of a written request for indemnification pursuant to Section 6.1 hereof with respect to which a Standard of Conduct Determination is required to be made by Independent Counsel pursuant to Section 4.1, either the Company or Indemnitee may petition the Delaware Court for resolution of any objection which shall have been made by the Indemnitee to the Board’s selection of Independent Counsel and/or for the appointment as Independent Counsel of a person selected by the Delaware Court or by such other person as the Delaware Court shall designate, and the person with respect to whom all objections are so resolved or the person so appointed shall act as Independent Counsel under Section 4.1 hereof. The Company shall pay any and all reasonable fees and expenses incurred by the Independent Counsel in connection with acting pursuant to Section 4.1 hereof, and the Company shall pay all reasonable fees and expenses incident to the procedures of this Section 5, regardless of the manner in which such Independent Counsel was selected or appointed.

SECTION 6. INDEMNIFICATION PROCEDURE

6.1 Notice. Promptly after receipt by the Indemnitee of notice of the commencement of any Proceeding, the Indemnitee will, if a claim is to be made against the Company under this Agreement, notify the Company of the commencement of the Proceeding and make a request for indemnification hereunder (the date on which such notice and request is delivered to the Company, the “Notification Date”), which notice and request shall contain a brief description of the Proceeding and include such documentation and information as is reasonably available to Indemnitee and is reasonably necessary to determine whether and to what extent Indemnitee is entitled to indemnification hereunder. The failure to so notify the Company will not relieve the Company from any liability which the Company may have to the Indemnitee, except to the extent the Company is materially damaged by the failure of the Indemnitee to so notify the Company. Indemnitee agrees not to make any admission or effect any settlement with respect to any such Proceeding without the consent of the Company. If, as of the Notification Date, the Company has D&O Insurance in effect, the Company shall give prompt notice of the Proceeding to its insurers in accordance with the procedures set forth in the applicable policies. The Company shall thereafter use commercially reasonable efforts to cause such insurers to pay, on behalf of Indemnitee, all Indemnifiable Costs relating to such Proceeding in accordance with the terms of such policies. The Company shall provide to the Indemnitee: (i) copies of all potentially applicable D&O Insurance, (ii) a copy of such notice delivered to the applicable insurers, and (iii) copies of all subsequent correspondence between the Company and such insurers regarding the Proceeding, in each case substantially concurrently with the delivery or receipt thereof by the Company.

6.2 Defense of Claims. With respect to any Proceeding for which indemnification is requested by Indemnitee under this Agreement, the Company will be entitled to participate in the Proceeding at its own expense and, except as otherwise provided below or pursuant to the terms of any applicable D&O Insurance, to the extent that it may desire, the Company may, upon written notice to Indemnitee within thirty (30) days after the Notification Date, assume and control the defense of the Proceeding, with counsel reasonably satisfactory to the Indemnitee. After the Company notifies the Indemnitee of the Company’s election to assume and control the defense of a Proceeding, during the Company’s good faith active defense of such Proceeding, the Company will not be liable to the Indemnitee under this Agreement for any legal or other expenses subsequently incurred by the Indemnitee in connection with the defense or settlement

11

of the Proceeding, other than reasonable expenses of investigation or as specifically provided below. The Indemnitee shall have the right to employ separate counsel for the Indemnitee in any Proceeding but the fees and expenses of such counsel incurred after notice from the Company of its assumption of control of the defense of the Proceeding shall be at the expense of the Indemnitee, unless (i) the employment of counsel by the Indemnitee has been authorized by the Company, (ii) the Indemnitee has reasonably concluded that counsel employed by the Company to assume defense of a Proceeding has a conflict of interest in representing both the Company and Indemnitee in the Proceeding, (iii) the Company has not in fact employed counsel to assume the defense of a Proceeding, (iv) the Company has returned defense of the Proceeding to Indemnitee, or (v) the Indemnitee has reasonably concluded that there may be legal defenses available to Indemnitee that are different from or additional to those available to the Company, in any of which events, Indemnitee shall be entitled to control its own defense of the Proceeding. In each of the foregoing cases, the reasonable fees and expenses of the Indemnitee’s counsel shall be at the expense of the Company, but in no event shall the Company be responsible for the fees or expenses of more than one law firm representing Indemnitee, plus, if necessary, one firm serving as local counsel to Indemnitee. The Company shall not be entitled to assume the defense of any Proceeding brought by or on behalf of the Company. Notwithstanding anything to the contrary in this Agreement, the Indemnitee shall not make any admission in any Proceeding with out the prior consent of the Company, which consent shall not be unreasonably withheld, and neither the Company nor the Indemnitee shall waive any privilege or right available to the other party (the “Privilege Party”) in any Proceeding without the prior consent of the Privilege Party, which consent shall not be unreasonably withheld.

6.3 Settlement. The Company shall not be liable to Indemnitee under this Agreement for any amounts paid in settlement of any threatened or pending Proceeding effected without the Company’s prior written consent, which consent shall not be unreasonably withheld. The Company shall not settle any Proceeding in any manner that would impose any monetary obligation on Indemnitee (after giving effect to any indemnification provided for herein) without Indemnitee’s prior written consent, which consent shall not be unreasonably withheld.

SECTION 7. REPAYMENT

7.1 Repayment. Notwithstanding anything in this Agreement to the contrary, the Company shall not be liable under this Agreement to make any payment to Indemnitee in respect of any Indemnifiable Costs to the extent Indemnitee has otherwise received payment under any insurance policy (including any D&O Insurance), Certificate of Incorporation, Bylaw, other contractual indemnity provision or otherwise of the amounts otherwise indemnifiable by the Company hereunder. The Indemnitee will promptly repay to the Company any such amounts paid to or on behalf of the Indemnitee under this Agreement to the extent those payments are duplicative of payments described above.

SECTION 8. MISCELLANEOUS

8.1 Successors and Assigns. This Agreement shall be binding upon, and shall inure to the benefit of the Indemnitee and the Indemnitee’s spouse, heirs, successors, personal representatives and assigns, and the Company and its successors and assigns, including any direct or indirect successor by purchase, merger, consolidation or otherwise to all or substantially

12

all of the business and/or assets of the Company. Nothing in this Agreement, express or implied, is intended to confer any rights or remedies upon any other person. In the event of a Change in Control of the type described in Section 1.1(d)(iii)(1), the Company will use its reasonable best efforts to (a) have the obligations of the Company under this Agreement expressly assumed by the surviving, purchasing or succeeding entity, or (b) otherwise adequately provide for the satisfaction of the Company’s obligations under this Agreement in a manner reasonably acceptable to Indemnitee.

8.2 Separability. Each provision of this Agreement is a separate and distinct agreement and independent of the others, so that if any provision of this Agreement shall be held to be invalid or unenforceable for any reason, the invalidity or unenforceability shall not affect the validity or enforceability of the other provisions of this Agreement. To the extent required, any provision of this Agreement may be modified by the Delaware Court to preserve its validity and to provide the Indemnitee with the broadest possible indemnification permitted under applicable law.

8.3 Savings Clause. If this Agreement or any portion of it is invalidated on any ground by the Delaware Court, then the Company shall nevertheless indemnify Indemnitee as to Indemnified Costs with respect to any Proceeding to the full extent permitted by any applicable portion of this Agreement that shall not have been invalidated.

8.4 Interpretation; Governing Law; Consent to Jurisdiction. This Agreement shall be construed as a whole and in accordance with its fair meaning. Headings are for convenience only and shall not be used in construing meaning. This Agreement shall be governed and interpreted in accordance with the laws of the State of Delaware applicable to agreements made and to be performed entirely in such State. The Company and the Indemnitee each hereby irrevocably and unconditionally (a) agree that any action or proceeding arising out of or in connection with this Agreement shall be brought only in the Delaware Court and not in any other state or federal court (other than any appeal from a decision of the Delaware Court), and (b) consent to the exclusive jurisdiction of the Delaware Court for purposes of any action or proceeding arising out of or in connection with this Agreement.

8.5 Amendments; Waivers; Nature of Rights. No amendment, waiver, modification, termination or cancellation of this Agreement shall be effective unless in writing signed by the party against whom enforcement is sought. No failure or delay in exercising any right will be deemed a waiver of such right. The indemnification rights afforded to the Indemnitee by this Agreement are contract rights and may not be diminished, eliminated or otherwise affected by amendments to the Company’s Certificate of Incorporation, its Bylaws or any other agreement, including, without limitation, any D&O Insurance. Indemnitee agrees that neither the stockholders of the Company, nor any director, officer, employee, representative or agent of the Company, shall be personally liable for the satisfaction of the Company’s obligations under this Agreement and Indemnitee shall look solely to the assets of the Company for satisfaction of any claims hereunder.

8.6 Counterparts. This Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement and shall become effective when one or more counterparts have been signed by each party and delivered to the other.

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8.7 Liability Insurance. To the extent the Company maintains D&O Insurance, Indemnitee, if an officer or director of the Company, shall be covered by such D&O Insurance, in accordance with its terms, to the maximum extent of the coverage available to any director or officer of the Company.

8.8 Notices. Any notice required to be given hereunder shall be in writing and, if directed to the Company, delivered to the Company at 1001 Main Street, Suite 600, Buffalo, NY 14203, Attention: General Counsel, and, if directed to the Indemnitee, delivered to the Indemnitee at the Indemnitee’s most recent address on the books and records of the Company, or to another address as either shall designate in writing.

8.9 Continuation After Term. Indemnitee’s rights hereunder shall continue after the Indemnitee has ceased acting as a director and/or officer of the Company, or as a director, officer, employee, manager, agent or fiduciary of another entity at the request of the Company and so long as the Indemnitee shall be subject to any pending or threatened Proceedings, and the benefits hereof shall inure to the benefit of the heirs, executors and administrators of Indemnitee.

8.10 Non-Exclusivity; Certificate of Incorporation and By-Laws. The rights of Indemnitee hereunder shall be in addition to any other rights Indemnitee may have under the Company’s Certificate of Incorporation, the Company’s Bylaws, the Delaware General Corporation Law, any vote of stockholders or Disinterested Directors or otherwise, both as to action in Indemnitee’s official capacity and as to action in any other capacity by holding such office. The Company agrees that it shall not adopt any amendment to the Company’s Certificate of Incorporation or By-laws in effect on the date hereof the effect of which would be to deny, diminish or encumber the rights of Indemnitee granted hereby The Company further agrees that it shall exercise the powers granted to it under its Certificate of Incorporation, its By-laws and by applicable law to indemnify Indemnitee to the fullest extent possible as required hereby.

8.11 Subrogation. In the event of payment to Indemnitee under this Agreement, the Company shall be subrogated to the extent of such payment to all of the rights of recovery of Indemnitee. Indemnitee shall execute all papers required and shall do everything that may be necessary to secure such rights, including the execution of such documents necessary to enable the Company effectively to bring suit to enforce such rights.

[The next page is the signature page]

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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

INDEMNITEE	ATHENEX, INC.
	By:
Name:	Name:
	Title:

15

EX-10

Exhibit 10.7.3

THIRD AMENDMENT TO LICENSE AGREEMENT

THIS THIRD AMENDMENT TO LICENSE AGREEMENT (this “Third Amendment”) is made and entered into as of March 3, 2015 (“Effective Date”), by and between KINEX PHARMACEUTICALS, INC., a corporation organized and existing under the laws of the State of Delaware USA and having its principal office at 701 Ellicott Street, Buffalo, New York 14203, United States (“Kinex”) and HANMI PHARMACEUTICAL LTD., a publicly traded company existing under the laws of South Korea and having its principal office at 14, Wiryeseong-daero,Songpa-gu, Seoul, 138-724 South Korea (“Hanmi”).

WITNESSTH:

WHEREAS, Hanmi and Kinex (under the name of its predecessor entity, Kinex Pharmaceuticals LLC) entered into a License Agreement on December 16, 2011 for the license by Hanmi to Kinex of rights in the Hanmi Orascovery Program which License Agreement was previously amended by First Amendment to License Agreement on November 9, 2012 and Second Amendment to License Agreement on October 21, 2013 (the “License”); and

WHEREAS, Hanmi and Kinex now wish to amend the License to amend the definition of “Territory” to add India.

NOW, THEREFORE, the Parties hereby agree as follows:

1. All capitalized terms used in this Third Amendment and not defined herein shall have the meaning given to them in the License. Except as amended by this Third Amendment, the License shall continue in full force and effect.

2. Section 1.66 of the License is amended and restated in its entirety to read as follows:

“Territory” means the following designated countries and all countries within the following designated continents or economic union only: North America, South America, European Union, Australia, New Zealand, Russia, Eastern Europe, Taiwan, Hong Kong Macau, Singapore, Malaysia, Thailand, Vietnam, Philippines, Indonesia and India. All other countries are expressly excluded including, but not limited to, the Asian countries of Japan, Mainland China, and Korea.

3. In consideration for this Third Amendment, Kinex shall pay to Hanmi USD $50,000 within 45 days of the Effective Date of this Third Amendment.

IN WITNESS WHEREOF, the Parties have executed this Third Amendment as of the date first set forth above.

KINEX PHARMACEUTICALS, INC		HANMI PHARMACEUTICAL LTD.
By:		By:
	Johnson Lau, CEO		Gwan-Sun Lee, President and CEO

EX-10

Exhibit 10.7.4

FOIA CONFIDENTIAL TREATMENT REQUESTED

Confidential Materials omitted and filed separate with the Securities and Exchange Commission

Triple asterisks denote omissions

FOURTH AMENDMENT TO LICENSE AGREEMENT

THIS FOURTH AMENDMENT TO LICENSE AGREEMENT (this “Fourth Amendment”) is made and entered as of March 7, 2017 (“Effective Date”), by and between ATHENEX INC., (formerly known as Kinex Pharmaceuticals INC. and prior, Kinex Pharmaceuticals, LLC.), a corporation organized and existing under the laws of the State of Delaware, and having its principal office in Suite 600, Conventus Building, 1001 Main Street, Buffalo, New York 14203, United States (‘Athenex”) and HANMI PHARMACEUTICAL CO., LTD., a publicly traded company existing under the laws of South Korea and having its principal office at 14, Wiryeseong-daero, Songpa-gu, Seoul, 05545, South Korea (“Hanmi”).

WITNESSTH:

WHEREAS, Hanmi and Athenex (under the name of its predecessor entity, Kinex Pharmaceuticals, LLC) entered into a license agreement on December 16, 2011 for the license by Hanmi to Athenex of rights in the Hanmi Orascovery Program (“License Agreement”), which License Agreement was previously amended by First Amendment to License Agreement on November 9, 2012 and Second Amendment to License Agreement on October 21, 2013, and Third Amendment to the License Agreement dated March 3, 2015 (the “License”); and

WHEREAS, Hanmi and Athenex now wish to amend the License to amend the definition of “Territory” to add Japan.

NOW, THEREFORE, the Parties hereby agree as follows:

1. All capitalized terms used in this Fourth Amendment and not defined herein shall have the meaning given to them in the License. Except as amended by this Fourth Amendment, the License shall continue in full force and effect.

2. Section 1.66 of the License is amended and restated in its entirety to read as follows:

“Territory” means the following designated countries and all countries within the following designated continents or economic union only: North America, South America, European Union, Australia, New Zealand, Russia, Eastern Europe, Taiwan, Hong Kong, Macau, Singapore, Malaysia, Thailand, Vietnam, Philippines, Indonesia, India and Japan. All other countries are expressly excluded including, but not limited to, the Asian countries of Mainland China and Korea.

*** = Portions of this exhibit have been omitted pursuant to a request for confidential treatment. An unredacted version of this exhibit has been filed separately with the Commission.

3. In consideration for this Fourth Amendment, Athenex shall pay to Hanmi the following:

a. Upfront: in addition to the Upfront Fee under Section 4.1 of the License Agreement and consideration under Section 3 of the Third Amendment, Athenex shall pay U.S. Dollar (USD) seven (7) Million of the mezzanine financing round of the September 2016 convertible bond (a two year convertible note with a ten percent (10%) annual yield if no IPO occurred in two years and during IPO, will be automatically converted to common shares to be priced at twenty percent (20%) discount to the IPO price) with the same terms as other convertible bond investors. Note that this USD seven (7) Million payment is in addition to the USD five (5) Million of the mezzanine financing round to be paid to Hanmi as described inthe original License Agreement. The USD five (5) Million convertible bond by contract, is following the same automatic conversion plan during IPO as set forth in the License Agreement. However, for the USD seven (7) Million upfront fee under this Fourth Amendment, there is no forced automatic conversion during IPO. Instead, Hanmi may elect to convert the entire USD seven (7) Million convertible bond to Athenex stock as follows:

i. With the IPO – Hanmi may elect to convert the entire USD seven (7) Million convertible bond to Athenex stock during the IPO upon advance written notice to Athenex of at least seven (7) calendar days before the IPO

ii. October 16, 2017 (Monday) – Hanmi may elect to convert the entire USD seven (7) Million convertible bond to Athenex stock at the end of this trading day upon advance written notice to Athenex of at least seven (7) calendar days before October 16, 2017

iii. April 16, 2018 (Monday) - Hanmi may elect to convert the entire USD seven (7) Million convertible bond to Athenex stock at the end of this trading day upon advance written notice to Athenex of at least seven (7) calendar days before April 16, 2018

iv. October 1, 2018 (Monday) (End of the convertible bond period) – This is the end of that mezzanine round of convertible debt. In the event that Hanmi does not make any of the elections under Section 3(a)(i., ii. or iii.), on October 1, 2018, Hanmi may elect either to convert the entire USD seven (7) Million convertible bond to Athenex stock, or for Athenex to pay Hanmi USD seven (7) Million plus interest at ten percent (10%) per annum from the day of execution of this Fourth Amendment to October 1, 2018.

For all circumstances, the entire USD seven (7) Million will be converted once Hanmi elects the conversion date. Note that only on October 1, 2018 will cash be paid for the bond.

A copy of the template convertible bond contract is attached as Annex A. Once this Fourth Amendment is executed, the convertible bond contract, including the above time of pre-defined conversion timepoints, will be executed by the parties and incorporated into the Fourth Amendment as Annex A. In the event of any conflict in terms between this Fourth Amendment and the convertible bond contract attached as Annex A, such terms shall be construed in accordance with the convertible bond contract attached as Annex A.

*** = Portions of this exhibit have been omitted pursuant to a request for confidential treatment. An unredacted version of this exhibit has been filed separately with the Commission.

b. Milestones for the Japan Territory

i. Regulatory Milestone: USD *** of Athenex stock or cash (to be mutually agreed between Hanmi and Athenex) after the approval of the first Orascovery product in Japan.

ii. Japan Sales Milestone:

a) USD *** of Athenex stock or cash (subject to Hanmi’s selection) after the sales of Oraxol hit USD *** per year in the Japan market for the first time. There will be only one payment for the achievement of this milestone.

b) USD *** of Athenex stock or cash (subject to Hanmi’s selection) after the sales of Oratecan hit USD *** per year in the Japan market for the first time. There will be only one payment for the achievement of this milestone.

c. Japan Sales Royalty: The royalty for the Japan Territory will be calculated with the same formula as described in Section 4.3 of the License Agreement with the sales for the Japan Territory incorporated in the aggregate annual Net Sales of Licensed Product.

ATHENEX, INC.		HANMI PHARMACEUTICAL CO., LTD.
By:		By:
	Johnson Lau, CEO		Gwan Sun Lee, President and CEO

*** = Portions of this exhibit have been omitted pursuant to a request for confidential treatment. An unredacted version of this exhibit has been filed separately with the Commission.

ANNEX A

*** = Portions of this exhibit have been omitted pursuant to a request for confidential treatment. An unredacted version of this exhibit has been filed separately with the Commission.

THIS CONVERTIBLE LOAN AGREEMENT is made on March 7, 2017BY AND BETWEEN:

(1) Athenex, Inc., a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware, the United States, with an office for the transaction of business at 1001 Main Street, Buffalo, New York 14203 (the “Company”); and

(2) Hanmi Pharmaceutical Co., Ltd., a publicly traded company existing under the laws of South Korea and having its principal office at 14, Wiryeseong-daero, Songpa-gu, Seoul, 05545, South Korea (the “Investor”).

The Company and the Investor are referred to herein collectively as the “Parties” and individually as a “Party.”

1. Definitions

“Bank Account”	has the meaning ascribed to it in Clause 2 hereof.
“Business Day”	means any day other than a Saturday, Sunday or another day on which commercial banks in Hong Kong are required or authorized by law or executive order to close.
“Common Stock”	means the common stock of the Company, par value US$0.001 per share with voting rights, including any subdivisions, combinations, splits or reclassifications thereof.
“Convertible Loan”	has the meaning ascribed to it in Clause 2 hereof.
“Discount Price”	means the initial public offering price per share of the Common Stock in the Initial Public Offering multiplied by (100% minus the Discount Rate).
“Discount Rate”	unless otherwise amended pursuant to Clause 3 hereof, means 20%.
“Event of Default”	has the meaning ascribed to it in Clause 2(e) hereof.
“Initial Public Offering”	means the closing of the Company’s first firm commitment underwritten initial public offering of Common Stock pursuant to a registration statement filed under the Securities Act on the New York Stock Exchange, NASDAQ, or an internationally recognized stock exchange.

*** = Portions of this exhibit have been omitted pursuant to a request for confidential treatment. An unredacted version of this exhibit has been filed separately with the Commission.

“Interest Rate”	means compound interest at the rate of 10% per annum.
“Maturity Date”	means October 1, 2018 or any other later date otherwise agreed by both Parties.
“Securities Act”	means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.
“Total Outstanding Amount”	means the total outstanding amount of the Convertible Loan and the accrued and unpaid interest thereof.

2. The Convertible Loan

(a) The Investor hereby agrees to lend to the Company US$7,000,000 (Seven Million Dollars) (the “Convertible Loan”), which will be deemed to be lent pursuant to the Fourth Amendment (“Fourth Amendment”), Section 3(a), “Upfront”, made and entered as of March 7, 2017 (“Effective Date”), by and between Investor and Company.

The Company shall issue to the Investor a signed acknowledgment of receipt of the Convertible Loan, within five (5) Business Days as of the receipt thereof.

(b) Investor may elect to convert the entire Convertible Loan to Company stock as follows:

i. With the IPO – Investor may elect to convert the entire Convertible Loan to Company stock during the IPO upon advance written notice to Company of at least seven (7) calendar days before the IPO.

ii. October 16, 2017 (Monday) – Investor may elect to convert the entire Convertible Loan to Company stock at the end of this trading day upon advance written notice to Company of at least seven (7) calendar days before October 16, 2017.

iii. April 16, 2018 (Monday) – Investor may elect to convert the entire Convertible Loan to Company stock at the end of this trading day upon advance written notice to Athenex of at least seven (7) calendar days before April 16, 2018.

iv. October 1, 2018 (Monday) (End of the convertible loan period) – This is the end of that mezzanine round of convertible debt. In the event that Investor does not make any of the elections under Section 2(b)(i., ii. or iii.), above, on October 1, 2018, Investor may elect either to convert the entire Convertible Loan to Company stock, or for Company to pay Investor USD seven (7) Million plus interest at ten percent (10%) per annum from the Effective Date to October 1, 2018.

For all circumstances, the entire Convertible Loan will be converted once Investor elects the conversion date. Note that only on October 1, 2018 will cash be paid for the loan.

*** = Portions of this exhibit have been omitted pursuant to a request for confidential treatment. An unredacted version of this exhibit has been filed separately with the Commission.

(c) If, and only if, the Convertible Loan has not, prior to the Maturity Date, converted into Common Stock pursuant to Clause 2(b), above, and the Investor has elected to be paid in cash on the Maturity Date, then the Company undertakes to pay interest at the Interest Rate on the Convertible Loan from the Effective Date of this Convertible Loan Agreement until the Maturity Date of the Convertible Loan, or if an Event of Default (as defined below) shall occur before the Maturity Date and the Investor declares all the Total Outstanding Amount to be immediately due and payable, until the date of repayment of the Total Outstanding Amount upon the occurrence of an Event of Default, which interest shall be calculated on the basis of a 365-day year for the actual number of days elapsed.

(d) Subject to sub-paragraph (e) below, the Company shall pay the Total Outstanding Amount to the Investor on the Maturity Date. The Company shall not prepay any part of the Convertible Loan or the accrued interest without the prior written consent of the Investor.

(e) If any one or more of the events of default set out in Schedule A hereto (each of them, an “Event of Default”) shall occur before the Maturity Date, the Investor may, by written notice to the Company:

i. declare all the Total Outstanding Amount to be immediately due and payable without further demand, notice or other legal formality of any kind; and/or

ii. take such action as the Majority Convertible Loan Investors may deem appropriate to enforce the Investor’s rights, powers and remedies under this Agreement.

3. Adjustment of the Discount Rate

If an Initial Public Offering occurs on any date (i) from April 1, 2018 to October 1, 2018, the Discount Rate shall be adjusted from 20% to 22.5% or (ii) after October 1, 2018 (if the Parties have agreed to extend the Maturity Date to any date after October 1, 2018), the Discount Rate shall further be adjusted from 22.5% to 25%.

For the avoidance of doubt, the Discount Rate shall remain at 20% if an Initial Public Offering occurs before April 1, 2018.

4. Lock-up Period

The Investor hereby agrees that it will not, without the prior written consent of the managing underwriter of the Initial Public Offering of the Company (the “Managing Underwriter”), during the period commencing on the first date of the Initial Public Offering and ending on the date specified by the Company and the Managing Underwriter (such period not to exceed one hundred and eighty (180) days), (i) lend, offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, or otherwise transfer or dispose of, directly or indirectly, any of its Common

*** = Portions of this exhibit have been omitted pursuant to a request for confidential treatment. An unredacted version of this exhibit has been filed separately with the Commission.

Stock, or (ii) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of its Common Stock, whether any such transaction described in (i) or (ii) above is to be settled by delivery of its Common Stock or such other securities of the Company, in cash or otherwise. The Managing Underwriter in the Initial Public Offering is intended third party beneficiary and shall have the right, power and authority to enforce the provisions hereof as though it was a party hereto.

5. Registration Rights

The Company undertakes to the Investor that upon conversion of the Convertible Loan into Common Stock at one of the alternative timepoints as set forth in Clause 2(b), above, the Company shall grant to the Investor, as holder of the issued Common Stock, the same registration rights which, at the material time, are pari passu with the registration rights the Company granted to the other holders of Common Stock of the Company.

6. Company Representations

The Company hereby represents and warrants to the Investor that the following representations and warranties are true and correct as of the date of this Agreement:

(a) The Company is a corporation duly organized, validly existing and in good standing under the laws of the state of its incorporation, and has the power and authority to own, lease and operate its properties and carry on its business as now conducted. The Company has full legal capacity, power and authority to execute and deliver this Agreement and to perform its obligations hereunder. This Agreement constitutes valid and binding obligation of the Company, enforceable in accordance with its terms, except as limited by bankruptcy, insolvency or other laws of general application relating to or affecting the enforcement of debtors’ obligations generally and general principles of equity.

(b) The execution, delivery and performance by the Company of this Agreement is within the power of the Company and, other than with respect to the actions to be taken when equity is to be issued to the Investor, has been duly authorized by all necessary actions on the part of the Company. This Agreement constitutes a legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, except as limited by bankruptcy, insolvency or other laws of general application relating to or affecting the enforcement of creditors’ rights generally and general principles of equity. To the best knowledge of the Company, it is not in violation of (i) its current certificate of incorporation or bylaws, (ii) any material statute, rule or regulation applicable to the Company or (iii) any material indenture or contract to which the Company is a party or by which it is bound, where, in each case, such violation or default, individually, or together with all such violations or defaults, could not reasonably be expected to have a material adverse effect on the Company.

*** = Portions of this exhibit have been omitted pursuant to a request for confidential treatment. An unredacted version of this exhibit has been filed separately with the Commission.

(c) The performance and consummation of the transactions contemplated by this Agreement do not and will not: (i) violate any material judgment, statute, rule or regulation applicable to the Company; (ii) result in the acceleration of any material indenture or contract to which the Company is a party or by which it is bound; or (iii) result in the creation or imposition of any lien upon any property, asset or revenue of the Company or the suspension, forfeiture, or nonrenewal of any material permit, license or authorization applicable to the Company, its business or operations.

(d) No consents or approvals are required in connection with the performance of this Agreement, other than: (i) the Company’s corporate approvals; (ii) any qualifications or filings under applicable securities laws, if any; and (iii) necessary corporate approvals for the authorization of Common Stock issuable pursuant to Clause 2(b) hereof.

7. Investor Representations

The Investor hereby represents and warrants to the Company that the following representations and warranties are true and correct as of the date of this Agreement:

(a) The Investor has full legal capacity, power and authority to execute and deliver this Agreement and to perform its obligations hereunder. This Agreement constitutes valid and binding obligation of the Investor, enforceable in accordance with its terms, except as limited by bankruptcy, insolvency or other laws of general application relating to or affecting the enforcement of creditors’ rights generally and general principles of equity.

(b) The Investor is an accredited investor as such term is defined in Rule 501 of Regulation D under the Securities Act. The Investor has been advised that this Agreement and the underlying securities have not been registered under the Securities Act, or any state securities laws and, therefore, cannot be resold unless they are registered under the Securities Act and applicable state securities laws or unless an exemption from such registration requirements is available. The securities which may be acquired by the Investor hereunder are for its own account for investment, not as a nominee or agent, and not with a view to, or for resale in connection with, the distribution thereof, and the Investor has no present intention of selling, granting any participation in, or otherwise distributing the same. The Investor has such knowledge and experience in financial and business matters that the Investor is capable of evaluating the merits and risks of such investment, is able to incur a complete loss of such investment without impairing the Investor’s financial condition and is able to bear the economic risk of such investment for an indefinite period of time.

(c) The Investor believes it has received all the information it considers necessary or appropriate for deciding whether to enter into this Agreement. The Investor further represents that it has had an opportunity to ask questions and receive answers from the Company regarding this Agreement and the transactions contemplated hereunder as well as the business, properties, prospects and financial condition of the Company. The foregoing, however, does not limit or modify the representations and warranties of the Company in Clause 6 of this Agreement.

*** = Portions of this exhibit have been omitted pursuant to a request for confidential treatment. An unredacted version of this exhibit has been filed separately with the Commission.

8. Miscellaneous

(a) This Agreement will expire and terminate (without relieving the Company of any obligations arising from a prior breach of or non-compliance with this Agreement) upon either (i) the issuance of Common Stock to the Investor pursuant to Clause 2(b) hereof; or (ii) the repayment of all the Total Outstanding Amount due to the Investor pursuant to Clause 2(e) hereof.

(b) Any provision of this Agreement may be amended, waived or modified only upon the written consent of the Company and the Investor.

(c) All notices, requests, demands and other communications hereunder shall be in writing and shall be deemed given if sent by email and thereafter delivered personally or mailed by internationally recognized overnight courier, postage prepaid, return receipt requested, to the following addresses set forth below or such other address as the Company or the Investor shall provide to each other party in writing:

The Company:

Athenex Inc., 1001 Main Street, Buffalo, New York 14203, attention: Johnson Y.N. Lau, jlau@athenex.com

The Investor:

Hanmi Pharmaceutical Co., LTD., 14, Wiryeseong-daero, Songpa-gu, Seoul, 05545, attention: Chief Executive Officer

(d) The Investor is not entitled, as a holder of this Agreement, to vote or receive dividends or be deemed the holder of Common Stock for any purpose, nor will anything contained herein be construed to confer on the Investor, as such, any of the rights of a stockholder of the Company or any right to vote for the election of directors or upon any matter submitted to stockholders at any meeting thereof, or to give or withhold consent to any corporate action or to receive notice of meetings, or to receive subscription rights or otherwise until shares have been issued upon the terms described herein.

(e) Neither this Agreement nor the rights contained herein may be assigned, by operation of law or otherwise, by either party without the prior written consent of the other; provided, however, that this Agreement and/or the rights contained herein may be assigned without the Company’s consent by the Investor to any other entity who directly or indirectly, controls, is controlled by or is under common control with the Investor, including, without limitation, any general partner, managing member, officer or director of the Investor, or any venture capital fund now or hereafter existing which is controlled by one or more general partners or managing members of, or shares the same management company with, the Investor.

(f) In the event any one or more of the provisions of this Agreement is for any reason held to be invalid, illegal or unenforceable, in whole or in part or in any respect, or in the event that any one or more of the provisions of this Agreement operate or would prospectively operate to invalidate this Agreement, then and in any such event, such provision(s) only will be deemed null and void and will not affect any other provision of this Agreement and the remaining provisions of this Agreement will remain operative and in full force and effect and will not be affected, prejudiced, or disturbed thereby.

*** = Portions of this exhibit have been omitted pursuant to a request for confidential treatment. An unredacted version of this exhibit has been filed separately with the Commission.

(g) All rights and obligations hereunder will be governed by the laws of the State of Delaware, without regard to the conflicts of law provisions of such jurisdiction.

(Signature page follows)

*** = Portions of this exhibit have been omitted pursuant to a request for confidential treatment. An unredacted version of this exhibit has been filed separately with the Commission.

IN WITNESS WHEREOF, the undersigned have caused this Agreement to be duly executed and delivered.

ATHENEX, INC.
By:
	Name: Johnson Y.N. Lau
	Title:   Chairman and CEO
HANMI PHARMACEUTICAL CO., LTD.
By:
	Name: Gwan Sun Lee
	Title:   President and CEO

*** = Portions of this exhibit have been omitted pursuant to a request for confidential treatment. An unredacted version of this exhibit has been filed separately with the Commission.

SCHEDULE  A

EVENTS OF DEFAULT

Each of the following events shall be an Event of Default:

(a) the Company fails to pay any sum payable under this Agreement or the Fourth Amendment when due or otherwise in accordance with the provisions hereof or therof;

(b) the Company fails to perform or observe or comply with any of its obligations under this Agreement or the Fourth Amendment in any material respect such that there is a material adverse impact on the Company’s ability to perform its obligations under this Agreement or the Fourth Amendment, which failure continues for a period of fifteen (15) Business Days after the Company receives written notice from the Investor specifying the failure;

(c) any representation or warranty made or deemed to be made by the Company in this Agreement proves to have been incorrect or misleading in any material respect;

(d) the Company is in default under any material indebtedness and such default is not remedied within fifteen (15) Business Days from the day such default occurred such that there is a material adverse impact on the Company’s ability to perform its obligations under this Agreement;

(e) a creditor takes possession of all or substantially all of the assets of the Company, as the case may be, or any execution or other legal process is enforced against all or substantially all of the assets of the Company and such possession or enforcement is not discharged within fifteen (15) Business Days;

(f) a petition is presented or a proceeding is commenced or an order is made or an effective resolution is passed for the winding-up, insolvency, reorganization, reconstruction, dissolution or bankruptcy of the Company or for the appointment of a liquidator, receiver, administrator, trustee or similar officer of the Company which is not stayed or discharged within fifteen (15) Business Days;

(g) the Company stops or suspends payment to its creditors generally or are unable to or admit its inability to pay their debts as they fall due or are declared or become bankrupt or insolvent; and

(h) any litigation, arbitration or administrative proceeding is commenced against the Company such that there is a material adverse impact on the Company’s ability to perform its obligations under this Agreement.

*** = Portions of this exhibit have been omitted pursuant to a request for confidential treatment. An unredacted version of this exhibit has been filed separately with the Commission.

EX-10

Exhibit 10.14.2

FOIA CONFIDENTIAL TREATMENT REQUESTED

Confidential Materials omitted and filed separate with the Securities and Exchange Commission

Triple asterisks denote omissions

BINDING TERM SHEET FOR LICENSE

dated February 22, 2017

by and between

ATHENEX PHARMACEUTICAL DIVISION, LLC (“Athenex”)

and

GLAND PHARMA LIMITED (“Gland”)

Definitions

Effective Date: February 22, 2017

Product License: Gland is the manufacturer of the Products identified on Schedule A (Products). Gland licenses Athenex to distribute the Product in North America (Territory).

Ownership:

All right, title and interest in the ANDAs, the Product Information and any other results of the Development Activities related to the preparation of the ANDAs for the Product shall be owned by Gland, subject to the terms of this License.

Development and Regulatory Fees:

The Parties acknowledge and agree that as of the date hereof, Gland has completed the development of the Products, filed ANDA’s for the Products with FDA and obtained regulatory approval while a few are awaiting regulatory approval from the FDA. To the extent that there are any additional fees associated with the development of the Products, including fees relating to manufacturing line change parts required for the Products, or regulatory fees in connection with the ANDAs, Gland shall be responsible for all such fees.

Licensing Fee:

The License granted by Gland to Athenex for the Products shall be on a non-exclusive basis. In consideration of Gland granting such License to Athenex, Athenex shall pay Gland the License fees shown on Schedule A (II). The aggregate License fee for the Products identified is $3,150,000 (USD) and shall be payable in sixty (60) days from invoicing as mentioned in Schedule A (II).

Term:

The initial term of the License is 5 years from the launch of each product subject to automatic renewal for additional terms of 2 years, unless terminated by either party providing notice 90 days in advance of a renewal date.

*** = Portions of this exhibit have been omitted pursuant to a request for confidential treatment. An unredacted version of this exhibit has been filed separately with the Commission.

Exclusivity:

Gland will manufacture and supply the Products to Athenex for sale in the Territory on a non-exclusive basis, and Gland will have right to manufacture and supply the Products to other Partners in the Territory. Athenex will market the Products on a private label basis under the “Athenex” brand in a commercially reasonably manner. Gland will be identified on any Product labels as the ANDA holder of record.

Delivery of Product:

Gland shall ship and deliver the Products Ex-Works Gland Pharma Warehouse, in accordance with Incoterms 2010.

Net Profit Share:

During the Initial Term and any renewal periods, Athenex shall pay to Gland a payment equivalent to percent (%) of the Net Profits from sale of the Products as defined in Schedule A. Athenex will provide payment to Gland on a quarterly basis not more than Thirty (30) days following the end of each quarterly period following the Launch Date. Each payment shall be accompanied by a statement showing the Net Sales of the product for the applicable quarter, the aggregate Transfer Price paid for the units sold, and the calculation of the Net Profit Share. “Net Profit” shall mean Net Sales less (i) the cost of the Product, including the Transfer Price, freight in, duty, customs, shipping, inventory, write offs and all other related costs of acquiring the Product; and (ii) seven percent (7%) of Net Sales representing the overheads attributable to marketing and selling the Product and “Net Sales” shall mean, gross invoiced sales of a Product to all customers less (i) chargebacks; (ii) freight and insurance charges; (iii) trade discounts, credits or allowances; (iv) costs of replacements, returns, recalls or rebates (v) wholesaler service charges; and (vi) sales, excise or value added taxes paid on or in relation to the product; all as calculated in accordance with United States Generally Accepted Accounting Principles, or US GAAP.

License Fee recoupment: Athenex will recoup 100% of the License Fee from the Net Profit prior to it sharing Profits with Gland for Carboplatin, Gemcitabine, Cisplatin and Doxorubicin inj.

Legal Compliance: Gland represents and warrants it is in compliance with all applicable laws and regulatory requirements for the Products, including the U.S. Drug Supply Chain and Security Act (DSCSA), and the Parties agree to maintain legal compliance with DSCSA during the term of the License. Gland further acknowledges and agrees that the Products will be manufactured by Gland in accordance with the approved drug applications and U.S. Current Good Manufacturing Practices (CGMP).

Regulatory Agent: Gland will be the sole Regulatory Agent for the Products in North America for the term of the License. Gland will be responsible for all filings and interactions with the national regulatory agencies. As a marketing company, Athenex will be responsible for anything pertaining to submission of, Promotional materials; labelling filings with FDA and any Product recalls.

*** = Portions of this exhibit have been omitted pursuant to a request for confidential treatment. An unredacted version of this exhibit has been filed separately with the Commission.

Definitive Agreement: This binding term sheet is intended to be legally binding, but will be supplemented by definitive agreements which are mutually agreed by the parties. The definitive agreements will contain the terms of the License, customary representations and warranties, provision for payment terms, product warranties and product liability, insurance, marketing issues, shipment, delivery and stocking, reporting, responsibility for regulatory filings, recalls and withdrawals, and other terms mutually agreed by the parties which are customary for definitive agreements covering the subject matter contemplated by this License. As part of the definitive agreements, the Parties will enter into a Quality Agreement which will include appropriate policies and procedures to provide a reliable and consistent supply of Products to the Territory. The parties will negotiate to enter into definitive agreements within 60 days after the date this letter is signed by both parties.

Governing Law: This binding term sheet will be governed by the laws of the State of Illinois (without giving effect to choice of law or conflict of law provisions). The parties agree to the exclusive jurisdiction and venue of the state and federal courts in the Northern District of the State of Illinois for the resolution of any disputes under this binding term sheet

Confidentiality: The terms of this License are confidential and will not be disclosed without mutual agreement of the parties, except as required in connection with the performance of this Agreement and the marketing of the Products or as required by applicable legal or regulatory requirements.

Execution: This letter may be executed in counterparts, each of which shall be deemed to be an original and both of which together shall constitute a single document. Facsimile or scanned signatures shall be relied on as if original signatures.

IN WITNESS WHEREOF, the authorized representatives of the parties have executed this binding term sheet as of the Effective Date.

ATHENEX PHARMACEUTICAL DIVISION LLC		GLAND PHARMA LIMITED
By:		By:
Name:	Jeff Yordon	Name:	Srinivas Sadu
Title:	President	Title:	Chief Operating Officer

*** = Portions of this exhibit have been omitted pursuant to a request for confidential treatment. An unredacted version of this exhibit has been filed separately with the Commission.

Schedule A- Product Details

I. Regulatory Status-

a. Approved ANDAs:

S.No	Product	Presentation	Filing date	Approval date
1	***	***	***	***
2	***	***	***	***
3	***	***	***	***

b. Filed ANDAs:

S.No	Product	Presentation	Filing date	Approval Estimate
1	***	***	***	***
2	***	***	***	***
3	***	***	***	***

II. License Fee-

a. Approved ANDAs:

S.No	Product	Presentation	License Fee	BTS Execution (100%)
1	***	***	***	***
2	***	***	***	***
3	***	***	***	***

b. Filed ANDAs:

S.No	Product	Presentation	License Fee	BTS Execution (75%)	ANDA approval (25%)
1	***	***	***	***	***
2	***	***	***	***	***
3	***	***	***	***	***

III. Commercials-

a. Approved ANDAs:

S.No	Product	Presentation	Transfer Price USD	Profit Share (Athenex: Gland)
1	***	***	***	***
2	***	***	***	***
3	***	***	***	***

*** = Portions of this exhibit have been omitted pursuant to a request for confidential treatment. An unredacted version of this exhibit has been filed separately with the Commission.

b. Filed ANDAs:

S.No	Product	Presentation	Transfer Price USD	Profit Share (Athenex: Gland)
1	***	***	***	***
2	***	***	***	***
3	***	***	***	***

*** = Portions of this exhibit have been omitted pursuant to a request for confidential treatment. An unredacted version of this exhibit has been filed separately with the Commission.

EX-10

Exhibit 10.15.1

FOIA CONFIDENTIAL TREATMENT REQUESTED

Confidential Materials omitted and filed separate with the Securities and Exchange Commission

Triple asterisks denote omissions

ADDENDUM OF ADDITIONAL PRODUCT ADDED TO THE

LIMITED LIABILITY COMPANY AGREEMENT OF PETERSON ATHENEX

PHARMACEUTICALS, LLC DATED OCTOBER 4TH, 2016

November 29, 2016

Product: Desmopressin Acetate Injection (hereinafter referred to as “Product”) as 4mcg per ml with volume configurations of 1ml and 10m1, in 2m1 and 10m1 glass vials. The Product is in conformance with its FDA approved specifications shown in Exhibits A and B.

Term: The term will be ten (10) years beginning on the date of Product ANDAs approved by US FDA, and is renewable automatically for one (1) years period, unless terminated in writing, 6 (six) month prior to the end of the term or automatic extension.

Territory: The United States of America, its territories and possessions, and the Commonwealth of Puerto Rico, Canada, and the entire Central and South America, Latin America region.

Purchases: At time of purchase order placement, a down payment of fifty percent (50%) of the purchase value will be remitted.

In-Licensing Fee: We would agree to pay the In-Licensing Fee of the Product by USD 200,000. The upfront payment by 40% (USD 80,000: SUNGEN pays USD 40,000 and ATHENEX pays USD 40,000) of the In-Licensing Fee will be made after signing of this document. 60% (USD 120,000: SUNGEN pays USD 60,000 and ATHENEX pays USD 60,000) of the fee will be made when FDA grants the ANDAs approval of the Product.

GDUFA Fee Sharing: 8% of annual GDUFA (facility) fee shall be paid to UBIP from 2018 fiscal year onward. SUNGEN and ATHENEX will share the 8% GDUFA fee equally (SUNGEN pays 4% of total and ATHENEX pays 4% of total).

ANDA Fee: We agree to pay 50% of the ANDA fee (2017 fiscal year) of the Product to ANDA holder. SUNGEN will pay 25% of total and ATHENEX will pay 25% of total.

Transfer Price: The initial Product launching transfer price is agreed by two parties to be ex-work Taiwan at USD $*** per vial for the 1ml volume configuration (4mcg) and USD $*** per vial for the 10m1 volume configuration (40mcg). The Transfer Price shall be established on July of each calendar year and shall remain fixed for the next twelve (12) months. The Transfer Price shall increase or decrease based upon changes in the actual cost of components, only if the costs exceed or below 10% of Transfer Price of the Product including API and container-closure system. The payment of Transfer Price shall be made to UBIP within sixty (60) days from the date of the Invoice date.

Profit Sharing: UBI and PETERSON ATHENEX shall each retain 50% of the profit. PETERSON ATHENEX will share its 50% of the total profit with 25% going to SUNGEN and 25% to ATHENEX.

*** = Portions of this exhibit have been omitted pursuant to a request for confidential treatment. An unredacted version of this exhibit has been filed separately with the Commission.

EXHIBIT A

DRUG PRODUCT RELEASE SPECIFICATIONS

***	***	***
***	***	***
***	***	***
***	***	***
***	***	***
***	***	***
***	***	***
***	***	***
***	***	***
***	***	***
***	***	***
***	***	***

*** = Portions of this exhibit have been omitted pursuant to a request for confidential treatment. An unredacted version of this exhibit has been filed separately with the Commission.

EXHIBIT B

DRUG PRODUCT STABILITY SPECIFICATIONS

	***	***	***
1.	***	***	***
2.	***	***	***
3.	***	***	***
4.	***	***	***
5.	***	***	***
6.	***	***	***
7.	***	***	***
8.	***	***	***
9.	***	***	***
10.	***	***	***

*** = Portions of this exhibit have been omitted pursuant to a request for confidential treatment. An unredacted version of this exhibit has been filed separately with the Commission.

EXHIBIT C

ANNUAL FORECAST TARGETS

	Units.
	***	***	***	***	***	***	***
***	***	***	***	***	***	***	***
***	***	***	***	***	***	***	***

• ***

• ***

• ***

• ***

*** = Portions of this exhibit have been omitted pursuant to a request for confidential treatment. An unredacted version of this exhibit has been filed separately with the Commission.

SunGen Pharma LLC	Athenex Pharmaceuticacl Division, LLC
Signature	Signature
Print Name	Print Name
Title	Title

*** = Portions of this exhibit have been omitted pursuant to a request for confidential treatment. An unredacted version of this exhibit has been filed separately with the Commission.

EX-10

Exhibit 10.15.2

LIMITED LIABILITY COMPANY AGREEMENT

OF PETERSON ATHENEX PHARMACEUTICALS, LLC

This Limited Liability Company of Peterson Athenex Pharmaceuticals, LLC, a Delaware limited liability company (“Company”), is entered into as of October 4^th, 2016 by and among the Company, and SunGen Pharma LLC, a New Jersey limited liability company (“SunGen” dba “Peterson Pharmaceutical”) and Athenex Pharmaceutical Division, a division of Athenex, Inc., a Delaware corporation (“Athenex”).

RECITALS

A. SunGen and Athenex previously entered into a Joint Venture Agreement made as of September 22, 2016 (the “Joint Venture Agreement”). The purpose of the Joint Venture Agreement is to document the agreement of SunGen and Athenex with respect to their joint efforts to develop human Rx, including 503(b) compounding, pharmaceutical products.

B. The Joint Venture Agreement contemplates the formation of a Delaware limited liability company in relation to the business operations contemplated by the Joint Venture Agreement.

C. Consistent with the Joint Venture Agreement, the Company was formed under the laws of the State of Delaware by the filing of a Certificate of Formation with the Secretary of State of the State of Delaware on October     , 2016 (“Certificate of Formation”) for the purposes set forth in Section 2.05 of this Agreement.

D. The Members now wish to enter into this Agreement to set forth the terms and conditions governing the operation and management of the Company, in a manner that is consistent with the intent and purpose of the Joint Venture Agreement.

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

ARTICLE I

DEFINITIONS

Section 1.01 The definitions set forth in Exhibit A are hereby incorporated into this Agreement.

ARTICLE II

ORGANIZATION

Section 2.01 Formation. The Company was formed on October     , 2016, pursuant to the provisions of the Delaware Act, upon the filing of the Certificate of Formation with the Secretary of State of the State of Delaware.

Section 2.02 Name. The name of the Company is “Peterson Athenex Pharmaceuticals,

Section 2.03 Principal Office. The principal office of the Company shall be located at 303C College Road East, Princeton, New Jersey 08540 or such other location as may be determined by the Board from time to time.

Section 2.04 Registered Office; Registered Agent.

(a) The registered office of the Company shall be the office of the initial registered agent named in the Certificate of Formation or such other office (which need not be a place of business of the Company) as the Board may designate from time to time.

(b) The registered agent for service of process on the Company in the State of Delaware shall be the initial registered agent named in the Certificate of Formation or such other Person or Persons as the Company may designate from time to time.

Section 2.05 Purpose; Powers.

(a) The purposes of the Company are to engage in (i) the business of developing and commercializing certain human Rx, including 503(b) compounding, pharmaceutical products as contemplated by the terms of the Joint Venture Agreement as the same may be amended from time to time (the “Business”) and (ii) any and all activities necessary or incidental thereto.

(b) The Company shall have all of the powers necessary or convenient to carry out the purposes for which it is formed, including the powers granted by the Delaware Act.

Section 2.06 Term. The term of the Company commenced on the date the Certificate of Formation was filed with the Secretary of State of the State of Delaware and shall continue in existence perpetually until the Company is dissolved in accordance with the provisions of this Agreement.

ARTICLE III

CAPITAL CONTRIBUTIONS; CAPITAL ACCOUNTS

Section 3.01 Initial Contribution Commitments. Each Member commits to make (a) the contributions set forth in the Joint Venture Agreement (“Initial Contribution Commitment”) and (b) such additional Contributions as may be determined in accordance with Section 3.02.

Section 3.02 Procedures for Contributions.

(a) If any Member fails to make its Contributions in a timely manner, then the Company shall give such Member (a “Non-Contributing Member”) a notice of default. If the Non-Contributing Member fails to make all of such Member’s required Contribution, then the Manager appointed by the Non-Contributing Member shall be deemed to have resigned and the Non-Contributing Member shall not have the right to vote on any matter on which the Members may vote or to appoint a Manager. In addition, notwithstanding any other provisions of this Agreement, any amount that otherwise would be paid or distributed to a Non-Contributing Member pursuant to Article VI shall not be paid to the Non-Contributing Member but shall be deemed paid and applied on behalf of such Non-Contributing Member to satisfy any Contribution obligation of such Non-Contributing Member that has not been paid and is not deemed to have been paid.

2

Section 3.03 Maintenance of Capital Accounts. The Company shall establish and maintain for each Member a separate capital account (“Capital Account”) on its books and records. The Members intend that the Capital Accounts shall be determined and maintained throughout the full term of the Company in accordance with the partnership accounting rules of Section 704 of the Code and Treasury Regulations §1.704-1(b), as amended. Each Capital Account shall be established and maintained in accordance with the following provisions:

(a) Each Member’s Capital Account shall be increased by the amount of:

(i) the value of such Member’s Contributions, including such Member’s Initial Contribution and any additional Contributions;

(ii) any Net Income or other item of income or gain allocated to such Member pursuant to Article V; and

(iii) any liabilities of the Company that are assumed by such Member or secured by any property distributed to such Member.

(b) Each Member’s Capital Account shall be decreased by:

(i) the cash amount or Book Value of any property distributed to such Member pursuant to Article VI and Section 11.03(c);

(ii) the amount of any Net Loss or other item of loss or deduction allocated to such Member pursuant to Article V; and

(iii) the amount of any liabilities of such Member assumed by the Company or that are secured by any property contributed by such Member to the Company.

Section 3.04 Succession Upon Transfer. In the event that any Membership Interests are Transferred in accordance with the terms of this Agreement, the Transferee shall succeed to the Capital Account of the Transferor to the extent it relates to the Transferred Membership Interests and, subject to Section 5.04, shall receive allocations and distributions pursuant to Article V, Article VI and Article XI in respect of such Membership Interests.

Section 3.05 Negative Capital Accounts. In the event that any Member shall have a deficit balance in its Capital Account, such Member shall have no obligation, during the term of the Company or upon dissolution or liquidation thereof, to restore such negative balance or make any Contributions to the Company by reason thereof, except as may be required by Applicable Law or in respect of any negative balance resulting from a withdrawal of capital or dissolution in contravention of this Agreement.

Section 3.06 No Withdrawals From Capital Accounts. No Member shall be entitled to withdraw any part of its Capital Account or to receive any distribution from the Company, except as otherwise provided in this Agreement. No Member shall receive any interest with

3

respect to its Capital Contributions or its Capital Account. The Capital Accounts are maintained for the sole purpose of allocating items of income, gain, loss and deduction among the Members and shall have no effect on the amount of any distributions to any Members, in liquidation or otherwise.

Section 3.07 Treatment of Loans From Members. Loans by any Member to the Company shall not be considered Capital Contributions and shall not affect the maintenance of such Member’s Capital Account, other than to the extent provided in Section 3.03(a)(iii), if applicable.

ARTICLE IV

MEMBERS

Section 4.01 Members. The Members are those persons or entities set forth on Schedule A and their successors and permitted assigns and any other persons or entities who have been duly admitted as Members pursuant to this Agreement. A Member shall act solely through its designated Manager identified on Schedule A.

Section 4.02 Admission of New Members

(a) The Company may admit new or substitute Members with the unanimous approval of the Board and solely in accordance with this Agreement.

(b) In order for any Person to be admitted as a Member, such Person shall have executed and delivered to the Company a joinder agreement or other written undertaking agreeing to be a party to this Agreement. Upon amendment of Schedule A of the Agreement by the Company and the satisfaction of any other applicable conditions, including the receipt by the Company of payment for the issuance of Membership Interests and reimbursement of the Company’s related costs, such Person shall be admitted as a Member. The Company shall not be required to deal with any Person by reason of an assignment by a Member to such Person, except as otherwise provided in this Agreement.

Section 4.03 No Personal Liability. Except as otherwise provided in the Delaware Act, by Applicable Law or expressly in this Agreement, no Member will be obligated personally for any debt, obligation or liability of the Company or other Members, whether arising in contract, tort or otherwise, solely by reason of being a Member.

Section 4.04 Withdrawal Rights. A Member shall have no ability to withdraw or resign as a Member prior to the dissolution and winding up of the Company, unless approved by the unanimous consent of the Members acting in their sole discretion. If any Member wishes to withdraw, such Member shall give notice to the other Members.

Section 4.05 No Interest in Company Property. No real or personal property of the Company shall be deemed to be owned by any Member individually, but shall be owned by, and title shall be vested solely in, the Company. Without limiting the foregoing, each Member hereby irrevocably waives during the term of the Company any right that such Member may have to maintain any action for partition with respect to the property of the Company.

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Section 4.06 No Certification of Membership Interests. The Membership Interests shall not be certificated.

ARTICLE V

ALLOCATIONS

Section 5.01 Allocation of Net Income and Net Loss. For each Fiscal Year (or portion thereof), after giving effect to the special allocations set forth in Section 5.02, Net Income and Net Loss of the Company shall be allocated among the Members pro rata in accordance with their Membership Interests.

Section 5.02 Regulatory and Special Allocations. Notwithstanding the provisions of Section 5.01:

(a) If there is a net decrease in Company Minimum Gain (determined according to Treasury Regulations Section 1.704-2(d)(1)) during any Fiscal Year, each Member shall be specially allocated Net Income for such Fiscal Year (and, if necessary, subsequent Fiscal Years) in an amount equal to such Member’s share of the net decrease in Company Minimum Gain, determined in accordance with Treasury Regulations Section 1.704-2(g). The items to be so allocated shall be determined in accordance with Treasury Regulations Sections 1.704-2(f)(6) and 1.704-2(j)(2). This Section 5.02 is intended to comply with the “minimum gain chargeback” requirement in Treasury Regulations Section 1.704-2(f) and shall be interpreted consistently therewith.

(b) Member Nonrecourse Deductions shall be allocated in the manner required by Treasury Regulations Section 1.704-2(i). Except as otherwise provided in Treasury Regulations Section 1.704-2(i)(4), if there is a net decrease in Member Nonrecourse Debt Minimum Gain during any Fiscal Year, each Member that has a share of such Member Nonrecourse Debt Minimum Gain shall be specially allocated Net Income for such Fiscal Year (and, if necessary, subsequent Fiscal Years) in an amount equal to that Member’s share of the net decrease in Member Nonrecourse Debt Minimum Gain. Items to be allocated pursuant to this paragraph shall be determined in accordance with Treasury Regulations Sections 1.704-2(i)(4) and 1.704-2(j)(2). This Section 5.02(b) is intended to comply with the “minimum gain chargeback” requirements in Treasury Regulations Section 1.704-2(i)(4) and shall be interpreted consistently therewith.

(c) Nonrecourse Deductions shall be allocated to the Members in accordance with their Membership Interests.

(d) In the event any Member unexpectedly receives any adjustments, allocations or distributions described in Treasury Regulations Section 1.704-1(b)(2)(ii)(d)(4), (5) or (6), Net Income shall be specially allocated to such Member in an amount and manner sufficient to eliminate the Adjusted Capital Account Deficit created by such adjustments, allocations or distributions as quickly as possible. This Section 5.02(d) is intended to comply with the qualified income offset requirement in Treasury Regulations Section 1.704-1(b)(2)(ii)(d) and shall be interpreted consistently therewith.

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(e) The allocations set forth in paragraphs (a), (b), (c) and (d) above (“Regulatory Allocations”) are intended to comply with certain requirements of the Treasury Regulations under Code Section 704. Notwithstanding any other provisions of this Article V (other than the Regulatory Allocations), the Regulatory Allocations shall be taken into account in allocating Net Income and Net Losses among Members so that, to the extent possible, the net amount of such allocations of Net Income and Net Losses and other items and the Regulatory Allocations to each Member shall be equal to the net amount that would have been allocated to such Member if the Regulatory Allocations had not occurred.

Section 5.03 Tax Allocations.

(a) Subject to Section 5.03(b), Section 5.03(c) and Section 5.03(d), all income, gains, losses and deductions of the Company shall be allocated, for federal, state and local income tax purposes, among the Members in accordance with the allocation of such income, gains, losses and deductions pursuant to Section 5.01 and Section 5.02, except that if any such allocation for tax purposes is not permitted by the Code or other Applicable Law, the Company’s subsequent income, gains, losses and deductions shall be allocated among the Members for tax purposes, to the extent permitted by the Code and other Applicable Law, so as to reflect as nearly as possible the allocation set forth in Section 5.01 and Section 5.02.

(b) Items of Company taxable income, gain, loss and deduction with respect to any property contributed to the capital of the Company shall be allocated among the Members in accordance with Code Section 704(c) and the traditional method with curative allocations of Treasury Regulations Section 1.704-3(c), so as to take account of any variation between the adjusted basis of such property to the Company for federal income tax purposes and its Book Value.

(c) If the Book Value of any Company asset is adjusted pursuant to Treasury Regulations Section 1.704-1(b)(2)(iv)(f) as provided in clause (c) of the definition of Book Value, subsequent allocations of items of taxable income, gain, loss and deduction with respect to such asset shall take account of any variation between the adjusted basis of such asset for federal income tax purposes and its Book Value in the same manner as under Code Section 704(c).

(d) Allocations of tax credit, tax credit recapture and any items related thereto shall be allocated to the Members according to their interests in such items as determined by the Managing Member taking into account the principles of Treasury Regulations Section 1.704- 1(b)(4)(ii).

(e) Allocations pursuant to this Section 5.03 are solely for purposes of federal, state and local taxes and shall not affect, or in any way be taken into account in computing, any Member’s Capital Account or share of Net Income, Net Losses, distributions or other items pursuant to any provisions of this Agreement.

Section 5.04 Allocations in Respect of Transferred Membership Interests. In the event of a Transfer of Membership Interests during any Fiscal Year made in compliance with the provisions of Article IX, Net Income, Net Losses and other items of income, gain, loss and deduction of the Company attributable to such Membership Interests for such Fiscal Year shall be determined using the interim closing of the books method.

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ARTICLE VI

DISTRIBUTIONS

Section 6.01 Distributions of Cash Flow and Capital Proceeds.

(a) Any available cash of the Company, after allowance for all reasonable costs and expenses incurred by the Company and for such reasonable reserves as contemplated in the Budget, may be distributed to the Members at such time as determined by the Board, in accordance with their respective Membership Interests.

(b) If a Member has (i) an unpaid Contribution that is overdue any amount that otherwise would be distributed to such Member pursuant to Section 6.01(a) or Section 11.06 (up to the amount of such required Contribution) shall not be paid to such Member but shall be deemed distributed to such Member and paid as a Contribution.

Section 6.02 Tax Withholding; Withholding Advances.

(a) Tax Withholding. If requested by the Company, each Member shall deliver to the Company:

(i) an affidavit in form satisfactory to the Company that the applicable Member (or its members, as the case may be) is not subject to withholding under the provisions of any federal, state, local, foreign or other Applicable Law; and/or

(ii) any certificate or other instrument that the Company may reasonably request with respect to any such laws.

If a Member fails or is unable to deliver to the Company the affidavit described in Section 6.02(a)(i), the Company may withhold amounts from such Member in accordance with Section 6.02(b).

(b) Withholding Advances. The Company is hereby authorized at all times to make payments (“Withholding Advances”) with respect to each Member in amounts required to discharge any obligation of the Company to withhold or make payments to any federal, state, local or foreign taxing authority (“Taxing Authority”) with respect to any distribution or allocation by the Company of income or gain to such Member and to withhold the same from distributions to such Member. Any funds withheld from a distribution by reason of this Section 6.02(b) shall nonetheless be deemed distributed to the Member in question for all purposes under this Agreement.

(c) Repayment of Withholding Advances. Any Withholding Advance made by the Company to a Taxing Authority on behalf of a Member and not simultaneously withheld from a distribution to that Member shall, with interest thereon accruing from the date of payment at the applicable federal rate as determined under the Code:

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(i) be promptly repaid to the Company by the Member on whose behalf the Withholding Advance was made (which repayment by the Member shall not constitute a Capital Contribution, but shall credit the Member’s Capital Account if the Managing Member shall have initially charged the amount of the Withholding Advance to the Capital Account); or

(ii) with the consent of the Company, be repaid by reducing the amount of the next succeeding distribution or distributions to be made to such Member (which reduction amount shall be deemed to have been distributed to the Member, but which shall not further reduce the Member’s Capital Account if the Managing Member shall have initially charged the amount of the Withholding Advance to the Capital Account).

Interest shall cease to accrue from the time the Member on whose behalf the Withholding Advance was made repays such Withholding Advance (and all accrued interest) by either method of repayment described above.

(d) Indemnification. Each Member hereby agrees to indemnify and hold harmless the Company and the other Members from and against any liability with respect to taxes, interest or penalties that may be asserted by reason of the Company’s failure to deduct and withhold tax on amounts distributable or allocable to such Member. The provisions of this Section 6.02(d) and the obligations of a Member pursuant to Section 6.02(c) shall survive the termination, dissolution, liquidation and winding up of the Company and the withdrawal of such Member from the Company or Transfer of its Membership Interests. The Company may pursue and enforce all rights and remedies it may have against each Member under this Section 6.02, including bringing a lawsuit to collect repayment with interest of any Withholding Advances.

(e) Over-withholding. The Company shall not be liable for any excess taxes withheld in respect of any distribution or allocation of income or gain to a Member. In the event of an over-withholding, a Member’s sole recourse shall be to apply for a refund from the appropriate Taxing Authority.

ARTICLE VII

MANAGEMENT

Section 7.01 Management of the Company. The business and affairs of the Company shall be managed by a Board of Managers (“Board”) as set forth in this Article 7. Except as otherwise expressly provided in other provisions of this Agreement, all management powers over the business and affairs of the Company shall be exclusively vested in the Board, and the Members (except as expressly set forth herein) shall not have any right of control or management power over the business and affairs of the Company. Except as otherwise expressly provided in this Agreement, in addition to the powers now or hereafter granted to a manager of a limited liability company under the Act, or which are granted to the Board under any other provisions of this Agreement, the Board shall have full power and authority without any prior approval from any Member to cause the Company to do all things deemed necessary or desirable by the Board to conduct the business of the Company.

Section 7.02 Size of the Board; Appointment and Removal of Managers. The Board shall consist of four (4) individuals, each referred to herein as a “Manager.” Each of the initial Members shall have the right to appoint two (2) Managers to the Board. Any vacancy in the Board shall be filled by the Member whose designated Manager created the vacancy.

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Section 7.03 Meetings of the Board.

(a) Meetings of the Board (each, a “Board Meeting”) shall be held at such place designated by a majority of the Managers. At a minimum, meetings of the Board shall be held following the end of each calendar quarter and following the issuance of quarterly reports of sales of the Company to the Board. A Board Meeting also may be called by any Manager for any matter that is appropriate for consideration.

(b) Board Meetings may be held through the use of conference telephone or similar communications equipment so long as all persons participating in such Board Meetings can hear one another at the time of such Board Meeting. Participation in a Board Meeting via conference telephone or similar communications equipment in accordance with the preceding sentence constitutes presence in person at the Board Meeting.

(c) Written notice of a Board Meeting may be given by any Manager and shall be given to each other Manager at such other Manager’s designated address, or in person or by telephone, so that it is received at least five (5) business days before the meeting.

(d) Notice of a Board Meeting need not be given to any Manager who signs a waiver of notice, in person or by proxy, whether before or after the Board Meeting. The attendance of any Manager at a Board Meeting, in person or by proxy, without protesting prior to the conclusion of such Board Meeting the lack of notice of such Board Meeting, shall constitute a waiver of notice by such Manager.

(e) The attendance whether in person or as set forth in subparagraph (c) above of at least a majority of the Managers shall constitute a quorum at a Board Meeting for the transaction of any business. Unless otherwise provided in this Agreement, the vote of the majority of the Managers shall be the act of the Board.

(f) Each Manager shall have one vote on all matters to be voted on by the Board.

(g) Any action required or permitted to be taken at any Board Meeting may be taken without a meeting if such number of Managers required to take any such action consent thereto in writing. Any such written consents shall be filed with the books and records of the Company and made part of the minutes of such action.

Section 7.04 Officers; Agents. The Board may delegate its day-to-day operational authority to executive and non-executive officers (which persons may be given further delegation authority) pursuant to a resolution of the Board (which resolution(s) shall be reduced to writing as soon as practicable after the adoption thereof). The Board may also appoint successor officers or other officers of the Company, who may include one or more vice presidents, a secretary and one or more assistant secretaries. Employment policies and compensation (including all benefits) of officers and key employees, whether or not appointed pursuant to this Section 7.04, shall be determined by the Board in its sole discretion, and any modifications to such policies or compensation shall be subject to Board approval. Any number of offices may be held by the

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same person. The Board may choose such other agents to act on behalf of the Company as the Board shall deem necessary in its sole discretion. The officers of the Company shall hold their offices for such terms and shall exercise such powers and perform such duties as shall be determined from time to time by the Board.

Section 7.05 Actions Requiring Supermajority Approval of the Board. Notwithstanding the provisions of Sections 7.01, 4.02 and 9.01 hereof:

(a) without the written approval of Board members acting as representatives of the holders of at least 60% of the Membership Interests, the Company will not:

(i) Amend, modify or waive the Certificate of Formation or this Agreement;

(ii) Issue, repurchase or approve the Transfer any Membership Interests, or any transaction that would result in a change of ownership or control of the Company;

(iii) Require Contributions in excess of the Initial Contribution Commitments;

(iv) Dissolve, wind-up or liquidate the Company or initiate a bankruptcy proceeding involving the Company.

(v) Make any material change to the nature of the Business conducted by the Company or enter into any business other than the Business;

(vi) License or sell to a non-Member any product or intellectual property of the Company;

(vii) Incur indebtedness;

(viii) Enter into a joint venture or strategic alliance with any other party;

(ix) Sell any material portion of the assets of the Company, other than the sale of products or services of the Company in the ordinary course of business;

(x) Hire or agree to hire any Company employees;

(xi) Make any distributions or in any way change the methods of determining the manner in which distributions are to be made under this Agreement;

(xii) Alter the tax elections or tax status of the Company, including without limitation as applied to allocations of profits and losses and distributions;

(xiii) Establish or amend the Company’s sales or marketing plans or strategies;

(xiv) Engage accountants, attorneys or other consultants that will provide services to the Company; or

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(xv) Place additional products that may be acquired or developed as products of the Company.

Section 7.06 Budget. At least thirty (30) days before the beginning of each Fiscal Year, the Company shall prepare or have prepared and submit to the Board proposed revisions (including any extensions thereof) to the Budget for such upcoming Fiscal Year. Not later than thirty (30) days following its receipt of the proposed revisions, the Board shall either approve or disapprove the revised Budget. If the Board disapproves of the proposed revisions, then the Board shall use good faith efforts to agree on a revised Budget. The Board shall use commercially reasonable efforts to operate the Company in accordance with the existing Budget until a revised Budget is approved by the Board. In accordance with Section 7.05 (b)(iii) above no Revised Budget shall be approved requiring Contributions in excess of the Initial Contribution Commitments without the unanimous approval of the Members.

Section 7.07 Other Activities; Business Opportunities. Nothing contained in this Agreement shall prevent any Member or its Affiliates from engaging in any activities or businesses, regardless of whether those activities or businesses are similar to or competitive with the Business, except to the extent agreed to in the Joint Venture Agreement. None of the Members nor their Affiliates shall be obligated to account to the Company or to the other Members for any profits or income earned or derived from other such activities or businesses. None of the Members nor their Affiliates shall be obligated to inform the Company or the other Member of any business opportunity of any type or description.

Section 7.08 Reimbursement of the Board. The Managers shall not be compensated for their services on the Board, but the Company shall reimburse each Manager for all ordinary, necessary and direct expenses incurred by each the Manager on behalf of the Company in carrying out the Company’s business activities.

Section 7.09 Advisory Board. The Board may establish an Advisory Board, the composition of which shall be determined by the Board. If an Advisory Board is established, it shall meet at such times as determined by the Board. The Advisory Board shall provide advice to the Company, but members of the Advisory Board shall have no legal authority or liability of the nature typically imposed upon managers of limited liability companies or directors of corporations.

ARTICLE VIII

EXCULPATION AND INDEMNIFICATION

Section 8.01 Exculpation of Covered Persons.

(a) Covered Persons. As used herein, the term “Covered Person” shall mean (i) each Member, (ii) each officer, director, stockholder, partner, member, Affiliate, employee, agent or representative of each Member, and each of their Affiliates; and (iii) each Manager, Officer, employee, agent or representative of the Company.

(b) Standard of Care. No Covered Person shall be liable to the Company or any other Covered Person for any loss, damage or claim incurred by reason of any action taken or omitted to be taken by such Covered Person in good faith reliance on the provisions of this Agreement, so long as such action or omission does not constitute fraud, gross negligence, willful misconduct or a material breach of this Agreement by such Covered Person.

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Section 8.02 Limitation of Liability. This Agreement is not intended to, and does not, create or impose any fiduciary duty on any Covered Person. Furthermore, each of the Members and the Company hereby waives any and all fiduciary duties that, absent such waiver, may be implied by Applicable Law, and in doing so, acknowledges and agrees that the duties and obligation of each Covered Person to each other and to the Company are only as expressly set forth in this Agreement.

Section 8.03 Indemnification.

(a) The Company shall indemnify, defend and hold harmless each Covered Person, and each such Person’s present or former Affiliates, officers, directors, managers, partners, members, shareholders, employees and agents (each, an “Indemnified Person”) from and against any and all losses, claims, damages, liabilities, expenses (including reasonable legal fees and expenses), judgments, fines, settlements and other amounts relating to any and all third-party claims, demands, actions, suits or proceedings, whether civil, criminal, administrative or investigative, actual or threatened, that relate to such Indemnified Person’s status or activities on behalf of the Company or to the Company’s property, business or affairs (“Claims”) to the maximum extent permitted by applicable law. An Indemnified Person’s expenses paid or incurred in defending itself against any Claim shall be reimbursed as paid or incurred, if such Indemnified Person executes an undertaking to repay the amount so paid or reimbursed if there is a final determination by a court of competent jurisdiction that such Indemnified Person is not entitled to indemnification under this Section 8.03. Any Person who is within the definition of “Indemnified Person” at the time the events that gave rise to a Claim occurred shall be entitled to the benefits of this Section 8.03 as an “Indemnified Person” with respect thereto, regardless of whether such Person continues to be within the definition of “Indemnified Person” at the time of such Indemnified Person’s claim for indemnification or exculpation hereunder. The indemnification and advancement of expenses provided by, or granted pursuant to, this Section 8.03 shall, unless otherwise provided when authorized or ratified, continue as to an Indemnified Person who has ceased to be such. This Section 8.03 shall not apply with respect to any Indemnified Person for that portion of any Claim determined by the final decision (from which an appeal cannot be taken or is not taken on a timely basis) of a court of competent jurisdiction to have been caused by his or its fraud, gross negligence, willful misconduct or knowing violation of law. Any payments made to or on behalf of a Person who is later determined not to be entitled to such payments shall be refunded to the Company promptly following such determination. Notwithstanding anything contained herein to the contrary, a Member shall not be obligated to make any additional Capital Contributions to the Company or to any Indemnified Person in order to satisfy the Company’s obligation under this Section 8.03, and such obligations of the Company shall be recoverable only from the assets of the Company and not from any assets of the Members.

(b) The right to indemnification and the advancement of expenses conferred in this Section 8.03 shall not be exclusive of any other right which any Person may have or hereafter acquire under any statute, agreement, vote of the Board or otherwise.

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(c) The Company may maintain insurance, at its expense, to protect any Person against any expense, liability or loss, to the extent that the Company would have the power to indemnify such Person against such expense, liability or loss under the Act including Managers and officers indemnity insurance satisfactory to the Board.

(d) The provisions of this Section 8.03 are for the benefit of the Indemnified Persons, their heirs, successors, assigns and administrators and shall not be deemed to create any rights for the benefit of any other Persons.

Section 8.04 Survival. The provisions of this Article VIII shall survive the dissolution, liquidation, winding up and termination of the Company.

ARTICLE IX

TRANSFER

Section 9.01 Restrictions on Transfer.

(a) No Member shall Transfer all or any portion of its Membership Interest in the Company without the unanimous written consent of the Board, which consent may be granted or withheld in the sole discretion of the Board. No Transfer of Membership Interests to a Person not already a Member of the Company shall be deemed completed until the prospective Transferee is admitted as a Member of the Company in accordance with Section 4.02(b) hereof.

(b) Any Transfer or attempted Transfer of any Membership Interest in violation of this Agreement shall be null and void, no such Transfer shall be recorded on the Company’s books and the purported Transferee in any such Transfer shall not be treated (and the purported Transferor shall continue be treated) as the owner of such Membership Interest for all purposes of this Agreement. For the avoidance of doubt, such purported Transferee shall only be entitled to the assignor’s rights to distributions as and when determined by the Board and shall have no voting rights or the right to obtain any information regarding the Company or the right to inspect the Company’s books and records.

(c) For the avoidance of doubt, any Transfer of a Membership Interest permitted by this Agreement shall be deemed a sale, transfer, assignment or other disposal of such Membership Interest in its entirety as intended by the parties to such Transfer, and shall not be deemed a sale, transfer, assignment or other disposal of any less than all of the rights and benefits described in the definition of the term “Membership Interest,” unless otherwise explicitly agreed to by the parties to such Transfer.

(d) A Change in Control of a Member shall be deemed a Transfer of a Membership Interest. In the absence of unanimous written consent of the Board to such Transfer, the affected Member shall be deemed to have withdrawn from the Company in accordance with Section 4.04 hereof.

Section 9.02 Permitted Transfers. The provisions of Section 9.01(a) shall not apply to any Transfer by any Member of all or any portion of its Membership Interest to its Affiliate (provided there is no Change in Control).

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ARTICLE X

ACCOUNTING; TAX MATTERS

Section 10.01 Financial Statements. The Company shall furnish to each Member the following reports:

(a) Annual Financial Statements. As soon as available, and in any event within one hundred twenty (120) days after the end of each Fiscal Year, the unaudited balance sheet of the Company at the end of each such Fiscal Year and statement of income, and Members’ equity for such Fiscal Year, prepared on a basis of accounting agreed by the Members, which fairly presents in all material respects the financial condition of the Company as of the dates thereof and the results of the Company’s operations and changes in Members’ equity for the periods covered thereby.

(b) Periodic Financial Statements. As soon as available, and in any event within forty-five (45) days after the end of calendar quarter in each Fiscal Year (other than the last fiscal period of the Fiscal Year) determined by the Board, unaudited balance sheets of the Company as at the end of each such period and for the current Fiscal Year to date and unaudited statement of income, and Members’ equity for such fiscal period and for the current Fiscal Year to date, in each case setting forth in comparative form the figures for the corresponding periods of the previous fiscal period, all in reasonable detail and all prepared on a basis of accounting agreed to by the Members.

Section 10.02 Inspection Rights. Upon reasonable notice from a Member, the Company shall, within thirty (30) days after such notice, afford each Member and its Representatives access during normal business hours to (i) the Company’s financial and similar records, reports and documents of the Company, including, without limitation, all books and records, minutes of proceedings, internal management documents, reports of operations, copies of any management letters and communications with Members, and to permit each Member and its Representatives to examine such documents and make copies thereof; and (ii) any Officers of the Company, and to afford each Member and its Representatives the opportunity to discuss the affairs, finances and accounts of the Company with such Officers and senior employees.

Section 10.03 Income Tax Status. It is the intent of the Company and the Members that the Company shall be treated as a partnership for U.S., federal, state and local income tax purposes. Neither the Company nor any Member shall make an election for the Company to be classified as other than a partnership pursuant to Treasury Regulations Section 301.7701-3.

Section 10.04 Tax Matters Member.

(a) Appointment. The Members hereby appoint          as the “Tax Matters Member” who shall serve as the “tax matters partner” (as such term is defined in Code Section 6231) for the Company.

(b) Tax Examinations and Audits. The Tax Matters Member is authorized and required to represent the Company (at the Company’s expense) in connection with all examinations of the Company’s affairs by Taxing Authorities, including resulting administrative and judicial proceedings, and to expend Company funds for professional services and costs

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associated therewith. Without the consent of the other Members, the Tax Matters Member shall not extend the statute of limitations, file a request for administrative adjustment, file suit relating to any Company tax refund or deficiency or enter into any settlement agreement relating to items of income, gain, loss or deduction of the Company with any Taxing Authority.

(c) Income Tax Elections. The Tax Matters Member will make an election under Section 754 of the Code, if requested in writing by another Member. Except as otherwise provided herein, all determinations as to tax elections and accounting principles shall be made solely by the Tax Matters Member; provided, that any determination that would benefit the Tax Matters Member to the detriment of another Member shall require the consent of the other Member.

(d) Tax Returns and Tax Deficiencies. Each Member agrees that such Member shall not treat any Company item inconsistently on such Member’s federal, state, foreign or other income tax return with the treatment of the item on the Company’s return.

(e) Resignation. The Tax Matters Member may resign at any time if there is another Member to act as the Tax Matters Member.

Section 10.05 Tax Returns. The Company shall prepare and timely file (including extensions) all tax returns required to be filed by the Company pursuant to the Code as well as all other required tax returns in each jurisdiction in which the Company own property or does business. As soon as reasonably possible after the end of each Fiscal Year, the Company will cause to be delivered to each Person who was a Member at any time during such Fiscal Year, IRS Schedule K-1 to Form 1065 and such other information with respect to the Company as may be necessary for the preparation of such Person’s federal, state and local income tax returns for such Fiscal Year.

Section 10.06 Company Funds. All funds of the Company shall be deposited in its name in such checking, savings or other accounts, or held in its name in the form of such other investments as shall be designated by the Company. The funds of the Company shall not be commingled with the funds of any other Person. All withdrawals of such deposits or liquidations of such investments by the Company shall be made exclusively upon the signature or signatures of such Officer or Officers as the Board may designate.

ARTICLE XI

DISSOLUTION AND LIQUIDATION

Section 11.01 Events of Dissolution. The Company shall be dissolved and its affairs wound up only upon the occurrence of any of the following events:

(a) An election to dissolve the Company made by the requisite members of the Board; or

(b) Any event which makes it unlawful for the Business of the Company to be carried on by the Company or its Members.

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Section 11.02 Effectiveness of Dissolution. Dissolution of the Company shall be effective on the day on which the event described in Section 11.01 occurs, but the Company shall not terminate until the winding up of the Company has been completed, the assets of the Company have been distributed as provided in Section 11.03 and the Certificate of Formation shall have been cancelled as provided in Section 11.04.

Section 11.03 Liquidation. If the Company is dissolved pursuant to Section 11.01, the Company shall be liquidated and its business and affairs wound up in accordance with the Delaware Act and the following provisions:

(a) The Board. The Board shall act as liquidator to wind up the Company. The Board shall have full power and authority to sell, assign, and encumber any or all of the Company’s assets and to wind up and liquidate the affairs of the Company in an orderly and business-like manner.

(b) Accounting. As promptly as possible after dissolution and again after final liquidation, the Liquidator shall cause a proper accounting to be made by a recognized firm of certified public accountants of the Company’s assets, liabilities and operations through the last day of the calendar month in which the dissolution occurs or the final liquidation is completed, as applicable.

(c) Distribution of Proceeds. The Board shall liquidate the assets of the Company and distribute the proceeds of such liquidation in the following order of priority, unless otherwise required by mandatory provisions of Applicable Law:

(i) First, to the payment of all of the Company’s debts and liabilities to its creditors (including Members, if applicable) and the expenses of liquidation (including sales commissions incident to any sales of assets of the Company);

(ii) Second, to the establishment of and additions to reserves that are determined by the Board to be reasonably necessary for any contingent unforeseen liabilities or obligations of the Company; and

(iii) Third, to the Members in the same manner as distributions are made under Article VI.

(d) Discretion of Board. Notwithstanding the provisions of Section 11.03(c) that require the liquidation of the assets of the Company, but subject to the order of priorities set forth in Section 11.03(c), if upon dissolution of the Company the Board reasonably determines that an immediate sale of part or all of the Company’s assets would be impractical or could cause undue loss to the Members, the Board may defer the liquidation of any assets except those necessary to satisfy Company liabilities and reserves, and may, with the consent of all of the Members, distribute to the Members, in lieu of cash, as tenants in common and in accordance with the provisions of Section 11.03(c), undivided interests in such Company assets as the Board deems not suitable for liquidation. Any such distribution in kind shall be subject to such conditions relating to the disposition and management of such properties as the Board deems reasonable and equitable and to any agreements governing the operation of such assets at such time. For purposes of any such distribution, any property to be distributed will be valued at its Fair Market Value.

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Section 11.04 Cancellation of Certificate. Upon completion of the distribution of the assets of the Company as provided in Section 11.03(c) hereof, the Company shall be terminated and the Board shall cause the cancellation of the Certificate of Formation in the State of Delaware and of all qualifications and registrations of the Company as a foreign limited liability company in jurisdictions other than the State of Delaware and shall take such other actions as may be necessary to terminate the Company.

Section 11.05 Survival of Rights, Duties and Obligations. Dissolution, liquidation, winding up or termination of the Company for any reason shall not release any party from any Loss that at the time of such dissolution, liquidation, winding up or termination already had accrued to any other party or thereafter may accrue in respect of any act or omission prior to such dissolution, liquidation, winding up or termination. For the avoidance of doubt, none of the foregoing shall replace, diminish or otherwise adversely affect any Member’s right to indemnification pursuant to Section 8.03.

Section 11.06 Recourse for Claims. Each Member shall look solely to the assets of the Company for all distributions with respect to the Company, such Member’s Capital Account, and such Member’s share of Net Income, Net Loss and other items of income, gain, loss and deduction, and shall have no recourse therefor (upon dissolution or otherwise) against the Board or any other Member.

ARTICLE XII

DISPUTE RESOLUTION

Section 12.01 Exclusive Dispute Resolution Mechanism. The parties shall resolve any dispute, controversy or claim or breach arising out of or relating to this Agreement (each, a “Dispute”), under the provisions of Sections 12.01 through 12.04, which shall be the exclusive mechanism for resolving any Dispute that may arise from time to time.

Section 12.02 Negotiations. The parties shall first attempt in good faith to resolve any Dispute by negotiation and consultation between themselves. In the event that such Dispute is not resolved on an informal basis within fifteen (15) days after one Member provides notice to the other Members or the Company of such Dispute (“Dispute Notice”), any party may, by written notice to the other party (“Escalation to Mediation”), initiate mediation under Section 12.03.

Section 12.03 Mediation.

(a) Upon receipt of an Escalation to Mediation notice, the parties shall attempt to settle the Dispute by mediation in accordance with the mediation rules of the JAMS, Inc. (“JAMS”). The parties shall submit to JAMS a joint, written request for mediation, setting forth the subject of the dispute and the relief requested. Unless otherwise agreed by the parties, JAMS shall appoint the mediator. The parties covenant that they will use commercially reasonable efforts in participating in the mediation. The parties agree that the mediator’s fees and expenses and the costs incidental to the mediation will be shared equally between the parties.

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(b) The parties further agree that all offers, promises, conduct and statements, whether oral or written, made in the course of the mediation by any of the parties, their agents, employees, experts and attorneys, and by the mediator and any employees of the mediation service, are confidential, privileged and inadmissible for any purpose, including impeachment, in any litigation, arbitration or other proceeding involving the parties, provided that evidence that is otherwise admissible or discoverable shall not be rendered inadmissible or non-discoverable as a result of its use in the mediation.

Section 12.04 Litigation as a Final Resort. If the Parties cannot resolve a Dispute for any reason, a Party may file suit in accordance with the provisions of Section 13.14.

ARTICLE XIII

GENERAL TERMS

Section 13.01 Expenses. Except as otherwise expressly provided herein, all costs and expenses, including fees and disbursements of counsel, financial advisors and accountants, incurred in connection with the preparation and execution of this Agreement, or any amendment or waiver hereof, and the transactions contemplated hereby shall be paid by the party incurring such costs and expenses.

Section 13.02 Further Assurances. In connection with this Agreement and the transactions contemplated hereby, the Company and each Member hereby agrees, at the request of the Company or any other Member, to execute and deliver such additional documents, instruments, conveyances and assurances and to take such further actions as may be required to carry out the provisions hereof and give effect to the transactions contemplated hereby.

Section 13.03 Confidentiality.

(a) Each Member acknowledges that during the term of this Agreement, it will have access to and become acquainted with trade secrets, proprietary information and confidential information belonging to the Company and its Affiliates that are not generally known to the public, including, but not limited to, information concerning business plans, technology development, financial statements and other information provided pursuant to this Agreement, operating practices and methods, expansion plans, strategic plans, marketing plans, contracts, or other business and technical documents or information that the Company treats as confidential, in any format whatsoever (including oral, written, electronic or any other form or medium) (collectively, “Confidential Information”). In addition, each Member acknowledges that: (i) the Company will invest, substantial time, expense and specialized knowledge in developing its Confidential Information; (ii) the Confidential Information provides the Company with a competitive advantage over others in the marketplace; and (iii) the Company would be irreparably harmed if the Confidential Information were disclosed to competitors or made available to the public. Without limiting the applicability of any other agreement to which any Member is subject, no Member shall, directly or indirectly, disclose or use (other than solely for the purposes of such Member monitoring and analyzing its investment in the Company), including, without limitation, use for personal, commercial or proprietary advantage or profit, any Confidential Information of which such Member is or becomes aware. Each Member in possession of Confidential Information shall take all appropriate steps to safeguard such

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information and to protect it against disclosure, misuse, espionage, loss and theft. Each Member acknowledges that certain of its employees and/or contractors may have access to Confidential Information, and each such Member agrees to take appropriate action to require that all such employees and/or contractors maintain the confidentiality of Confidential Information.

(b) Nothing contained in Section 13.03(a) shall prevent any Member from disclosing Confidential Information: (i) upon the order of any court or administrative agency; (ii) upon the request or demand of any regulatory agency or authority having jurisdiction over such Member; (iii) to the extent compelled by legal process or required or requested pursuant to subpoena, interrogatories or other discovery requests; (iv) to the extent necessary in connection with the exercise of any remedy hereunder; (v) to the other Members; or (vi) to such Member’s Representatives who, in the reasonable judgment of such Member, need to know such Confidential Information and agree to be bound by the provisions of this Section 13.03 as if a Member; provided, that in the case of clause (i), (ii) or (iii), such Member shall notify the Company and other Members of the proposed disclosure as far in advance of such disclosure as practicable (but in no event make any such disclosure before notifying the Company and other Members) and use reasonable efforts to ensure that any Confidential Information so disclosed is accorded confidential treatment satisfactory to the Company, when and if available.

(c) The restrictions of Section 13.03(a) shall not apply to Confidential Information that: (i) is or becomes generally available to the public other than as a result of a disclosure by a Member in violation of this Agreement; (ii) is or has been independently developed or conceived by such Member without use of Confidential Information; or (iii) becomes available to such Member or any of its Representatives on a non-confidential basis from a source other than the Company, any other Member or any of their respective Representatives, provided, that such source is not known by the receiving Member to be bound by a confidentiality agreement regarding the Company.

(d) The obligations of each Member under this Section 13.03 shall survive during the term of this Agreement, whether or not such Member remains a Member.

Section 13.04 Non-Solicitation. Each Member agrees that while it is a Member of the Company and for a period of twelve (12) months thereafter, it shall not, on its own behalf or on behalf of any other person or entity solicit, induce or attempt to solicit or induce any then current employee of the Company (who is not then also employed by such Member) to terminate or modify his or her relationship with the Company.

Section 13.05 Notices. All notices, requests, consents, claims, demands, waivers and other communications hereunder shall be in writing and shall be deemed to have been given: (a) when delivered by hand (with written confirmation of receipt); (b) when received by the addressee if sent by a nationally recognized overnight courier (receipt requested); (c) on the date sent by email of a PDF document if sent during normal business hours of the recipient, and on the next Business Day if sent after normal business hours of the recipient; or (d) on the third day after the date mailed, by certified or registered mail, return receipt requested, postage prepaid. Such communications must be sent to the respective parties at the following addresses (or at such other address for a party as shall be specified in a notice given in accordance with this Section 13.04):

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If to the Company:	Isaac Liu
	isaac.liu@sungenpharm.com
	E-mail:
	Attention:
If to SunGen:	Isaac Liu
	isaac.liu@sungenpharm.com
	E-mail:
	Attention:
If to Athenex:	James Hussey
	jhussey@athenex.com
	E-mail:
	Attention:

Section 13.06 Severability. If any term or provision of this Agreement is held to be invalid, illegal or unenforceable under Applicable Law in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other term or provision of this Agreement or invalidate or render unenforceable such term or provision in any other jurisdiction.

Section 13.07 Entire Agreement. This Agreement, together with the Certificate of Formation and all related Exhibits and Schedules, constitutes the sole and entire agreement of the parties to this Agreement with respect to the subject matter contained herein and therein, and supersedes all prior and contemporaneous understandings, agreements, representations and warranties, both written and oral, with respect to such subject matter.

Section 13.08 Successors and Assigns. Subject to the restrictions on Transfers set forth herein, this Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective heirs, executors, administrators, successors and permitted assigns.

Section 13.09 No Third-party Beneficiaries. Except as provided in Article VIII, which shall be for the benefit of and enforceable by Covered Persons as described therein, this Agreement is for the sole benefit of the parties hereto (and their respective heirs, executors, administrators, successors and assigns) and nothing herein, express or implied, is intended to or shall confer upon any other Person, including any creditor of the Company, any legal or equitable right, benefit or remedy of any nature whatsoever under or by reason of this Agreement.

Section 13.10 Amendment. No provision of this Agreement may be amended or modified except by an instrument in writing executed by the Members holding at least 60% of the Membership Interests. Any such written amendment or modification will be binding upon the Company and all Members, provided no such amendment or modification approved by less than all of the Members shall disproportionately impact any individual Member. Notwithstanding the foregoing, amendments to Schedule A following any new issuance, redemption, repurchase or Transfer of Membership Interests in accordance with this Agreement may be made by the Company without the consent of or execution by the Members.

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Section 13.11 Waiver. No waiver by any party of any of the provisions hereof shall be effective unless explicitly set forth in writing and signed by the party so waiving. No waiver by any party shall operate or be construed as a waiver in respect of any failure, breach or default not expressly identified by such written waiver, whether of a similar or different character, and whether occurring before or after that waiver. No failure to exercise, or delay in exercising, any right, remedy, power or privilege arising from this Agreement shall operate or be construed as a waiver thereof, nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege.

Section 13.12 Governing Law. All issues and questions concerning the application, construction, validity, interpretation and enforcement of this Agreement shall be governed by and construed in accordance with the internal laws of the State of Delaware, without giving effect to any choice or conflict of law provision or rule (whether of the State of Delaware or any other jurisdiction) that would cause the application of laws of any jurisdiction other than those of the State of Delaware.

Section 13.13 Submission to Jurisdiction. Subject to Article XII The parties hereby agree that any suit, action or proceeding seeking to enforce any provision of, or based on any matter arising out of or in connection with, this Agreement or the transactions contemplated hereby, whether in contract, tort or otherwise, shall be brought in the United States District Court for the District of Delaware or in the Court of Chancery of the State of Delaware (or, if such court lacks subject matter jurisdiction, in the Superior Court of the State of Delaware), so long as one of such courts shall have subject-matter jurisdiction over such suit, action or proceeding, and that any case of action arising out of this Agreement shall be deemed to have arisen from a transaction of business in the State of Delaware. Each of the parties hereby irrevocably consents to the jurisdiction of such courts (and of the appropriate appellate courts therefrom) in any such suit, action or proceeding and irrevocably waives, to the fullest extent permitted by law, any objection that it may now or hereafter have to the laying of the venue of any such suit, action or proceeding in any such court or that any such suit, action or proceeding that is brought in any such court has been brought in an inconvenient form. Service of process, summons, notice or other document in accordance with Section 13.04 shall be effective service of process for any suit, action or other proceeding brought in any such court.

Section 13.14 Waiver of Jury Trial. Each party hereto hereby acknowledges and agrees that any controversy that may arise under this Agreement is likely to involve complicated and difficult issues and, therefore, each such party irrevocably and unconditionally waives any right it may have to a trial by jury in respect of any legal action arising out of or relating to this Agreement or the transactions contemplated hereby. This waiver applies irrespective of the complexity or difficulty of the issues involved in the legal action.

Section 13.15 Equitable Remedies. Each party hereto acknowledges that a breach or threatened breach by such party of any of its obligations under this Agreement would give rise to irreparable harm to the other parties, for which monetary damages would not be an adequate remedy, and hereby agrees that in the event of a breach or a threatened breach by such party of any such obligations, each of the other parties hereto shall, in addition to any and all other rights and remedies that may be available to them in respect of such breach, be entitled to equitable

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relief, including a temporary restraining order, an injunction, specific performance and any other relief that may be available from a court of competent jurisdiction (without any requirement to post bond).

Section 13.16 Attorneys’ Fees. In the event that any party hereto institutes any legal suit, action or proceeding, including arbitration, against another party in respect of a matter arising out of or relating to this Agreement or the transactions contemplated hereby, the prevailing party in the suit, action or proceeding shall be entitled to receive, in addition to all other damages to which it may be entitled, the costs incurred by such party in conducting the suit, action or proceeding, including reasonable attorneys’ fees and expenses and court costs.

Section 13.17 Remedies Cumulative. The rights and remedies under this Agreement are cumulative and are in addition to and not in substitution for any other rights and remedies available at law or in equity or otherwise.

Section 13.18 Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original, and all of which together shall be deemed to be one and the same agreement. A signed copy of this Agreement delivered by facsimile, e-mail or other means of Electronic Transmission shall be deemed to have the same legal effect as delivery of an original signed copy of this Agreement.

Section 13.19 Interpretation. For purposes of this Agreement: (a) the words “include,” “includes” and “including” shall be deemed to be followed by the words “without limitation”; (b) the word “or” is not exclusive; and (c) the words “herein,” “hereof,” “hereby,” “hereto” and “hereunder” refer to this Agreement as a whole. The definitions given for any defined terms in this Agreement shall apply equally to both the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. Unless the context otherwise requires, references herein: (x) to Articles, Sections, and Exhibits mean the Articles and Sections of, and Exhibits attached to, this Agreement; (y) to an agreement, instrument or other document means such agreement, instrument or other document as amended, supplemented and modified from time to time to the extent permitted by the provisions thereof; and (z) to a statute means such statute as amended from time to time and includes any successor legislation thereto and any regulations promulgated thereunder. This Agreement shall be construed without regard to any presumption or rule requiring construction or interpretation against the party drafting an instrument or causing any instrument to be drafted. The Exhibits referred to herein shall be construed with, and as an integral part of, this Agreement to the same extent as if they were set forth verbatim herein.

Signatures on Next Page

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IN WITNESS WHEREOF, the parties have caused this Agreement to be executed as of the date first written above by their respective authorized representatives.

Company:

Peterson Athenex Pharmaceuticals, LLC

By:  

Name:	James Hussey
Title:	Treasury

Company:

Peterson Athenex Pharmaceuticals, LLC

By:  

Name:	Isaac Liu
Title:	Chairman

Members:

SunGem Pharma LLC

By:  

Name:	Isaac Liu
Title:	Co-CEO
Athenex Pharmaceutical Division

By:  

Name:	James Hussey
Title:	Executive Vice President

EXHIBIT A

DEFINITIONS

In this Agreement:

“Adjusted Capital Account Deficit” means, with respect to any Member, the deficit balance, if any, in such Member’s Capital Account as of the end of the relevant Fiscal Year, after giving effect to the following adjustments:

(a) crediting to such Capital Account any amount that such Member is obligated to restore or is deemed to be obligated to restore pursuant to Treasury Regulations Sections 1.704-1(b)(2)(ii)(c), 1.704-2(g)(1) and 1.704-2(i); and

(b) debiting to such Capital Account the items described in Treasury Regulations Section 1.704-1(b)(2)(ii)(d)(4), (5) and (6).

“Affiliate” means, with respect to any Person, any other Person who, directly or indirectly (including through one or more intermediaries), controls, is controlled by, or is under common control with, such Person. For purposes of this definition, “control” means the power, direct or indirect, to direct or cause the direction of the management and policies of such Person.

“Agreement” means this Limited Liability Company Agreement, as executed and as it may be amended or restated from time to time.

“Applicable Law” means all applicable provisions of (a) constitutions, treaties, statutes, laws (including the common law), rules, regulations, decrees, orders, ordinances, codes, proclamations, declarations or orders of any Governmental Authority; and (b) any consents or approvals of any Governmental Authority.

“Bankruptcy” means (a) the filing of an application by a Member for, or a consent to, the appointment of a trustee of such Member’s assets; (b) the filing by a Member of a voluntary petition in bankruptcy or the filing of a pleading in any court of record admitting in writing such Member’s inability to pay its debts as they come due; (c) the making by a Member of a general assignment for the benefit of such Member’s creditors; (d) the filing by a Member of an answer admitting the material allegations of, or such Member’s consenting to, or defaulting in answering a bankruptcy petition filed against such Member in any bankruptcy proceeding; or (e) the expiration of sixty (60) days following the entry of an order, judgment or decree by any court of competent jurisdiction adjudicating such Member a bankrupt or appointing a trustee of such Member’s assets.

“Board” means the Board of Managers as defined in Section 7.01.

“Book Depreciation” means, with respect to any Company asset for each Fiscal Year, the Company’s depreciation, amortization, or other cost recovery deductions determined for federal income tax purposes, except that if the Book Value of an asset differs from its adjusted tax basis at the beginning of such Fiscal Year, Book Depreciation shall be an amount which bears the same ratio to such beginning Book Value as the federal income tax depreciation,

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amortization, or other cost recovery deduction for such Fiscal Year bears to such beginning adjusted tax basis; provided, that if the adjusted basis for federal income tax purposes of an asset at the beginning of such Fiscal Year is zero and the Book Value of the asset is positive, Book Depreciation shall be determined with reference to such beginning Book Value using any permitted method selected by [unanimous consent of the Members/the Managing Member] in accordance with Treasury Regulations Section 1.704-1(b)(2)(iv)(g)(3).

“Book Value” means, with respect to any Company asset, the adjusted basis of such asset for federal income tax purposes, except as follows:

(a) the initial Book Value of any Company asset contributed by a Member to the Company shall be the gross Fair Market Value of such Company asset as of the date of such contribution;

(b) immediately prior to the distribution by the Company of any Company asset to a Member, the Book Value of such asset shall be adjusted to its gross Fair Market Value as of the date of such distribution;

(c) the Book Value of all Company assets shall be adjusted to equal their respective gross Fair Market Values, as reasonably determined by the Managers, as of the following times:

(i) the acquisition of an additional Membership Interest in the Company by a new or existing Member in consideration for more than a de minimis Capital Contribution; and

(ii) the liquidation of the Company within the meaning of Treasury Regulations Section 1.704-1(b)(2)(ii)(g);

provided, that adjustments pursuant to clauses (i) and (ii) above need not be made if the Board of Managers reasonably determines that such adjustment is not necessary or appropriate to reflect the relative economic interests of the Members and that the absence of such adjustment does not adversely and disproportionately affect any Member;

(d) the Book Value of each Company asset shall be increased or decreased, as the case may be, to reflect any adjustments to the adjusted tax basis of such Company asset pursuant to Code Section 734(b) or Code Section 743(b), but only to the extent that such adjustments are taken into account in determining Capital Account balances pursuant to Treasury Regulations Section 1.704-1(b)(2)(iv)(m); provided, that Book Values shall not be adjusted pursuant to this paragraph (d) to the extent that an adjustment pursuant to paragraph (c) above is made in conjunction with a transaction that would otherwise result in an adjustment pursuant to this paragraph (d); and

(e) if the Book Value of a Company asset has been determined pursuant to paragraph (a) or adjusted pursuant to paragraphs (c) or (d) above, such Book Value shall thereafter be adjusted to reflect the Book Depreciation taken into account with respect to such Company asset for purposes of computing Net Income and Net Losses.

“Budget” has the meaning set forth in Section 7.06(a).

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“Business” has the meaning set forth in Section 2.05(a).

“Business Day” means a day other than a Saturday, Sunday or other day on which commercial banks in Delaware are authorized or required to close.

“Capital Account” has the meaning set forth in Section 3.03.

“Certificate of Formation” has the meaning set forth in the Recitals.

“Change of Control” with respect to any Member means: (a) the sale or transfer of all or substantially all of the assets of a Member to a third party; (b) a sale or transfer resulting in no less than a majority of the ownership of a Member being held by a third party; or (c) a merger, consolidation, recapitalization or reorganization of a Member with or into a third party that results in the inability of prior owners of the Member to designate or elect a majority of its governing body.

“Code” means the Internal Revenue Code of 1986, as amended.

“Company Interest Rate” has the meaning set forth in Section 6.02(c).

“Company Minimum Gain” means “partnership minimum gain” as defined in Treasury Regulations Section 1.704-2(b)(2), substituting the term “Company” for the term “partnership” as the context requires.

“Confidential Information” has the meaning set forth in Section 13.03(a).

“Contribution” means, for any Member, the total amount of cash and cash equivalents and the Book Value of any property contributed to the Company by such Member.

“Covered Person” has the meaning set forth in Section 8.01(a).

“Delaware Act” means the Delaware Limited Liability Company Act, Title 6, Chapter 18, §§ 18-101, et seq, and any successor statute, as it may be amended from time to time.

“Electronic Transmission” means any form of communication not directly involving the physical transmission of paper that creates a record that may be retained, retrieved and reviewed by a recipient and that may be directly reproduced in paper form by such a recipient through an automated process.

“Fair Market Value” of any asset as of any date means the purchase price that a willing buyer having all relevant knowledge would pay a willing seller for such asset in an arm’s length transaction, as determined by the Board.

“Fiscal Year” means such fiscal year of the Company as determined by the Board consistent with the requirements of Section 706 of the Code.

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“GAAP” means United States generally accepted accounting principles in effect from time to time.

“Governmental Authority” means any federal, state, local or foreign government or political subdivision thereof, or any agency or instrumentality of such government or political subdivision, or any self-regulated organization or other non-governmental regulatory authority or quasi-governmental authority, or any arbitrator, court or tribunal of competent jurisdiction.

“Losses” has the meaning set forth in Section 8.03(a).

“Manager” has the meaning set forth in Section 7.01.

“Member Nonrecourse Debt” means “partner nonrecourse debt” as defined in Treasury Regulations Section 1.704-2(b)(4), substituting the term “Company” for the term “partnership” and the term “Member” for the term “partner” as the context requires.

“Member Nonrecourse Debt Minimum Gain” means an amount, with respect to each Member Nonrecourse Debt, equal to the Company Minimum Gain that would result if the Member Nonrecourse Debt were treated as a Nonrecourse Liability, determined in accordance with Treasury Regulations Section 1.704-2(i)(3).

“Member Nonrecourse Deduction” means “partner nonrecourse deduction” as defined in Treasury Regulations Section 1.704-2(i), substituting the term “Member” for the term “partner” as the context requires.

“Membership Interest” means an interest in the Company, including a share of the Company’s Net Income, Net Losses and other items of income, gain, loss and deduction of the Company, distributions of Company assets, and allocations pursuant to this Agreement together with the right to participate in the management of the business and affairs of the Company as provided in this Agreement or the Delaware Act including the right to vote on, consent to or otherwise participate in any decision of the Members as provided in this Agreement or the Delaware Act.

“Net Income” and “Net Loss” mean, for each Fiscal Year or other period specified in this Agreement, an amount equal to the Company’s taxable income or taxable loss, or particular items thereof, determined in accordance with Code Section 703(a) (where, for this purpose, all items of income, gain, loss or deduction required to be stated separately pursuant to Code Section 703(a)(1) shall be included in taxable income or taxable loss), but with the following adjustments:

(a) any income realized by the Company that is exempt from federal income taxation, as described in Code Section 705(a)(1)(B), shall be added to such taxable income or taxable loss, notwithstanding that such income is not includable in gross income;

(b) any expenditures of the Company described in Code Section 705(a)(2)(B), including any items treated under Treasury Regulations Section 1.704-1(b)(2)(iv)(I) as items described in Code Section 705(a)(2)(B), shall be subtracted from such taxable income or taxable loss, notwithstanding that such expenditures are not deductible for federal income tax purposes;

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(c) any gain or loss resulting from any disposition of Company property with respect to which gain or loss is recognized for federal income tax purposes shall be computed by reference to the Book Value of the property so disposed, notwithstanding that the adjusted tax basis of such property differs from its Book Value;

(d) any items of depreciation, amortization and other cost recovery deductions with respect to Company property having a Book Value that differs from its adjusted tax basis shall be computed by reference to the property’s Book Value (as adjusted for Book Depreciation) in accordance with Treasury Regulations Section 1.704-1(b)(2)(iv)(g);

(e) if the Book Value of any Company property is adjusted as provided in the definition of Book Value, then the amount of such adjustment shall be treated as an item of gain or loss and included in the computation of such taxable income or taxable loss; and

(f) to the extent an adjustment to the adjusted tax basis of any Company property pursuant to Code Sections 732(d), 734(b) or 743(b) is required, pursuant to Treasury Regulations Section 1.704 1(b)(2)(iv)(m), to be taken into account in determining Capital Accounts, the amount of such adjustment to the Capital Accounts shall be treated as an item of gain (if the adjustment increases the basis of the asset) or loss (if the adjustment decreases such basis).

“Non-Contributing Member” has the meaning set forth in Section 3.02.

“Nonrecourse Deductions” has the meaning set forth in Treasury Regulations Section 1.704-2(b).

“Nonrecourse Liability” has the meaning set forth in Treasury Regulations Section 1.704-2(b)(3).

“Permitted Transfer” means the Transfer of a Membership Interest carried out pursuant to Section 9.02.

“Permitted Transferee” means a recipient of a Permitted Transfer.

“Person” means an individual, corporation, partnership, joint venture, limited liability company, Governmental Authority, unincorporated organization, trust, association or other entity.

“Regulatory Allocations” has the meaning set forth in Section 5.02(e).

“Representative” means, with respect to any Person, any and all directors, officers, employees, consultants, financial advisors, counsel, accountants and other agents of such Person.

“Securities Act” means the Securities Act of 1933, as amended, or any successor federal statute, and the rules and regulations thereunder, which shall be in effect at the time.

“Tax Matters Member” has the meaning set forth in Section 10.04.

“Taxing Authority” has the meaning set forth in Section 6.02(b).

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“Transfer” means to, directly or indirectly, sell, transfer, assign, pledge, encumber, hypothecate or similarly dispose of, either voluntarily or involuntarily, by operation of law or otherwise, or to enter into any contract, option or other arrangement or understanding with respect to the sale, transfer, assignment, pledge, encumbrance, hypothecation or similar disposition of, any Membership Interests owned by a Person or any interest (including a beneficial interest) in any Membership Interests owned by a Person. “Transfer” when used as a noun shall have a correlative meaning. “Transfer” also includes any merger, consolidation or in which the Member is not the surviving party or any other transaction in which there is a Change of Control of the Member. “Transferor” and “Transferee” mean a Person who makes or receives a Transfer, respectively.

“Treasury Regulations” means the final or temporary regulations issued by the United States Department of Treasury pursuant to its authority under the Code, and any successor regulations.

“Withholding Advances” has the meaning set forth in Section 6.02(b).

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SCHEDULE A

MEMBERS SCHEDULE

Member Name	Membership Interest			Manager Designated by Member	Initial Capital Contribution Commitment
SunGen Pharma LLC		51	%	Isaac Liu	$	1
Athenex Inc.		49	%	Jeff Yordon	$	1

EX-10

Exhibit 10.17

FOIA CONFIDENTIAL TREATMENT REQUESTED

Confidential Materials omitted and filed separate with the Securities and Exchange Commission

Triple asterisks denote omissions

CLINICAL TRIAL COLLABORATION AND SUPPLY AGREEMENT

This CLINICAL TRIAL COLLABORATION AND SUPPLY AGREEMENT (this “Agreement”), made as of October 24, 2016 (the “Effective Date”), is by and between Athenex, Inc., also known as Kinex Pharmaceuticals, Inc. (“Athenex”), a Delaware corporation having a place of business at 1001 Main Street, Suite 600 Buffalo, New York, and Eli Lilly and Company, having a place of business at Lilly Corporate Center, Indianapolis, Indiana 46285 (“Lilly Parent”) and ImClone LLC, having a place of business at 450 East 29th Street 12th Floor, New York, NY 10016 (“ImClone”, and together with Lilly Parent, “Lilly”. Athenex and Lilly are each referred to herein individually as “Party” and collectively “Parties”.

RECITALS

A. Athenex is developing the Athenex Compound (as defined below) for the treatment of certain tumor types.

B. Lilly is developing the Lilly Compound (as defined below) for the treatment of certain tumor types.

C. Athenex desires to sponsor a clinical trial in which the Lilly Compound and the Athenex Compound would be dosed concurrently or in combination.

D. Athenex and Lilly, consistent with the terms of this Agreement, desire to collaborate as more fully described herein, including by providing the Athenex Compound and the Lilly Compound for the Study (as defined below).

NOW, THEREFORE, in consideration of the premises and of the following mutual promises, covenants and conditions, the Parties, intending to be legally bound, mutually agree as follows:

1. Definitions.

For all purposes of this Agreement, the capitalized terms defined in this Article 1 and throughout this Agreement shall have the meanings herein specified.

1.1 “Adverse Event (AE)” means any untoward medical occurrence in a patient or clinical investigation subject administered a pharmaceutical product and which does not necessarily have to have a causal relationship with this treatment. Also known as an Adverse Experience.

1.2 “Affiliate” means, with respect to either Party, a firm, corporation or other entity which directly or indirectly owns or controls said Party, or is owned or controlled by said Party, or is under common ownership or control with said Party. The word “control” means (i) the direct or indirect ownership of fifty percent (50%) or more of the outstanding voting securities of a legal entity, or (ii) possession, directly or indirectly, of the power to direct the management or

1

*** = Portions of this exhibit have been omitted pursuant to a request for confidential treatment. An unredacted version of this exhibit has been filed separately with the Commission.

policies of a legal entity, whether through the ownership of voting securities, contract rights, voting rights, corporate governance or otherwise.

1.3 “Agreement” means this agreement, as amended by the Parties from time to time, and as set forth in the preamble.

1.4 “Applicable Law” means all federal, state, local, national and regional statutes, laws, rules, regulations and directives applicable to a particular activity hereunder, including performance of clinical trials, medical treatment and the processing and protection of personal and medical data, that may be in effect from time to time, including those promulgated by the United States Food and Drug Administration (“FDA”), national regulatory authorities, the European Medicines Agency (“EMA”) and any successor agency to the FDA or EMA or any agency or authority performing some or all of the functions of the FDA or EMA in any jurisdiction outside the United States or the European Union (each a “Regulatory Authority” and collectively, “Regulatory Authorities”), and including without limitation cGMP and GCP (each as defined below); all data protection laws, regulations, and requirements, such as those specified in the EU Data Protection Directive and the General Data Protection Regulation, and the United States Health Insurance Portability and Accountability Act of 1996, as amended, and its associated regulations (“HIPAA”); export control and economic sanctions regulations which prohibit the shipment of United States-origin products and technology to certain restricted countries, entities and individuals; anti-bribery and anti-corruption laws pertaining to interactions with government agents, officials and representatives; laws and regulations governing payments to healthcare providers; and any United States or other country’s or jurisdiction’s successor or replacement statutes, laws, rules, regulations and directives relating to the foregoing.

1.5 “Athenex” has the meaning set forth in the preamble.

1.6 “Athenex Compound” means oraxol, a small molecule oral formulation of a taxane, paclitaxel, excluding however, any generic version of oraxol other than a generic version owned or controlled by Athenex or its Affiliate.

1.7 “Business Day” means any day other than a Saturday, Sunday or any public holiday in the country where the applicable obligations are to be performed.

1.8 “Calendar Quarter” means a three-month period beginning on January, April, July or October 1st.

1.9 “Calendar Year” means a one-year period beginning on January 1st and ending on December 31st.

1.10 “cGMP” means the current Good Manufacturing Practices officially published and interpreted by EMA, FDA, WHO and other applicable Regulatory Authorities that may be in effect from time to time and are applicable to the Manufacture of the Compounds.

1.11 “Clinical Data” means all data (including raw data) and results generated under the Study and includes Sample Testing Results.

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1.12 “Quality Agreement” means a written agreement that documents the responsibilities and quality expectations between Lilly and any internal or external collaboration partner, supplier, contract manufacturer or service.

1.13 “CMC” means Chemistry Manufacturing and Controls.

1.14 “Compounds” means the Athenex Compound and the Lilly Compound. A “Compound” means either the Athenex Compound or the Lilly Compound, as applicable.

1.15 “Combination” means the use or method of using the Athenex Compound and the Lilly Compound in concomitant or sequential administration.

1.16 “Confidential Information” means any information, Know-How or other proprietary information or materials furnished to one Party by the other Party pursuant to this Agreement, except to the extent that such information or materials: (a) was already known to the receiving Party, other than under an obligation of confidentiality, at the time of disclosure by the other Party, as demonstrated by competent evidence; (b) was generally available to the public or otherwise part of the public domain at the time of its disclosure to the receiving Party; (c) became generally available to the public or otherwise part of the public domain after its disclosure and other than through any act or omission of the receiving Party in breach of this Agreement; (d) was disclosed to the receiving Party by a Third Party who had no obligation to the disclosing Party not to disclose such information to others; or (e) was subsequently developed by the receiving Party without use of the Confidential Information, as demonstrated by competent evidence.

1.17 “CTA” means “Clinical Trial Application” means a document used to request authorization from a Regulatory Authority to begin testing an experimental compound/drug in patients.

1.18 “Disposition Package” has the meaning set forth in Section 8.7.1.

1.19 “Dispute” has the meaning set forth in Section 21.1.

1.20 “Effective Date” has the meaning set forth in the preamble.

1.21 “EMA” has the meaning set forth in the definition of Applicable Law.

1.22 “FDA” has the meaning set forth in the definition of Applicable Law.

1.23 “cGCP” means the current Good Clinical Practices officially published by EMA, FDA and the International Conference on Harmonisation of Technical Requirements for Registration of Pharmaceuticals for Human Use (ICH) that may be in effect from time to time and are applicable to the testing of the Compounds.

1.24 “Government Official” means: (i) any officer or employee of: (a) a government, or any department or agency thereof; (b) a government-owned or controlled company, institution, or other entity, including a government-owned hospital or university; or

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(c) a public international organization (such as the United Nations, the International Monetary Fund, the International Committee of the Red Cross, and the World Health Organization), or any department or agency thereof; (ii) any political party or party official or candidate for public or political party office; and (iii) any person acting in an official capacity on behalf of any of the foregoing.

1.25 “HIPAA” has the meaning set forth in the definition of Applicable Law.

1.26 “IND” means the Investigational New Drug Application filed or to be filed with the FDA as described in Title 21 of the U.S. Code of Federal Regulations, Part 312, and the equivalent application in the jurisdictions outside the United States, including an “Investigational Medicinal Product Dossier” filed or to be filed with the Regulatory Authorities in the European Union.

1.27 “Inventions” means all inventions and discoveries which are made or conceived in the performance of the Study and/or which are made or conceived by a Party through use of the Clinical Data.

1.28 “Internal Compliance Codes” shall mean a Party’s internal policies and procedures intended to ensure that a Party complies with Applicable Laws, Party Specific Regulations, and such Party’s internal ethical, medical and similar standards.

1.29 “Compliance” shall mean the adherence by the Parties in all material respects to all Applicable Laws and Party Specific Regulations, in each case with respect to the activities to be conducted under this Agreement.

1.30 “Party Specific Regulations” shall mean all judgments, decrees, orders or similar decisions issued by any Governmental Authority specific to a Party, and all consent decrees, corporate integrity agreements, or other agreements or undertakings of any kind by a Party with any Governmental Authority, in each case as the same may be in effect from time to time and applicable to a Party’s activities contemplated by this Agreement.

1.31 “Jointly Owned Invention” has the meaning set forth in Section 10.1.1.

1.32 “Joint Patent Application” has the meaning set forth in Section 10.1.2.

1.33 “Joint Patent” means a patent that issues from a Joint Patent Application.

1.34 “Know-How” means any proprietary invention, innovation, improvement, development, discovery, computer program, device, trade secret, method, know-how, process, technique or the like, including manufacturing, use, process, structural, operational and other data and information, whether or not written or otherwise fixed in any form or medium, regardless of the media on which contained and whether or not patentable or copyrightable, that is not generally known or otherwise in the public domain.

1.35 “Liability” has the meaning set forth in Section 14.2.1.

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1.36 “Lilly” has the meaning set forth in the preamble.

1.37 “Lilly Compound” means ramucirumab, excluding, however, any generic version of ramucirumab other than a generic version owned or controlled by Lilly or its Affiliate.

1.38 “Manufacture,” “Manufactured,” or “Manufacturing” means all stages of the manufacture of a Compound, including planning, purchasing, manufacture, processing, compounding, storage, filling, packaging, waste disposal, labeling, leafleting, testing, quality assurance, sample retention, stability testing, release, dispatch and supply, as applicable.

1.39 “Manufacturer’s Release” or “Release” has the meaning ascribed to such term in the Quality Agreement.

1.40 “Manufacturing Site” means the facilities where a Compound is Manufactured.

1.41 “Party” has the meaning set forth in the preamble.

1.42 “Protocol” means the written documentation that describes the Study and sets forth specific activities to be performed as part of the Study conduct, a summary of which is attached hereto as Appendix A.

1.43 “Regulatory Approvals” means any and all permissions (other than the Manufacturing approvals) required to be obtained from Regulatory Authorities and any other competent authority for the development, registration, importation, use (including in clinical trials), distribution, sale and marketing of a Compound in the United States, Europe or other applicable jurisdictions for use in humans, including any pricing or reimbursement approvals.

1.44 “Regulatory Authorities” has the meaning set forth in the definition of Applicable Law.

1.45 “Related Agreements” means the Pharmacovigilance Agreement and the Clinical Quality Agreement.

1.46 “Specifications” means, with respect to a given Compound, the set of requirements for such Compound as set forth in the Clinical Quality Agreement.

1.47 “Study” means the study entitled “A Phase Ib study of Oraxol in combination with Ramucirumab in patients with Gastric, Gastro-esophageal, or Esophageal Cancers.”

1.48 “Study Completion” has the meaning set forth in Section 3.5.

1.49 “Territory” means worldwide.

1.50 “Third Party” means any person or entity other than Lilly, Athenex or their respective Affiliates.

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2. Scope of the Agreement.

2.1 Each Party shall contribute to the Study such resources as are necessary to fulfill its obligations set forth in this Agreement.

2.2 Each Party agrees to act in good faith in performing its obligations under this Agreement and each Related Agreement, and shall notify the other Party as promptly as possible in the event of any Manufacturing delay that is likely to adversely affect supply of its Compound as contemplated by this Agreement.

2.3 Representations and Warranties.

2.3.1 Lilly agrees to Manufacture and supply the Lilly Compound for purposes of the Study as set forth in Article 8, and Lilly hereby represents and warrants to Athenex that, at the time of Delivery of the Lilly Compound, such Lilly Compound shall have been Manufactured and supplied in compliance with: (i) the Specifications for the Lilly Compound; and (ii) all Applicable Law, including cGMP and health, safety and environmental protections.

2.3.2 Without limiting the foregoing, each Party is responsible for obtaining all regulatory approvals (including facility licenses) that are required to Manufacture its Compound in accordance with Applicable Law (provided that for clarity, Athenex shall be responsible for obtaining Regulatory Approvals for the Study as set forth in Section 3.3).

2.4 Each Party shall have the right to subcontract any portion of its obligations hereunder: (i) to its own Affiliates, without the other Party’s written consent; or (ii) to third parties, provided that with respect to third parties that are directly involved in the conduct of the clinical trial that is subject of the Study, the Parties have approved (in a written document) the use of such third parties in the performance of such activities, and provided further that no consent shall be necessary for either Party’s delegation to or use of contract research organizations or other third parties that are already conducting clinical trials of such Party’s Compound and are set forth in the Protocol as performing such Study activities. In any event, each Party shall remain solely and fully liable for the performance of its subcontractors. Each Party shall ensure that each of its subcontractors performs its obligations pursuant to the terms of this Agreement, including the Appendices attached hereto. Each Party shall use reasonable efforts to obtain and maintain copies of documents relating to the obligations performed by such subcontractors that are held by or under the control of such subcontractors and that are required to be provided to the other Party under this Agreement.

2.5 This Agreement does not create any obligation on the part of Athenex to provide the Athenex Compound for any activities other than the Study, nor does it create any obligation on the part of Lilly to provide the Lilly Compound for any activities other than the Study.

2.6 Nothing in this Agreement shall (i) prohibit either Party from performing clinical studies other than the Study relating to its own Compound, either individually or in combination with any other compound or product, in any therapeutic area, or (ii) create an exclusive relationship between the Parties with respect to any Compound.

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3. Conduct of the Study.

3.1 Athenex shall act as the sponsor of the Study and shall hold the IND/CTA relating to the Study; provided, however, that in no event shall Athenex file a separate IND/CTA for the Study unless required by Regulatory Authorities to do so. If a Regulatory Authority requests a separate IND/CTA for the Study the Parties will meet and mutually agree on an approach to address such requirement.

3.2 Athenex shall ensure that the Study is performed in accordance with this Agreement, the Protocol and all Applicable Law, including GCP.

3.3 Athenex shall ensure that all directions from any Regulatory Authority and/or ethics committee with jurisdiction over the Study are followed. Further, Athenex shall ensure that all Regulatory Approvals from any Regulatory Authority and/or ethics committee with jurisdiction over the Study are obtained prior to initiating performance of the Study. Athenex shall participate in and lead all discussions with any Regulatory Authority regarding the Study, provided, however, that Lilly shall have the right (but no obligation) to participate in any discussions with a Regulatory Authority, and prior review and approval of any written communications with a Regulatory Authorty, regarding matters related to the Lilly Compound.

3.4 Athenex shall maintain reports and all related documentation (paper or electronic versions as applicable) in good scientific manner and in compliance with Applicable Law. Athenex shall provide any Study information and documentation reasonably requested to enable Lilly to (i) comply with any of its legal and regulatory obligations, or any request by any Regulatory Authority, in each case, to the extent related to the Study or such the Lilly Compound, (ii) satisfy any contractual obligation to a subcontractor engaged pursuant to Section 2.4 hereof, and (iii) to determine whether the Study has been performed by Athenex in accordance with this Agreement.

3.5 Athenex shall ensure that all patient authorizations and consents, and all consents from other data subjects, for the processing, use and disclosure of their data and the Clinical Data, required under HIPAA, the EU Data Protection Directive, EU General Data Protection Regulation, and any other similar Applicable Law in connection with the Study, permit the use and sharing of the Clinical Data as set forth in this Agreement, including the sharing of Clinical Data with Lilly.

3.6 All Clinical Data, including raw data and results, generated under this Agreement, as well as the protocol(s), analyses, plans and any other documentation prepared by one or more of the Parties under this Agreement specifically for use in connection with the Study and related to the Lilly Compound, shall be jointly owned by Lilly and Athenex.

3.7 Project Managers. Each Party shall designate a project manager (the “Project Manager”) who shall be responsible for implementing and coordinating activities, and facilitating the exchange of scientific information between the Parties with respect to the Study. The Athenex Project Manager shall provide regular updates in writing to the Lilly Project Manager, no less frequently than twice yearly, which update shall contain information about

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overall Study progress, recruitment status, interim analysis (if results are available), final analysis and other information relevant to the conduct of the Study.

3.7.1 Each Party shall appoint a supply chain representative to hold telephone discussions at a mutually agreed-upon frequency to review the quantities of Lilly Compound needed for the Study (in accordance with Appendix B) and any other supply chain issues that may arise during the Study.

3.8 Athenex shall provide Lilly with (i) an electronic draft of the final study report for Lilly to provide comments to Athenex within thirty (30) days of receipt of such draft final study report and (ii) the final version of the final study report promptly following Study Completion. Athenex shall consider in good faith any comments provided by Lilly on the draft of the final study report. “Study Completion” shall be deemed to occur upon lock of the Study database.

3.9 Notwithstanding anything in this Agreement to the contrary, each Party acknowledges and agrees that the other Party may have present or future business activities or opportunities, including business activities or opportunities with Third Parties, involving similar products, programs, technologies or processes. Accordingly, each Party acknowledges and agrees that nothing in this Agreement shall be construed as a representation or inference that the other Party will not develop for itself, or enter into business relationships with other Third Parties regarding, any products, programs, studies (including combination studies), technologies or processes that are similar to or that may compete with the Combination or any other product, program, technology or process provided that the Clinical Data, Jointly Owned Inventions, and Confidential Information are used or disclosed in connection therewith consistent with and not in violation of Sections 3.3, 9.1 or 10 of this Agreement.

3.10 Nothing in this Agreement shall prohibit or restrict a Party from licensing, assigning or otherwise transferring to an Affiliate or Third Party its Compound and the related Clinical Data, Confidential Information, Sample Testing Results or Jointly Owned Inventions; provided, however, that in the case of any such license, assignment or transfer, the licensee, assignee or transferee shall agree in writing to be bound by the terms of this Agreement.

4. Protocol and Related Documents.

4.1 A summary of the initial Protocol, entitled “A phase Ib study of Oraxol in combination with Ramucirumab in patients with Gastric, Gastro-esophageal, or Esophageal Cancers” has been agreed to by the Parties as of the Effective Date, and is attached as Appendix A. The final Protocol must be accepted by both Parties. Athenex shall have the final decision regarding the contents of the Protocol; provided, however, that any material changes to the Protocol (other than relating solely to the Athenex Compound), and any changes (whether or not material) relating to the Lilly Compound, shall require Lilly’s prior written consent. Any such proposed changes will be sent in writing to Lilly’s Project Manager. Lilly will provide such consent, or a written explanation for why such consent is being withheld, within fifteen (15) Business Days of receiving a copy of Athenex’s requested changes; provided that if Lilly fails to provide such written explanation within such 15 Business Day period, then Lilly shall be deemed to have consented to such change or changes. Athenex will provide a copy of the final approved protocol and any subsequent protocol amendments.

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5. Safety and Regulatory Reporting.

Athenex will be solely responsible for compliance with all Applicable Law pertaining to safety reporting for the Study and related activities. The Parties will execute a Pharmacovigilance Agreement within ninety (90) days following the Effective Date of this Agreement or prior to the initiation of the Trial. The Pharmacovigilance Agreement will ensure the exchange of relevant safety data and Adverse Event reporting within appropriate timeframes and in appropriate format to enable the Parties to fulfill local and international regulatory reporting obligations and to facilitate appropriate safety reviews. Each Party’s right to audit the other Party as it relates to pharmacovigilance activities shall be set forth in the Pharmacovigilance Agreement.

In the event of a conflict between this Agreement and the Pharmacovigilance Agreement, where the conflict relates to a term governing the exchange of safety data or Adverse Event reporting, the terms of the Pharmacovigilance Agreement shall control.

6. Term and Termination.

6.1 The term of this Agreement shall commence on the Effective Date and shall continue in full force and effect until completion of all of the obligations of the Parties hereunder or until terminated by either Party pursuant to this Article 6.

6.2 In the event that Lilly reasonably and in good faith believes that the Lilly Compound is being used in the Study in an unsafe manner and notifies Athenex in writing of the grounds for such belief, and Athenex fails to promptly incorporate (subject to approval by applicable Regulatory Authorities or Institutional Review Boards) changes into the Protocol reasonably requested by Lilly to address such issue or to otherwise reasonably and in good faith address such issue, Lilly may terminate this Agreement and the supply of the Lilly Compound effective upon written notice to Athenex.

6.3 Either Party may terminate this Agreement if the other Party commits a material breach of this Agreement, and such material breach continues for thirty (30) days after receipt of written notice thereof from the non-breaching Party; provided that if such material breach cannot reasonably be cured within thirty (30) days, the breaching Party shall be given a reasonable period of time to cure such breach.

6.4 If either Party determines in good faith, based on a review of the Clinical Data or other Study-related Know-How or other information, that the Study may unreasonably affect patient safety, such Party shall promptly notify the other Party of such determination. The Party receiving such notice may propose modifications to the Study to address the safety issue identified by the other Party and, if the notifying Party agrees, shall act to immediately implement such modifications; provided, however, that if the notifying Party, in its sole discretion, believes that there is imminent danger to patients, such Party need not wait for the other Party to propose modifications and may instead terminate this Agreement immediately upon written notice to such other Party. Furthermore, if the notifying Party, in its sole discretion, believes that any modifications proposed by the other Party will not resolve the patient safety issue; such Party may terminate this Agreement effective upon written notice to such other Party.

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6.5 Either Party may terminate this Agreement immediately upon written notice to the other Party in the event that any Regulatory Authority takes any action, or raises any objection, that prevents the terminating Party from supplying its Compound for purposes of the Study. Additionally, either Party shall have the right to terminate this Agreement immediately upon written notice to the other Party in the event that it determines in its sole discretion to discontinue development of its Compound, for medical, scientific, legal or other reasons.

6.6 In the event that this Agreement is terminated, Athenex shall, at Lilly’s sole discretion, promptly either return or destroy all unused Lilly Compound pursuant to Lilly’s instructions. If Lilly requests that Athenex destroy the unused Lilly Compound, Athenex shall provide written certification of such destruction.

6.7 Either Party shall be entitled to terminate this Agreement immediately upon written notice to the other Party, if such other Party fails to perform any of its obligations under Section 13.3 or breaches any representation or warranty contained in Section 13.3. Subject to Section 6.11, the non-terminating Party shall have no claim against the terminating Party for compensation for any loss of whatever nature by virtue of the termination of this Agreement in accordance with this Section 6.7.

6.8 The provisions of this Section 6.8 and Sections 3.6 (other than the first sentence thereof), 3.7, 3.9, 6.6, 6.7 (other than the first sentence thereof), 6.9, 6.10, 6.11, 12.2, 12.3, 12.4, 12.5, 14.2 (Indemnification), 14.3 (Limitation of Liability), and Articles 1 (Definitions), 5 (Safety and Regulatory Reporting), 7 (Costs of Study), 9 (Confidentiality), 10 (Intellectual Property), 11 (Reprints; Rights of Cross-Reference), 12 (Press Releases and Publications), 20 (No Additional Obligations), 21 (Dispute Resolution and Jurisdiction), 22 (Notices), 23 (Relationship of the Parties) and 25 (Construction) shall survive the expiration or termination of this Agreement.

6.9 Termination of this Agreement shall be without prejudice to any claim or right of action of either Party against the other Party for any prior breach of this Agreement.

6.10 Upon termination of this Agreement, each Party and its Affiliates shall promptly return to the other Party or destroy any Confidential Information of the other Party (other than Clinical Data, Sample Testing Results and Inventions) furnished to the receiving Party by the other Party, except that the receiving Party shall have the right to retain one copy for record-keeping purposes.

7. Costs of the Study.

The Parties agree that (i) Lilly shall provide the Lilly Compound for use in the Study, as described in Article 8 below, at no cost to Athenex; and (ii) Athenex shall bear all other costs associated with the conduct of the Study. Anydoses of Lilly Compound provided under this Agreement constitute free goods not contingent upon any purchase requirement(s). For the avoidance of doubt, Athenex will not be required to reimburse Lilly for any costs or expenses incurred by Lilly or its Affiliates in connection with the Study and Lilly will not be required to reimburse Athenex for any costs or expenses incurred by Athenex or its Affiliates in connection with the Study.

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8. Supply and Use of the Compounds.

8.1 Lilly will supply, or cause to be supplied, the Lilly Compound as set forth in Appendix B. The Parties shall enter into a “Quality Agreement” that shall address and govern issues related to labeling, packaging and the quality of clinical drug supply to be supplied by the Parties for use in the Study prior to shipping material.

8.2 Athenex shall (i) use the Lilly Compound solely for purposes of performing the Study; (ii) not use the Lilly Compound in any manner inconsistent with this Agreement or for any commercial purpose; and (iii) use, store, transport, handle and dispose of the Lilly Compound in compliance with Applicable Law and the Clinical Quality Agreement. Athenex shall not reverse engineer, reverse compile, disassemble or otherwise attempt to derive the composition or underlying information, structure or ideas of the Lilly Compound, and in particular shall not analyze the Lilly Compound by physical, chemical or biochemical means except as necessary to perform its obligations under the Quality Agreement.

8.3 Lilly may make changes from time to time to its Compound or the manufacturing thereof.

9. Confidentiality.

9.1 Lilly and Athenex agree to hold in confidence any Confidential Information of the other Party, and neither Party shall use Confidential Information of the other Party except for the performance of the Study and for permitted uses otherwise stated in this Agreement. Neither Party shall, without the prior written permission of the other Party, disclose any Confidential Information of the other Party to any Third Party except to the extent disclosure (i) is required by Applicable Law; (ii) is pursuant to the terms of this Agreement; or (iii) is necessary for the conduct of the Study, and in each case ((i) through (iii)) provided that the disclosing Party shall provide reasonable advance notice to the other Party before making such disclosure. For the avoidance of doubt, Athenex may, without Lilly’s consent, disclose Confidential Information to clinical trial sites and clinical trial investigators performing the Study, the data safety monitoring and advisory board relating to the Study, and Regulatory Authorities working with Athenex on the Study, in each case to the extent necessary for the performance of the Study and provided that such persons (other than governmental entities) are bound by an obligation of confidentiality at least as stringent as the obligations contained herein.

9.2 Notwithstanding the foregoing, Inventions and Clinical Data that constitute Confidential Information and are jointly owned by the Parties shall constitute the Confidential Information of both Parties and

(a) Lilly shall have the right to (i) use jointly owned Confidential Information in connection with its independent development, commercialization or other exploitation of any proprietary Lilly compound including the Lilly Compound (alone or in combination with the Athenex Compound and/or any other pharmaceutical agent) without the consent of, or any obligation to account to, Athenex; and (ii) disclose such Confidential Information to Third Parties consistent with Articles 10, 11 and 12. For clarity, Lilly retains the right to conduct additional studies and clinical trials (i.e., studies other than the Study) involving the Lilly

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Compound, either alone or with a Third Party, and such additional studies or clinical trials shall not be subject to the terms and conditions of this Agreement.

(b) Athenex shall have the right to (i) use jointly owned Confidential Information in connection with its independent development, commercialization or other exploitation of any proprietary Athenex compound including the Athenex Compound (alone or in combination with the Lilly Compound and/or any other pharmaceutical agent) without the consent of, or any obligation to account to, Lilly; and (ii) disclose such Confidential Information to Third Parties consistent with Articles 10, 11 and 12. For clarity, Athenex retains the right to conduct additional studies and clinical trials (i.e., studies other than the Study) involving the Athenex Compound, either alone or with a Third Party, and such additional studies or clinical trials shall not be subject to the terms and conditions of this Agreement.

9.3 Athenex may use and disclose to Third Parties any Athenex solely owned Confidential Information for any purpose without obligation or accounting to Lilly. Lilly may use and disclose to Third Parties any Lilly solely owned Confidential Information for any purpose without obligation or accounting to Athenex.

9.4 Each party agrees that with respect to its performance of all activities under this Agreement, it shall undertake appropriate physical, technical and administrative controls in order to protect personally identifiable data and prevent the unauthorized access to or disclosure of such personally identifiable data and that its processing of all personally identifiable data, including the Clinical Data, shall be in accordance with all data protection and privacy laws, rules and regulations and Applicable Law.

10. Intellectual Property.

10.1 Joint Ownership and Prosecution.

10.1.1 Subject to Sections 10.2 and 10.3, all rights to all Inventions relating to or covering the combined use of the Lilly Compound and the Athenex Compound (each a “Jointly Owned Invention”) shall belong jointly to Lilly and Athenex. For those countries where a specific license is required for a joint owner of a Jointly Owned Invention to practice such Jointly Owned Invention in such countries, (i) Athenex hereby grants to Lilly a perpetual, irrevocable, non-exclusive, worldwide, royalty-free, fully paid-up license, transferable and sublicensable, under Athenex’s right, title and interest in and to all Jointly Owned Inventions to use such Inventions and (ii) Lilly hereby grants to Athenex a perpetual, irrevocable, non-exclusive, worldwide, royalty-free, fully paid-up license, transferable and sublicensable, under Lilly’s right, title and interest in and to all Jointly Owned Inventions to use such Inventions. For clarity, the terms of this Agreement do not provide Lilly or Athenex with any rights, title or interest or any license to the other Party’s background intellectual property except as necessary to conduct the Study and as expressly set forth in Section 10.4. Each Party shall have the right to freely exploit each Jointly Owned Invention, both within and outside the scope of the Study, without accounting to or any other obligation to the other Party, and each Party may grant licenses (with a right to sublicense) to Third Parties under such Party’s interest in each Jointly Owned Invention.

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10.1.2 As needed following the Effective Date, patent representatives of each of the Parties shall meet (in person or by telephone) to discuss the patenting strategy for any Jointly Owned Inventions which may arise. In particular, the Parties shall discuss which Party will file a patent application (including any provisional, substitution, divisional, continuation, continuation in part, reissue, renewal, reexamination, extension, supplementary protection certificate and the like) in respect of any Jointly Owned Invention (each, a “Joint Patent Application”) and whether the Parties wish to appoint Joint Patent Counsel. In any event, the Parties shall consult and reasonably cooperate with one another in the preparation, filing, prosecution (including prosecution strategy) and maintenance of such patent application and shall equally share the expenses associated with the Joint Patent Applications. In the event that one Party (the “Filing Party”) wishes to file a patent application for a Jointly Owned Invention and the other Party (the “Non-filing Party”) does not want to file any patent application for such Jointly Owned Invention or does not want to file in a particular country, the Non-filing Party shall execute such documents and perform such acts at the Filing Party’s expense as may be reasonably necessary to effect an assignment of such Jointly Owned Invention to the Filing Party (in such country or all countries, as applicable) in a timely manner to allow the Filing Party to prosecute such patent application. Likewise, if a Party (the “Opting-out Party”) wishes to discontinue the prosecution and maintenance of a Joint Patent Application, the other Party, at its sole option (the “Continuing Party”), may continue such prosecution and maintenance. In such event, the Opting-out Party shall execute such documents and perform such acts at the Continuing Party’s expense as may be reasonably necessary to effect an assignment of such Joint Patent Application to the Continuing Party (in such country or all countries, as applicable) in a timely manner to allow the Continuing Party to prosecute and maintain such patent application. Any Joint Patent Application or Jointly Owned Invention so assigned shall thereafter be owned solely by the Continuing Party or Filing Party (as applicable), and any patent claiming such Jointly Owned Invention in the applicable country or countries any such patent, when issued, shall not be a Joint Patent. The Filing Party or Continuing Party (as applicable) hereby grants to the Opting-out Party or Non-Filing Party (as applicable) a perpetual, irrevocable, non-exclusive, royalty-free fully paid-up license under such solely owned patent applications and patents to practice any Invention claimed therein solely for the purposes of developing and commercializing its respective Compound for use in the Combination, which license shall not be transferable or sublicensable to any Third Party except to (A) Affiliates of the Opting-out Party or Non-Filing Party (as applicable) and (B) Third Parties engaged in developing, manufacturing or marketing that Party’s Compound for or on behalf of that Party or its Affiliates.

10.1.3 Except as expressly provided in Section 10.1.2 and in furtherance and not in limitation of Section 9.1, each Party agrees to make no patent application based on the other Party’s Confidential Information, and to give no assistance to any Third Party for such application, without the other Party’s prior written authorization.

10.1.4 Lilly shall have the first right to initiate and control legal action to enforce all Joint Patents against infringement, and to protect all Jointly Owned Inventions from misappropriation, by any Third Party where such infringement or misappropriation results from the development or sale of a molecule that is a biosimilar or interchangeable version of the Lilly Compound (i.e., where a Third Party has filed for marketing approval pursuant to 42 U.S.C. §262(k) or any comparable Applicable Law in other jurisdictions using the Lilly

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Compound as the reference drug), or to defend any declaratory judgment action relating thereto, at its sole expense (subject to Section 10.1.5). In the event that Lilly fails to initiate or defend such action within thirty (30) days after being first notified of such infringement or misappropriation, Athenex shall have the right to do so at its sole expense (subject to Section 10.1.5). Similarly, Athenex shall have the first right to initiate and control legal action to enforce all Joint Patents against infringement and to protect all Jointly Owned Inventions from misappropriation, by any Third Party where such infringement or misappropriation results from the development or sale of a molecule that is a biosimilar or interchangeable version of the Athenex Compound (i.e., where a Third Party has filed for marketing approval pursuant to 42 U.S.C. §262(k) or any comparable Applicable Law in other jurisdictions using the Athenex Compound as the reference drug), or to defend any declaratory judgment action relating thereto, at its sole expense (subject to Section 10.1.5). In the event that Athenex fails to initiate or defend such action within thirty (30) days after being first notified of such infringement, Lilly shall have the right to do so at its sole expense (subject to Section 10.1.5). In the event that legal action to enforce Joint Patents will involve infringement or misappropriation resulting from the development or sale of a molecule or molecules that is or includes both the Lilly Compound and the Athenex Compound, the Parties shall work together to coordinate such action and shall share the costs and expenses of such litigation equally. For clarity, if the alleged infringer is selling or intending to sell only one biosimilar or interchangeable version of either the Lilly Compound or the Athenex Compound, then the Parties obligation to share the costs and expenses of such litigation shall not apply.

10.1.5 If one Party brings any prosecution or enforcement action or proceeding against a Third Party with respect to any Joint Patent, the second Party agrees to be joined as a party plaintiff where necessary and to give the first Party reasonable assistance and authority to file and prosecute the suit. In such case, the costs and expenses of such second Party shall be borne by such second Party, but all other costs and expenses of the litigation shall be borne by the Party bringing or defending such suit. Any damages or other monetary awards recovered shall be shared by the Parties in proportion based on their relative contributions to the total costs and expenses of the litigation. A settlement or consent judgment or other voluntary final disposition of a suit under this Section 10.1.5 may not be entered into without the consent of the Party not bringing the suit.

10.2 Inventions Owned by Lilly. Notwithstanding Section 10.1, the Parties agree that all rights to Inventions relating solely to the Lilly Compound are the exclusive property of Lilly. Lilly shall be entitled to file in its own name relevant patent applications and to own resultant patent rights for any such Invention. For the avoidance of doubt, any Invention generically encompassing the Lilly Compound (and not any Athenex proprietary compound including the Athenex Compound) within its scope, even where the Lilly Compound is not disclosed per se, is the exclusive property of Lilly.

10.3 Inventions Owned by Athenex. Notwithstanding Section 10.1, the Parties agree that all rights to Inventions relating solely to the Athenex Compound are the exclusive property of Athenex. Athenex shall be entitled to file in its own name relevant patent applications and to own resultant patent rights for any such Invention. For the avoidance of doubt, any Invention generically encompassing the Athenex Compound (and not any Lilly proprietary compound

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including the Lilly Compound) within its scope, even where the Athenex Compound is not disclosed per se, is the exclusive property of Athenex.

10.4 Mutual Freedom to Operate for Combination Inventions.

(i) Lilly hereby grants to Athenex a non-exclusive, worldwide, royalty-free, fully paid-up license, transferable and sublicensable, to any patent owned or controlled by Lilly which (a) has a priority claim that is earlier than the initiation of the Study (i.e., first dosing of the first patient in the Study) and (b) claims the Combination, in order to practice such Combination for all purposes.

(ii) Athenex hereby grants to Lilly a non-exclusive, worldwide, royalty-free, fully paid-up license, transferable and sublicensable, to any patent owned or controlled by Athenex which (a) has a priority claim that is earlier than the initiation of the Study (i.e., first dosing of the first patient in the Study) and (b) claims the Combination, in order to practice such Combination for all purposes.

(iii) For clarity, the terms of this Section 10.4 do not provide Athenex or Lilly with any rights, title or interest or any license to the other Party’s background intellectual property which does not claim the Combination (i.e., intellectual property owned or licensed by either Party which does not constitute an Invention and does not claim the Combination) except as necessary to conduct the Study.

(iv) Notwithstanding the foregoing, any and all licenses granted under this Section shall terminate upon termination of this Agreement and any future agreement(s) the Parties may enter into related to the Combination.

11. Reprints.

Consistent with applicable copyright and other laws, each Party may use, refer to, and disseminate reprints of scientific, medical and other published articles and materials from journals, conferences and/or symposia relating to the Study which disclose the name of a Party, provided such use does not constitute an endorsement of any commercial product or service by the other Party.

12. Press Releases and Publications.

12.1 ***

12.2 To the extent required by Applicable Law or Lilly’s policies, Athenex will register the Study with the Clinical Trials Registry located at www.clinicaltrials.gov. Athenex is committed to timely publication of the results following Study Completion, after taking appropriate action to secure intellectual property rights (if any) arising from the Study. The publication of the results of the Study will be in accordance with the Protocol. Lilly agrees not to publish any results of the Study involving the Athenex Compound prior to the timely publication of such Study results by Athenex.

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12.3 Each Party shall use reasonable efforts to publish or present scientific papers dealing with the Study in accordance with accepted scientific practice. Each Party may issue a press release related to any scientific presentation or publication regarding the Study in a form mutually agreed to by the Parties.

12.4 The Parties agree that prior to submission of the results of the Study for publication or presentation or any other dissemination of results including oral dissemination, the publishing Party shall invite the other to comment on the content of the material to be published or presented according to the following procedure:

(i) At least *** days prior to submission for publication of any paper, letter or any other publication, or *** days prior to submission for presentation of any abstract, poster, talk or any other presentation, the publishing Party shall provide to the other Party the full details of the proposed publication or presentation in an electronic version (secure file transfer). Upon written request from the other Party, the publishing Party agrees not to submit data for publication/presentation for an additional *** days in order to allow for actions to be taken to preserve rights for patent protection.

(ii) The publishing Party shall give reasonable consideration to any request by the other Party made within the periods mentioned in clause (i) above to modify the publication and the Parties shall work in good faith and in a timely manner to resolve any issue regarding the content for publication.

(iii) The publishing Party shall remove all Confidential Information of the other Party before finalizing the publication.

12.5 Notwitstanding the foreging, that in the event Lilly has notified Athenex in writing that Lilly reasonably believes that prior to such publication or presentation it must take action to protect its intellectual property interests, such as the filing of a patent application claiming an invention or a trademark registration application, Athenex shall either (1) delay such publication or presentation for an additional *** days or until the foregoing action(s) have been taken, whichever shall first occur; or (2) if Athenex is unwilling to delay the publication or presentation, Athenex will remove from the publication or presentation the information which Lilly has specified it reasonably believes would jeopardize its intellectual property interests. Under certain circumstances, a shorter review period may be granted in writing by Lilly. Athenex will assist Lilly in obtaining reprints of the publication(s) resulting from the Study.

12.6 Each Party agrees to identify and acknowledge the other Party’s support in any press release and any other publication or presentation of the results of the Study, provided any such release, publication, presentation or other disclosure is reviewed and approved by the other Party.

13. Representations and Warranties; Disclaimers.

13.1 Each of Lilly and Athenex represents and warrants to the other that it has the full right and authority to enter into this Agreement.

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13.2 Neither Party undertakes that the Study shall lead to any particular result and both Parties agree and understand that the success of the Study is not guaranteed. Neither Party accepts any responsibility for any use that the other Party may make of the Clinical Data nor for advice or information given in connection therewith.

13.3 Anti-Corruption and Compliance.

13.3.1 In performing their respective obligations hereunder, the Parties acknowledge that the corporate policies of Lilly and Athenex and their respective Affiliates require that each Party’s business be conducted within the letter and spirit of the law. By signing this Agreement, each Party agrees to conduct the business contemplated herein in a manner which is consistent with all Applicable Law, including the U.S. Foreign Corrupt Practices Act, good business ethics, and its ethics and other corporate policies, and to abide by the spirit of the other Party’s applicable ethics and compliance guidelines which may be provided by such other Party from time to time. Specifically, each Party agrees that it has not, and covenants that it, its Affiliates, and its and its Affiliates’ directors, employees, officers, and anyone acting on its behalf, will not, in connection with the performance of this Agreement, directly or indirectly, make, promise, authorize, ratify or offer to make, or take any action in furtherance of, any payment or transfer of anything of value for the purpose of influencing, inducing or rewarding any act, omission or decision to secure an improper advantage; or improperly assisting it in obtaining or retaining business for it or the other Party, or in any way with the purpose or effect of public or commercial bribery.

13.3.2 Each Party shall not contact, or otherwise knowingly meet with, any Government Official for the purpose of discussing activities arising out of or in connection with this Agreement, without the prior written approval of the other Party, except where such meeting is consistent with the purpose and terms of this Agreement and in compliance with Applicable Law.

13.3.3 Each Party represents that: (i) it has no impediment to enter into the transaction contemplated in this Agreement; and (ii) it is not (and Athenex represents and covenants that no third party engaged to perform services for the Study will be) excluded, debarred, suspended, proposed for suspension or debarment, or otherwise ineligible for government programs.

13.3.4 Each Party represents and warrants that except as disclosed to the other in writing prior to the commencement of this Agreement: (1) it does not have any interest which directly or indirectly conflicts with its proper and ethical performance of this Agreement; (2) it shall maintain arm’s length relations with all Third Parties with which it deals for or on behalf of the other in performance of this Agreement; and (3) it has provided complete and accurate information to the other Party in the course of negotiating this Agreement, including disclosure of any officers, employees, owners or persons directly or indirectly retained by such Party, if any, in relation to the performance of this Agreement who are Government Officials or relatives of Government Officials. Each Party shall make all further disclosures as necessary to the other Party to ensure the information provided remains complete and accurate throughout the term of this Agreement. Subject to the foregoing, each Party agrees that it shall not hire or retain any

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Government Official to assist in its performance of this Agreement, with the sole exception of conduct of or participation in clinical trials under this Agreement, provided that such hiring or retention shall be subject to the completion by the hiring or retaining Party of a satisfactory anti-corruption and bribery (e.g., FCPA) due diligence review of such Government Official. Each Party further covenants that any future information and documentation submitted to the other Party as part of further due diligence or a certification shall be complete and accurate.

13.3.5 Each Party shall have the right during the term of this Agreement, and for a period of two (2) years following termination of this Agreement, to conduct an investigation and audit of the other Party’s activities, books and records, to the extent they relate to that other Party’s performance under this Agreement, to verify compliance with the terms of this Section 13.3. Such other Party shall cooperate fully with such investigation or audit, the scope, method, nature and duration of which shall be at the sole reasonable discretion of the Party requesting such audit.

13.3.6 Each Party shall ensure that all transactions under the Agreement are properly and accurately recorded in all material respects on its books and records and that each document upon which entries in such books and records are based is complete and accurate in all material respects. Each Party further represents, warrants and covenants that all books, records, invoices and other documents relating to payments and expenses under this Agreement are and shall be complete and accurate and reflect in reasonable detail the character and amount of transactions and expenditures. Each Party must maintain a system of internal accounting controls reasonably designed to ensure that no off-the-books or similar funds or accounts will be maintained or used in connection with this Agreement.

13.3.7 Each Party agrees that in the event that the other Party believes in good faith that there has been a possible violation of any provision of Section 14.3, such other Party may make full disclosure of such belief and related information needed to support such belief at any time and for any reason to any competent government bodies and its agencies, and to whoever such Party determines in good faith has a legitimate need to know.

13.3.8 Each Party agrees to ensure that all employees performing its obligations under this Agreement are provided ethics and compliance training in accordance with such Party’s corporate policies and procedures. All Internal Compliance Codes shall apply only to the Party to which they relate. The Parties agree to cooperate with each other to insure that each Party is able to comply with the substance of its respective Internal Compliance Codes and Party Specific Regulations and, to the extent practicable, to operate in a manner consist with its usual Compliance related processes. Neither Party shall be obligated to pursue any course of conduct that would result in such Party being in material breach of any Party Specific Regulation applicable to it. All Party Specific Regulations are binding only in accordance with their terms and only upon the Party to which they relate.

13.4 EXCEPT AS EXPRESSLY PROVIDED HEREIN, ATHENEX MAKES NO WARRANTIES, EXPRESS OR IMPLIED, INCLUDING ANY WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, WITH RESPECT TO THE ATHENEX COMPOUND, AND LILLY MAKES NO WARRANTIES, EXPRESS OR

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IMPLIED, INCLUDING ANY WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, WITH RESPECT TO THE LILLY COMPOUND.

14. Insurance; Indemnification; Limitation of Liability.

14.1 Insurance. Each Party warrants that it maintains a policy or program of insurance or self-insurance at levels sufficient to support the indemnification obligations assumed herein. Upon request, a Party shall provide evidence of such insurance.

14.2 Indemnification.

14.2.1 Indemnification by Athenex. Athenex agrees to defend, indemnify and hold harmless Lilly, its Affiliates, and its and their employees, directors, subcontractors and agents from and against any loss, damage, reasonable costs and expenses (including reasonable attorneys’ fees and expenses) incurred in connection with any claim, proceeding, or investigation by a Third Party arising out of this Agreement or the Study (a “Liability”), except to the extent that such Liability (A) was directly caused by (i) ***; (ii) ***; or (iii) ***; or (B) is determined to be attributable to ***.

14.2.2 Indemnification by Lilly. Lilly agrees to defend, indemnify and hold harmless Athenex, its Affiliates, and its and their employees, directors, subcontractors and agents from and against any Liability to the extent that such Liability (A) was directly caused by (i) ***; (ii) ***; or (iii) ***; or (B) is determined to be attributable to ***.

14.2.3 Procedure. The obligations of Athenex and Lilly under this Section 14.2 are conditioned upon the delivery of written notice to Athenex or Lilly, as the case might be, of any potential Liability within a reasonable time after a Party becomes aware of such potential Liability. A Party will have the right to assume the defense of any suit or claim related to the Liability (using counsel reasonably satisfactory to the other Party) if it has assumed responsibility for the suit or claim in writing. The other Party may participate in (but not control) the defense thereof at its sole cost and expense. The Party controlling such defense (the “Defending Party”) shall keep the other Party (the “Other Party”) advised of the status of such action, suit, proceeding or claim and the defense thereof and shall consider recommendations made by the Other Party with respect thereto. The Defending Party shall not agree to any settlement of such action, suit, proceeding or claim without the prior written consent of the Other Party, which shall not be unreasonably withheld. The Defending Party shall not agree to any settlement of such action, suit, proceeding or claim or consent to any judgment in respect thereof that does not include a complete and unconditional release of the Other Party from all liability with respect thereto or that imposes any liability or obligation on the Other Party without the prior written consent of the Other Party.

14.2.4 Study Subjects. Lilly shall not offer compensation on behalf of Athenex to any Study subject or bind Athenex to any indemnification obligations in favor of any Study subject. Likewise, Athenex shall not offer compensation on behalf of Lilly to any Study subject or bind Lilly to any indemnification obligations in favor of any Study subject.

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14.3 LIMITATION OF LIABILITY. OTHER THAN WITH RESPECT TO DAMAGES ARISING OUT OF OR RELATED TO A PARTY’S BREACH OF ITS OBLIGATIONS UNDER THIS AGREEMENT TO USE, DISCLOSE, LICENSE, ASSIGN OR OTHERWISE TRANSFER SAMPLE TESTING RESULTS, CLINICAL DATA, CONFIDENTIAL INFORMATION AND JOINTLY-OWNED INVENTIONS ONLY FOR THE PERMITTED USE, IN NO EVENT SHALL EITHER PARTY (OR ANY OF ITS AFFILIATES OR SUBCONTRACTORS) BE LIABLE TO THE OTHER PARTY FOR, NOR SHALL ANY INDEMNIFIED PARTY HAVE THE RIGHT TO RECOVER, ANY SPECIAL, INDIRECT, INCIDENTAL, PUNITIVE OR CONSEQUENTIAL DAMAGES (INCLUDING LOST PROFITS OR DAMAGES FOR LOST OPPORTUNITIES), WHETHER IN CONTRACT, WARRANTY, NEGLIGENCE, TORT, STRICT LIABILITY OR OTHERWISE, ARISING OUT OF (x) THE MANUFACTURE OR USE OF ANY COMPOUND SUPPLIED HEREUNDER OR (y) ANY BREACH OF OR FAILURE TO PERFORM ANY OF THE PROVISIONS OF THIS AGREEMENT OR ANY REPRESENTATION, WARRANTY OR COVENANT CONTAINED IN OR MADE PURSUANT TO THIS AGREEMENT, EXCEPT THAT SUCH LIMITATION SHALL NOT APPLY TO DAMAGES PAID OR PAYABLE TO A THIRD PARTY BY AN INDEMNIFIED PARTY FOR WHICH THE INDEMNIFIED PARTY IS ENTITLED TO INDEMNIFICATION HEREUNDER.

15. Use of Name.

Except as expressly provided herein, neither Party shall have any right, express or implied, to use in any manner the name or other designation of the other Party or any other trade name, trademark or logo of the other Party for any purpose in connection with the performance of this Agreement.

16. Force Majeure.

If in the performance of this Agreement, one of the Parties is prevented, hindered or delayed by reason of any cause beyond such Party’s reasonable control (e.g., war, riots, fire, strike, governmental laws), such Party shall be excused from performance to the extent that it is necessarily prevented, hindered or delayed (“Force Majeure”). The non-performing Party will notify the other Party of such Force Majeure within ten (10) days after such occurrence by giving written notice to the other Party stating the nature of the event, its anticipated duration, and any action being taken to avoid or minimize its effect. The suspension of performance will be of no greater scope and no longer duration than is necessary and the non-performing Party will use commercially reasonable efforts to remedy its inability to perform.

17. Entire Agreement; Modification.

The Parties agree to the full and complete performance of the mutual covenants contained in this Agreement. This Agreement, together with the Related Agreements, constitutes the sole, full and complete agreement by and between the Parties with respect to the subject matter of this Agreement, and all prior agreements, understandings, promises and representations, whether written or oral, with respect thereto are superseded by this Agreement. No amendments, changes, additions, deletions or modifications to or of this Agreement shall be valid unless reduced to writing and signed by the Parties hereto.

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18. Assignment and Sub-Contracting.

Neither Party shall assign or transfer this Agreement without the prior written consent of the other Party; provided, however, that either Party may assign all or any part of this Agreement to one or more of its Affiliates without the other Party’s consent, and any and all rights and obligations of either Party may be exercised or performed by its Affiliates, provided that such Affiliates agree to be bound by this Agreement.

19. Invalid Provision.

If any provision of this Agreement is held to be illegal, invalid or unenforceable, the remaining provisions shall remain in full force and effect and will not be affected by the illegal, invalid or unenforceable provision. In lieu of the illegal, invalid or unenforceable provision, the Parties shall negotiate in good faith to agree upon a reasonable provision that is legal, valid and enforceable to carry out as nearly as practicable the original intention of the entire Agreement.

20. No Additional Obligations.

Lilly and Athenex have no obligation to renew this Agreement or apply this Agreement to any clinical trial other than the Study. Neither Party is under any obligation to enter into another type of agreement at this time or in the future.

21. Dispute Resolution and Jurisdiction.

21.1 The Parties shall attempt in good faith to settle all disputes arising out of or in connection with this Agreement in an amicable manner. Any claim, dispute or controversy arising out of or relating to this Agreement, including the breach, termination or validity hereof or thereof (each, a “Dispute”), shall be governed by and construed in accordance with the substantive laws of the State of New York, without giving effect to its choice of law principles.

21.2 Nothing contained in this Agreement shall deny either Party the right to seek injunctive or other equitable relief from a court of competent jurisdiction in the context of a bona fide emergency or prospective irreparable harm, and such an action may be filed or maintained notwithstanding any ongoing discussions between the Parties.

22. Notices.

All notices or other communications that are required or permitted hereunder shall be in writing and delivered personally, sent by facsimile (and promptly confirmed by personal delivery or overnight courier), or sent by internationally-recognized overnight courier addressed as follows:

If to Athenex, to:

Athenex, Inc.

Conventus Building

1001 Main Street, Suite 600

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Buffalo, New York 14203

Attn: Teresa Bair, Esq., Legal Affairs

Fascimile No: 866-895-1793

With a copy to:

Athenex, Inc.

Conventus Building

1001 Main Street, Suite 600

Buffalo, New York 14203

Attn: Robert Keem, Operations

Fascimile No: 866-895-1793

If to Lilly, to:

Eli Lilly and Company

Lilly Corporate Center

893 S Delaware

Indianapolis, IN, USA 46285

Attention: Sr VP of Clinical Development and Medical Affairs, Oncology

Business Unit

Facsimile No: (317) 277-3652

With a copy to:

Eli Lilly and Company

Lilly Corporate Center

893 S Delaware

Indianapolis, IN, USA 46285

Attention: General Counsel

Facsimile No: (317) 433-3000

23. Relationship of the Parties.

The relationship between the Parties is and shall be that of independent contractors, and does not and shall not constitute a partnership, joint venture, agency or fiduciary relationship. Neither Party shall have the authority to make any statements, representations or commitments of any kind, or take any actions, which are binding on the other Party, except with the prior written consent of the other Party to do so. All persons employed by a Party will be the employees of such Party and not of the other Party and all costs and obligations incurred by reason of any such employment shall be for the account and expense of such Party.

24. Counterparts and Due Execution.

This Agreement, any amendment and Related Agreements may be executed in two (2) or more counterparts (including by way of facsimile or electronic transmission), each of which shall be deemed an original, but all of which together shall constitute one and the same instrument,

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notwithstanding any electronic transmission, storage and printing of copies of this Agreement from computers or printers. When executed by the Parties, this Agreement shall constitute an original instrument, notwithstanding any electronic transmission, storage and printing of copies of this Agreement from computers or printers. For clarity, facsimile signatures and signatures transmitted via PDF shall be treated as original signatures.

25. Construction.

Except where the context otherwise requires, wherever used, the singular will include the plural, the plural the singular, the use of any gender will be applicable to all genders, and the word “or” is used in the inclusive sense (and/or). Whenever this Agreement refers to a number of days, unless otherwise specified, such number refers to calendar days. The captions of this Agreement are for convenience of reference only and in no way define, describe, extend or limit the scope or intent of this Agreement or the intent of any provision contained in this Agreement. The term “including” as used herein shall be deemed to be followed by the phrase “without limitation” or like expression. The term “will” as used herein means shall. References to “Article,” “Section” or “Appendix” are references to the numbered sections of this Agreement and the appendices attached to this Agreement, unless expressly stated otherwise. Except where the context otherwise requires, references to this “Agreement” shall include the appendices attached to this Agreement. The language of this Agreement shall be deemed to be the language mutually chosen by the Parties and no rule of strict construction will be applied against either Party hereto.

[Remainder of page intentionally left blank.]

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FOIA CONFIDENTIAL TREATMENT REQUESTED

Confidential Materials omitted and filed separate with the Securities and Exchange Commission

Triple asterisks denote omissions

IN WITNESS WHEREOF, the respective representatives of the Parties have executed this Agreement as of the Effective Date.

Athenex, Inc.

By:

Name: (Type or Print) Simon Pedder, PhD

Title: Vice President of Corporate Strategy and Business Development

Date:

Eli Lilly and Company

By:

Name: Richard Gaynor

Title: Sr VP of Clinical Development and Medical Affairs, Oncology

Date:

Eli Lilly and Company

By:

Name: Michael Franklin

Title: Sr. Advisor Commercial Product/Collaborations

Date:

ImClone LLC

By:

Name (Type or Print):

Title: Member

Date:

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FOIA CONFIDENTIAL TREATMENT REQUESTED

Confidential Materials omitted and filed separate with the Securities and Exchange Commission

Triple asterisks denote omissions

Appendix A

PROTOCOL SUMMARY

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***

A total 77 pages of Protocol summary redacted.

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Appendix B

LILLY PRODUCT Supply Agreement

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***

A total 4 pages of Supply Agreement redacted.

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EX-10

Exhibit 10.18

FSMC-KINEX CONFIDENTIAL

SIGNATURE COPY

AGREEMENT FOR

MEDICAL TECHNOLOGY RESEARCH, DEVELOPMENT, INNOVATION,

AND COMMERCIALIZATION ALLIANCE

This AGREEMENT FOR MEDICAL TECHNOLOGY RESEARCH, DEVELOPMENT, INNOVATION, AND COMMERCIALIZATION ALLIANCE (“Agreement”) is effective as of May 1, 2015 (“Effective Date”) and is between FORT SCHUYLER MANAGEMENT CORPORATION (“FSMC”), a not-for-profit corporation existing under the laws of the State of New York having an office located at 257 Fuller Road, Albany, New York 12203, and KINEX PHARMACEUTICALS, INC. (“KINEX”), a Delaware corporation with its principal office located at 701 Ellicott Street, Buffalo, New York 14203. FSMC and KINEX are sometimes each referred to in this Agreement individually as a “Party” and collectively as “Parties.”

I. BACKGROUND

I.1. New York State (“NYS”) under the leadership of Governor Andrew Cuomo has led the U.S. in multi-billion dollar strategic investments in high technology programs that cover the entire spectrum of nanoelectronics, clean energy, information technology, medical, and smart cities industry needs, from long-term innovative research and development, to workforce development and education, to product demonstration and test-bedding, to product prototyping and supporting the transition to scale-up manufacturing and commercialization.

I.2. NYS’s comprehensive job creation and economic growth agenda for NYS provides strategic investments for job creation and workforce development in emerging high-tech industries across NYS and fosters critical partnerships between NYS government, the private sector and NYS’s top-flight universities and research institutions. This agenda is embodied by the commitment of NYS to, and the growth of, the State University of New York Polytechnic Institute (“SUNY POLY”) and facilities throughout NYS that support SUNY POLY’s collaborations with SUNY POLY’s public and private university and industry partners, including the Albany Nanotech Complex in Albany, the Smart Systems Technology Commercialization Center in Canandaigua, the Computer Chip Commercialization Center in Utica, the Buffalo Medical Innovation and Commercialization Hub, and the Buffalo High-Tech Manufacturing Innovation Hub at Riverbend.

I.3. KINEX is a leading international pharmaceutical company that originated in and is currently headquartered in Buffalo, NY with a leadership team consisting of Fortune 500 veterans. KINEX currently licenses or holds or has pending 194 patents across 66 countries with a pipeline of drug candidates with unique mechanisms that address unmet medical needs with large market potential with a focus on high potency oncological therapeutics.

I.4. SUNY POLY is a critical enabling component in maintaining and bolstering NYS’s position as a leader in nanoelectronics, medical and clean energy technology, and the Parties recognize the mutual benefit that can be attained by: (i) KINEX collaborating with SUNY POLY to bring to NYS new research, development, education, and business investments from the various sectors of the medical industry; (ii) fostering critical partnerships among the Parties and the public and private sectors; (iii) transitioning emerging technologies critical for medical and economic competitiveness; and (iv) commercializing emerging medical and other pharmaceutical products in commercial and consumer applications.

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I.5. SUNY POLY recognizes KINEX as a valuable potential collaborator and partner in the development of future generations of medical and pharmaceutical technologies.

I.6 The Parties desire to make joint investments in the State of New York that focus on (i) research, medical technology innovation and manufacturing expansion and commercialization of KINEX’s innovative new platform to manufacture several classes of specialized products including pharmaceutical based oral and sterile injectable oncological therapeutic products; (ii) establishment of a state-of-the-art ISO Class 5 high potency oral and sterile injectable pharmaceutical manufacturing facility in or near Olean, New York; and (iii) establishment of a medical technology research and innovation lab co-located with KINEX North American Headquarters in Buffalo, New York.

NOW, THEREFORE, the Parties agree as follows:

II. DEFINED TERMS

In addition to the terms defined elsewhere in this Agreement, the following terms have the described meanings listed below.

2.1 Affiliate

Affiliate means an entity that controls, is controlled by, or is under common control with, another entity, but only during the period that such control exists. For purposes of this Agreement, FSMC’s Affiliates shall be deemed to include, The Research Foundation for the State University of New York (“FOUNDATION”), Fuller Road Management Corporation (“FRMC”), SUNY and SUNY POLY.

2.2 Change of Control

Change of Control means one transaction or a series of transactions that result in a third party obtaining, directly or indirectly, (a) all or a majority of the assets of or (b) Control of, a Party. Change of Control shall not include the sale of capital stock in one or more financing transactions.

2.3 Control

Control means the power to direct the affairs of any individual, corporation, partnership, joint venture, trust, business association, governmental entity or other entity by reason of ownership of voting stock, by asset acquisition, by contract or otherwise.

2.4 North American Corporate Headquarters and Innovation Center

Corporate Headquarters and Innovation Center means, collectively, the approximately 51,000 square foot facility, including 14,000 square feet for a formulation testing lab and pilot plan, 2,000 square feet for a chemistry lab for a biological and analytical testing lab, 24,000 square feet for office and training space, 3,000 square feet for mechanicals, and related infrastructure

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to be located on the 6^th floor of the Conventus Building located at 1001 Main Street in Buffalo, New York. After the Parties sign this Agreement, the Parties will mutually agree on specifications for the design and construction of the Corporate Headquarters and Innovation Center to be set forth in Exhibit C by amending this Agreement and on terms for the lease of the Corporate Headquarters and Innovation Center by KINEX from FSMC in a separate written lease agreement between KINEX and FSMC consistent with the terms of this Agreement.

2.5 Knowledge

Knowledge means the actual knowledge of the officers and directors of KINEX.

2.6 Laboratory Equipment

Laboratory Equipment means the equipment listed in Exhibit D of this Agreement, which includes laboratory equipment that is necessary to accommodate all of KINEX’s expected U.S. pharmaceutical innovation formulation and feasibility output of innovative pharmaceutical products. After the Parties sign this Agreement, the Parties will mutually agree on the list of Laboratory Equipment to be set forth in Exhibit D by amending this Agreement.

2.7 Manufacturing Equipment

Manufacturing Equipment means the equipment listed in Exhibit B of this Agreement, which includes manufacturing tools that are necessary to perform the Manufacturing Operations. After the Parties sign this Agreement, the Parties will mutually agree on the list of Manufacturing Equipment to be set forth in Exhibit B by amending this Agreement.

2.8 Manufacturing Facility

Manufacturing Facility means the approximately 315,000 square foot state-of-the-art ISO Class 5 high potency oral and sterile injectable pharmaceutical manufacturing facility and related infrastructure to be located at a site in or near Olean, New York. After the Parties sign this Agreement, the Parties will mutually agree on specifications for the design and construction of the Manufacturing Facility to be set forth in Exhibit A by amending this Agreement and on terms for the operation and maintenance of the Manufacturing Facility in a separate written lease agreement between KINEX and FSMC.

2.9 Manufacturing Operations

Manufacturing Operations means the KINEX and/or its Affiliates activities in connection with the manufacture of high potency oral and sterile injectable pharmaceutical products and/or any other products and all other activities related thereto.

2.10 SUNY POLY Facilities

SUNY POLY Facilities means, collectively, the Manufacturing Facility, the Corporate Headquarters and Innovation Center and all other FSMC, FSMC Affiliate, and SUNY POLY facilities used in the Program (as defined in Exhibit E).

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2.11 SUNY POLY Tools

SUNY POLY Tools means, collectively, the Manufacturing Equipment, Laboratory Equipment, and all other FSMC and SUNY POLY tools and equipment used by a Party in the Program.

III. OBJECTIVES

3.1 Research and Development and Economic Development

The Parties are entering into this Agreement to establish a mutually beneficial collaboration focused on this U.S. based research, manufacturing expansion and commercialization of KINEX’s innovative new platform to manufacture pharmaceuticals including but not limited to oral and sterile injectable oncological therapeutic products and the research and development and workforce training necessary to achieve KINEX’s next generation pharmaceutical products.

3.2 Program Essential Purposes

For purposes of this Agreement, the “Essential Purposes” of the Program shall be as follows:

(a) Focus on the U.S. based research, medical technology innovation and manufacturing expansion and commercialization of KINEX’s innovative new platform to manufacture several classes of specialized products including pharmaceutical based oral and sterile injectable oncological therapeutic products;

(b) Identify, prepare, design, construct and provide for the purpose of this Agreement the Manufacturing Facility in or near Olean, New York;

(c) Identify, prepare, design, construct and provide for the purpose of this Agreement the Corporate Headquarters and Innovation Center;

(d) Develop a joint development program for FOUNDATION on behalf of SUNY POLY to support KINEX with existing complementary capabilities at the SUNY POLY Albany NanoTech Complex and any other SUNY POLY facility and may include the expansion of capabilities, if necessary and upon the award of NYS capital funds, to establish the full continuum of support for KINEX’s manufacturing and commercialization operations; and

(e) Expand and enhance the ever growing high tech cluster that has been developed in NYS and centered in Albany at SUNY POLY.

IV. KINEX PROGRAM CONTRIBUTION OBLIGATIONS

4.1 Manufacturing Operations

(a) Following the Manufacturing Facility Completion, KINEX shall establish its Manufacturing Operation in or near Olean, New York at the Manufacturing Facility and shall jointly

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commission, with FOUNDATION, the Manufacturing Operation as soon as possible, with a target date of December 1, 2017 (“Target Commission Date”). Following the Manufacturing Facility Completion, KINEX, at its expense, shall be responsible for operating and managing all aspects of the Manufacturing Operations at the Manufacturing Facility, including, without limitation, hiring the workforce to perform Manufacturing Operations in accordance with the terms of this Agreement, procuring the raw materials, supplies, manufacturing the pharmaceutical products, selling and distributing the pharmaceutical products, and maintaining compliance with all applicable laws. Except for the Manufacturing Facility and the Manufacturing Equipment that will be owned by FSMC and made available by FSMC to KINEX for the Manufacturing Operations, KINEX will own all the inventory, product, output, and other property it purchases or creates associated with running the Manufacturing Operation at the Manufacturing Facility. The profit or losses resulting from the Manufacturing Operation at the Manufacturing Facility shall accrue solely to KINEX. KINEX shall be responsible for all taxes, including, without limitation, federal and local taxes, associated with the Manufacturing Operation at the Manufacturing Facility.

(b) As used in this Agreement, the following terms have the following meanings:

“Manufacturing Facility Completion” means that the Manufacturing Facility and all related infrastructure have been completed in accordance with the agreed-on plans, specifications and requirements, all utilities serving the Manufacturing Facility are fully operational, a certificate of occupancy or its equivalent for the entire Manufacturing Facility has been issued by the applicable governmental agency and all Manufacturing Equipment has been acquired and delivered to the Manufacturing Facility.

“Manufacturing Equipment Commissioning” means that after Manufacturing Facility Completion has been achieved, all Manufacturing Equipment has been installed in the Manufacturing Facility, has been commissioned, and the entire manufacturing line and related Manufacturing Equipment is fully operational.

(c) FSMC is responsible at its cost (subject to the limits below in Section 5.1(d)) to achieve Manufacturing Facility Completion, including to acquire all Manufacturing Equipment and to provide for all Manufacturing Equipment to be delivered to the Manufacturing Facility. Once Manufacturing Facility Completion has been achieved, including all Manufacturing Equipment has been acquired and delivered to the Manufacturing Facility, KINEX is responsible at its cost to achieve Manufacturing Equipment Commissioning. The Parties will mutually agree upon the list of Manufacturing Equipment subject to KINEX’s general requirements with respect to the Manufacturing Equipment.

4.2 Manufacturing Facility and Manufacturing Equipment

After the Manufacturing Facility Completion, KINEX shall lease the Manufacturing Facility for the Manufacturing Operations from FSMC in accordance with the terms of a separate written lease agreement between KINEX and FSMC, consistent with the terms of this Agreement, at the base rent rate of $1.00 per year for a term of ten (10) years with the option to extend the term of the lease for a second ten (10) year term. Following the Manufacturing Facility Completion, KINEX is responsible for paying for all costs associated with the Manufacturing Facility and the

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property on which the Manufacturing Facility is situated, including, without limitation, maintenance and operating expenses, utilities, municipal charges, and real estate taxes assessed against the Manufacturing Facility and the property on which the Manufacturing Facility is situated or the amount(s) to be paid pursuant to a payment in lieu of taxes or other agreement with a governmental entity, whether such payments are by contribution or otherwise. Notwithstanding the foregoing or anything to the contrary in this Agreement, including Sections 4.1(a), and 4.3, with respect to the Manufacturing Facility and the property on which the Manufacturing Facility is situated, under the written lease agreement between FSMC and KINEX, KINEX shall in no event have any obligation to perform or to pay directly, or to reimburse FSMC for, and FSMC shall be solely responsible for: (a) costs caused by the violation of any law by FSMC or its Affiliates, or their respective agents, employees or contractors; (b) costs caused by condemnation or casualties that are not caused by the negligence or willful misconduct of KINEX or its agents, employees or contractors or that are of a type required to be insured against by FSMC under Exhibit F; (c) costs to correct any construction defect in the Manufacturing Facility or to comply with any covenant, condition, restriction or law applicable to the Manufacturing Facility on the Manufacturing Facility Completion date; (d) costs of structural or other repairs that are FSMC’s responsibility hereunder; or (f) any fee or compensation to FSMC or its Affiliates, designees, agents or contractors for management or administration of the Manufacturing Facility. The Manufacturing Equipment shall be located at the Manufacturing Facility and shall be assigned for the exclusive use of KINEX for a term of ten (10) years with the option to extend its use for a second ten (10) year term.

4.3 KINEX Investment & Spending in connection with the Manufacturing Facility

Provided FSMC performs its obligations hereunder and following the Manufacturing Facility Completion, KINEX commits to invest and spend in the Manufacturing Operation at the Manufacturing Facility, including raw materials, supplies, labor and other operational costs $1.52 Billion during the first ten (10) years following the Manufacturing Facility Completion, with an additional investment of $1.5 Billion over a subsequent ten (10) year period in the event of this Agreement and the lease agreement for the Manufacturing Facility are renewed, as follows:

OpEx (Yr. 1 – 10)
Raw Materials	$	300 Million
Supplies	$	250 Million
Labor (fully burdened)	$	570 Million
Other Operating	$	400 Million
Total	$	1.520 Billion

4.4 KINEX Employment Targets in connection with the Manufacturing Facility

Provided FSMC performs its obligations hereunder, KINEX shall create and hire as KINEX employees personnel for 450 direct, permanent high tech jobs at the Manufacturing Facility with most of these positions being high tech jobs. At least 300 of these jobs will be created over the first 2.5 years of the Manufacturing Facility operation following the Manufacturing Facility Completion, with 450 jobs achieved during the 5^th year of Manufacturing Facility operation following the Manufacturing Facility Completion. KINEX commits to the retention of these jobs for the Term of this Agreement. KINEX also commits to working jointly with

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FOUNDATION to assist it in attracting and locating an additional 450 jobs from companies that provide supplies, machinery, equipment, materials, and/or services or goods to the Manufacturing Facility. The jobs that set forth in this Section are expected to meet the commercially reasonable requirements of the funding agency(ies) supporting this Agreement.

4.5 KINEX Medical Technology Research & Innovation Center and North American Headquarters

(a) Following the Headquarters Build Out Completion, KINEX shall locate its North American Headquarters and Medical Technology Research & Innovation Center within the Buffalo Medical Innovation and Commercialization Hub at the Corporate Headquarters and Innovation Center. KINEX shall lease from FSMC the Corporate Headquarters and Innovation Center in accordance with the terms of a separate written lease agreement between KINEX and FSMC consistent with the terms of this Agreement for the purpose of housing KINEX’s Medical Technology Research & Innovation Center and North American Headquarters for a ten (10) year term, with the option to extend the term of the lease for a second ten (10) year term, at a lease rent rate equal to 35% of FSMC’s external lease rent costs for the Corporate Headquarters and Innovation Center for years 1 through 3 and thereafter at a lease rental rate equal to 100% of FSMC external lease rent costs for the Corporate Headquarters and Innovation Center. The lease term will commence on August 1, 2015. If fit-up for the Corporate Headquarters and Innovation Center is not completed by August 1, 2015, then KINEX will be allowed to begin moving into the Corporate Headquarters an Innovation Center while fit-up is being finalized. Subject to the terms of the separate written lease agreement, once Headquarters Build Out Completion has been achieved, KINEX shall pay all other FSMC external lease costs associated with FSMC’s lease of the Corporate Headquarters and Innovation Center, including, without limitation, maintenance and operating expenses, utilities, municipal charges, and real estate taxes assessed against the Corporate Headquarters and Innovation Center and the property on which the Corporate Headquarters and Innovation Center is situated or the amount(s) required to be paid pursuant to a payment in lieu of taxes or other agreement with a governmental entity, whether by contribution or otherwise.

(b) As used in this Agreement, “Headquarters Build Out Completion” means that the Corporate Headquarters and Innovation Center and all related infrastructure have been renovated and prepared in accordance with the agreed-on plans, specifications and requirements, and the premises are suitable for occupation by KINEX.

(c) FSMC is responsible at its cost (subject to the limits below in Section 5.1(g)) to achieve Headquarters Build Out Completion, including to acquire all Laboratory Equipment and to provide for all Laboratory Equipment to be delivered to the Corporate Headquarters and Innovation Center.

(d) The Laboratory Equipment shall be located at the Corporate Headquarters and Innovation Center and assigned for the exclusive use of KINEX for a term of ten (10) years with the option to extend its use for a second ten (10) year term.

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4.6 KINEX Investment Spending in connection with the Corporate Headquarters and Innovation Center

Following the Headquarters Build Out Completion, KINEX commits to invest and spend a total of $100 million over ten (10) years in operational expenses at the Corporate Headquarters and Innovation Center and other existing KINEX Erie County manufacturing facilities. In the event the term of the separate written lease agreement between KINEX and FSMC for KINEX lease of the Corporate Headquarters and Innovation Center is extended for an additional ten (10) years, KINEX will invest an additional $100 million in operational expenses at the Corporate Headquarters and Innovation Center and KINEX’s other existing KINEX Erie County manufacturing facilities.

4.7 KINEX Employment Targets in connection with the Corporate Headquarters and Innovation Center.

Following the Headquarters Build Out Completion, KINEX agrees to create and hire as KINEX employees personnel for 250 direct, permanent high tech and corporate jobs at the Corporate Headquarters and Innovation Center and other KINEX operations located in the Buffalo, NY area within the first 5 years the Corporate Headquarters and Innovation Center is open. KINEX commits to the retention of these jobs for the Term of this Agreement. KINEX also commits to working jointly with FSMC to assist it in attracting and locating an additional 250 jobs from companies that provide supplies, machinery, equipment, materials, and/or services or goods to the KINEX operations in NYS. The jobs that set forth in this Section are expected to meet the commercially reasonable requirements of the funding agency(ies) supporting this Agreement.

4.8 Additional KINEX Manufacturing Capacity

KINEX or a KINEX Affiliate may expand its healthcare manufacturing capacity beyond that described in this Agreement by creating another manufacturing facility (“Phase II”). KINEX hereby grants FSMC the right to have the first opportunity to discuss, negotiate, and enter into an agreement with KINEX or a KINEX Affiliate with respect to the location of Phase II. If, at any time during the Term of this Agreement, KINEX or a KINEX Affiliate has a commercially reasonable good faith intention to proceed with Phase II, then prior to KINEX or a KINEX Affiliate entering into a binding agreement with respect to the location, lease or purchase of Phase II with any party other than FSMC, KINEX will notify FSMC of the commercially reasonable good faith intention of KINEX or a KINEX Affiliate to proceed with Phase II. The Parties will negotiate in good faith and attempt to reach a mutual agreement in writing within 120 days from the date on which FSMC receives notice from KINEX (“Negotiation Period”) for KINEX or a KINEX Affiliate to locate Phase II in NYS. During the Negotiation Period, neither KINEX nor any of its Affiliates may negotiate with any party other than FSMC on behalf of SUNY POLY with respect to Phase II. After expiration of the Negotiation Period, if the Parties have not reached an agreement in writing for KINEX or a KINEX Affiliate to locate Phase II in NYS, then KINEX will be free to locate Phase II at any location it determines.

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4.9 Commitment to Local Content

KINEX acknowledges NYS’s desire to use as much locally manufactured product as is practical in support of the Manufacturing Facility, the Corporate Headquarters and Innovation Center and any other KINEX locations in NYS. KINEX will make reasonable efforts and provide first consideration to NYS based suppliers of equipment, materials and other items required for the establishment and growth of the KINEX’s operations in order to use as much NYS manufactured product as is practical.

4.10 Workforce Education and Training

KINEX commits to use commercially reasonable efforts to work with FSMC to help recruit, relocate, and train the workforce necessary to staff the Corporate Headquarters and Innovation Center and the Manufacturing Facility. This may include participation in one or more workforce development programs FSMC, FOUNDATION, and/or SUNY POLY has or will commence in NYS.

4.11 Programmatic Commitments

KINEX will use commercially reasonable efforts to guide and execute the activities outlined below with assistance from FOUNDATION:

• Work with FOUNDATION on behalf of SUNY POLY to develop next generation high potency oral and sterile injectable pharmaceutical product educational curriculum and workforce training content;

• Deliver joint educational programs, seminars, and conferences;

• Offer internships that will enable SUNY POLY students to participate in the development, manufacture, and distribution of next generation high potency sterile injectable pharmaceutical products; and

• Participate, as and when appropriate, in the medical, biomedical and life sciences related centers SUNY POLY has established or will in the future establish.

4.12 Contribution Verification and Audit

KINEX shall provide FSMC with reports verifying KINEX’s contributions to the Program and the fair market value of such contributions and such other information as reasonably requested by FSMC, with such reports being duly acknowledged by an officer of KINEX and in such form as reasonably requested by FSMC. During such audit, FSMC or its accounting firm may examine and copy KINEX’s books, records, documents, and other supporting data relating to this Agreement and the Program expenditures. KINEX shall maintain accurate books, records, documents, and other supporting data which relate to all financial matters concerning the Program and its obligations under this Agreement for seven (7) years from the date of termination of this Agreement. FSMC will notify KINEX in writing before any audit and will conduct such audit at reasonable times.

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V. FSMC PROGRAM CONTRIBUTION OBLIGATIONS

5.1 Manufacturing Facility and Manufacturing Equipment

(a) Subject to the limitation set forth in Section 5.1(d), FSMC will generate funding from the State of New York, to be administered through FSMC or its Affiliate, to design and construct the Manufacturing Facility, as may be mutually agreed to in writing by the Parties, to house the Manufacturing Operations. The Manufacturing Facility will be constructed and owned or controlled by FSMC and leased to KINEX in accordance with the terms of a separate written lease agreement between KINEX and FSMC, consistent with the terms of this Agreement, at the base rent rate of $1.00 per year for a term of ten (10) years with the option to extend the term of the lease for a second ten (10) year term.

(b) The Parties agree that KINEX will have the opportunity to fully participate in the design and construction process for the Manufacturing Facility. FSMC shall negotiate the contracts for the design and construction of the Manufacturing Facility including approving the budget for the contracts for the design and construction of the Manufacturing Facility, with the intent of the Manufacturing Facility to be completed in compliance with KINEX’s requirements. FSMC shall cause the Manufacturing Facility to be constructed in a good and workmanlike manner in accordance with all laws, plans approved by KINEX consistent with the requirements and a detailed project schedule to be mutually agreed between the Parties, pursuant to one or more guaranteed maximum price contracts requiring competitive bids for subcontractors. Notwithstanding anything to the contrary in Sections 5.1(a), (c), (d) and (g), FSMC shall be solely responsible for, and the $200 Million amount referenced herein includes, reasonable costs for roads, utilities and other site improvements reasonably required for KINEX Manufacturing Operations at the Manufacturing Facility, which FOUNDATION shall cause to be installed as part of the Manufacturing Facility.

(c) Subject to the limitation set forth in Section 5.1(d), FSMC will further generate funding from the State of New York, to be administered through FSMC or its Affiliate, to equip the Manufacturing Facility with the Manufacturing Equipment. The Manufacturing Equipment will be owned by FSMC or its Affiliate and assigned to KINEX for its exclusive use for a term of ten (10) years with the option to extend the term of its use for a second ten (10) year term.

(d) Under no circumstance will FSMC or its Affiliate’s costs for the Manufacturing Facility and Manufacturing Equipment exceed $200 million plus any remaining amount, not to exceed $25 million, from the funding for FSMC’s and its Affiliate’s costs associated with the KINEX Corporate Headquarters and Innovation Center and the Laboratory Equipment.

(e) Subject to the limitations set forth in Section 5.1(g), FSMC will generate funding from the State of New York, to be administered through FSMC or its Affiliate, to design, construct and fit-up the Corporate Headquarters and Innovation Center. The Corporate Headquarters and Innovation Center will be controlled by FSMC and leased to KINEX in accordance with the terms of a separate written lease agreement between KINEX and FSMC consistent with the terms of this Agreement for the purpose of housing KINEX’s Medical Technology Research & Innovation Center and North American Headquarters for a ten (10) year term, with the option to extend the term of the lease for a second ten (10) year term.

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(f) Subject to the limitations set forth in Section 5.1(g), FSMC will further use best efforts to generate funding from the State of New York, to be administered through FSMC or its Affiliate, to equip the Corporate Headquarters and Innovation Center with the Laboratory Equipment. The Laboratory Equipment will be owned by FOUNDATION or its Affiliate and assigned for the exclusive use of KINEX for a term of ten (10) years with the option to extend the term of its use for a second ten (10) year term.

(g) Under no circumstances will FSMC or its Affiliate’s costs for the Corporate Headquarters and Innovation Center and the Laboratory Equipment exceed $25 million in the aggregate. In the event these costs are less than $25 million, the remaining funds will be used by FSMC or its Affiliate in support of the Manufacturing Facility and Manufacturing Equipment as set forth in Section 5.1(d).

(h) FSMC will manage the design and construction of the Manufacturing Facility, subject to KINEX’s rights under Section 5.1(b). FSMC shall keep the foundation, the exterior walls, plate glass windows, exterior entrance doors, exterior entrance door closure devices, and other exterior openings; window and window frames, molding, locks, and hardware; signs, placards, decorations or advertising media of any type, underground utilities and roof of the Manufacturing Facility and furnace in good repair. FSMC will keep KINEX apprised, where applicable, of maintenance and repair work to the Manufacturing Facility and will coordinate any such maintenance and repair work with KINEX so as to minimize the disruption of the Manufacturing Operations.

KINEX shall be responsible for the maintenance and repair of the Manufacturing Equipment. KINEX shall make all needed repairs and replacements of the Manufacturing Equipment, within the Manufacturing Facility (including all utility systems located either within or above ground on the outside perimeter of the Manufacturing Facility), except for repairs and replacements required to be made by FSMC hereunder.

In the event the Manufacturing Equipment should become in need of maintenance or repair required to be made by KINEX hereunder, KINEX shall give prompt written notice thereof to FSMC reasonably describing the maintenance and repair work to be performed, the Manufacturing Equipment affected, and proposed treatment; but in the event a condition arises with respect to the Manufacturing Equipment that either (i) creates a materially unsafe condition or imminent danger to persons with respect to the Manufacturing Equipment, or (ii) materially impairs the Manufacturing Equipment, as determined by FSMC, FSMC may make immediate interim repairs as are necessary to prevent damage from occurring. FSMC and KINEX shall work together to coordinate maintenance and repair under any available warranties. FSMC may appoint KINEX as its agent to enforce all such express warranties with respect to the Manufacturing Equipment on a case by case basis, to allow KINEX to undertake needed maintenance and repairs on an expedited basis when necessary to minimize downtime and impact on the Manufacturing Operations.

In the event the Manufacturing Facility should become in need of maintenance or repair required to be made by FSMC hereunder, FSMC shall give prompt notice thereof to

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KINEX; but in the event of a materially unsafe condition or imminent danger to persons with respect to the Manufacturing Facility, as determined by FSMC, FSMC shall make immediate interim repairs as are necessary to prevent damage from occurring.

Notwithstanding anything to the contrary contained in this Section 5.1(h), if a condition arises with respect to the Manufacturing Facility that either (i) creates a materially unsafe condition or imminent danger to persons, or (ii) materially impairs the manufacturing capacity or operation of the Manufacturing Operations, KINEX shall provide prompt written notice thereof to FSMC and FSMC shall take commercially reasonable steps to address the condition, taking into account the urgency of the situation.

Where appropriate, FSMC shall cooperate with KINEX (e.g., assigning warranty rights) to enable KINEX to address the condition.

(i) FSMC (or its Affiliate) and KINEX will mutually agree in writing on terms associated with any option to renew the lease for the Manufacturing Facility and the Manufacturing Equipment from FSMC to either: 1) allow KINEX to purchase the Manufacturing Equipment at a pricing to be mutually agreed to and lease or purchase the Manufacturing Facility at a pricing to be mutually agreed to from FSMC; or 2) with KINEX committing to spend or incur at least $1.52 Billion in additional combined capital, operational expenses and other costs in New York State (as described in Section 4.3) during a ten (10) year period commencing on the tenth anniversary of Manufacturing Facility Completion, FSMC will extend the $1.00 per year lease terms for the Manufacturing Facility for an additional ten (10) years, including use of the Manufacturing Equipment at no additional cost.

(j) The Parties acknowledge and agree that, following the execution of this Agreement, the Parties will confer and mutually agree on timelines and milestone events for the construction of the Manufacturing facility and the build out of the Corporate Headquarters and Innovation Facility, and that upon the establishment of such timelines and milestones, this Agreement will be further amended to reflect deadlines for the achievement of relevant milestones, and termination provisions to reflect the failure of a party to timely achieve relevant milestones.

5.2 FSMC Assisted Employment Targets

FSMC commits to working jointly with KINEX to attract and locate an additional 250 support jobs from KINEX contractors and suppliers in the proximity of the Corporate Headquarters and Innovation Center and 450 support jobs from KINEX contractors and suppliers in the proximity of the Manufacturing Facility.

5.3 FOUNDATION R&D Funding Targets

FOUNDATION will use best efforts to work with KINEX to identify sources of funding to continue the development of high potency oral and sterile injectable pharmaceutical products.

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5.4 Workforce Education and Training/Other Incentives

FSMC will use best efforts to work with KINEX to help recruit, relocate, and train the workforce necessary to staff the Manufacturing Facility. This may include participation in one or more workforce development programs FSMC, FOUNDATION and/or SUNY POLY has or will commence in NYS. FSMC commits to work with KINEX to help coordinate other NYS or local workforce training, relocation or programs available to assist KINEX in the attraction, retraining, and retention of the workforce necessary to staff the Manufacturing Facility.

5.5 Programmatic Activities

FSMC will cause FOUNDATION will use best efforts to assist KINEX in guiding and executing the activities outlined below:

• Work with FOUNDATION on behalf of SUNY POLY to develop next generation high potency oral and sterile injectable pharmaceutical product educational curriculum and workforce training content;

• Deliver joint educational programs, seminars, and conferences;

• Offer internships that will enable SUNY POLY students to participate in the development, manufacture, and distribution of next generation high potency oral and sterile injectable pharmaceutical products; and

• Participate, as and when appropriate, in the medical, biomedical and life sciences related centers SUNY POLY has established or will in the future establish.

VI. FSMCPRINCIPAL INVESTIGATOR

FSMC shall provide or shall cause to be provided ALAIN KALOYEROS as the principal investigator regarding all technical, programmatic and facilities use requirements in respect of the terms and conditions of this Agreement and regarding the supervision, management and operation of the Program. If ALAIN KALOYEROS’ affiliation with SUNY POLY should terminate for any reason, an appropriate replacement shall be appointed by FSMC.

VII. FSMC/SUNY POLY OR FSMC’S AFFILIATE GUIDELINES

FSMC/SUNY POLY may provide to KINEX documents setting forth commercially reasonable guidelines applicable to (a) KINEX’s employees and agents that are resident or working at the SUNY POLY Facilities and, to the extent applicable, such guidelines shall be consistent with the terms and conditions of this Agreement, and (b) KINEX’s use of SUNY POLY Facilities for conducting operations of the Program. The Parties shall agree upon and shall document other guidelines that shall apply to the Parties’ employees and agents participating in the Program.

VIII. INTELLECTUAL PROPERTY

Rights in and obligations with respect to intellectual property created under this Agreement shall be in accordance with the terms of Exhibit E. Except as set forth in Exhibit E, no rights in any intellectual property are conveyed or granted by or under this Agreement.

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IX. PROJECTS

The Parties or their Affiliates may from time to time during the Term of this Agreement mutually agree to define and enter into one or more Statement(s) of Work (“SOW(s)”) for Projects in accordance with Exhibit E.

X. PROGRAM REVIEW AND DISPUTE RESOLUTION

10.1. The Parties will establish an annual program review process with appropriate senior executives of the Parties of at least the level of Vice President or other comparable level as defined by each Party.

10.2. Each Party shall designate a “Program Manager” to oversee its participation in Projects and the Program.

10.3 The Program Managers will exercise reasonable efforts in attempting to reach mutual agreement on all issues and matters under their consideration. If the Program Managers cannot reach agreement in a reasonable amount of time, the Program Managers shall refer the dispute in writing to the senior executives of the Parties that are designated under Section 10.1, who shall discuss and meet in person, if necessary, in order to negotiate a resolution to the dispute.

XI. TERM AND TERMINATION

11.1 Term

The term of this Agreement begins on the Effective Date and shall extend for ten (10) years from the Manufacturing Facility Completion, unless the Parties extend the term of this Agreement in accordance with the terms of this Agreement or unless this Agreement is terminated by a Party in accordance with the terms of this Agreement (“Term”). The Parties may mutually agree in a written amendment to this Agreement to extend the Term of this Agreement for an additional ten (10) years or for such other period of time as the Parties agree. The Parties anticipate the need for KINEX to have subsequent renewal options generally and in the event that the Parties decide not to extend this Agreement or if this Agreement is otherwise terminated, the Parties will mutually agree on terms to renew the lease for the Manufacturing Facility, the Corporate Headquarters and Innovation Center, the Manufacturing Equipment and the Laboratory Equipment from FSMC (or FSMC’s Affiliate).

11.2 Agreement Termination for Breach, Default or Failure to Perform

If a Party becomes a breaching Party (the “Breaching Party”) by breaching, defaulting or failing to perform any representation, warranty, covenant, obligation or agreement hereunder in any respect that is material to this Agreement, then the other Party (the “Non-Breaching Party”) may terminate this Agreement through a written notice to the Breaching Party (the “Breach Notice”) enumerating the Breaching Party’s breach(es) or failure(s) to perform or event(s) of default under this Agreement; provided, that within ninety (90) calendar days after the date upon which the Breach Notice was delivered to the Breaching Party, the Breaching Party shall be entitled to cure any of the breaches, failures to perform or events of default identified in the

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Breach Notice. If at the end of the 90-day cure period, any of the identified breaches, failures to perform or events of default have not been cured, the Non-Breaching Party may, by a signed written notice, terminate this Agreement with respect to the Breaching Party, effective immediately. Notwithstanding the above, if the Breaching Party commences to cure the breaches, failures to perform or events of default identified in the Breach Notice within the 90-day cure period, but is unable to reasonably complete the cure within such period, the Breaching Party may, upon written request to the Non-Breaching Party prior to the end of the original cure period, together with a reasonably detailed explanation of how such cure would be achieved, have an additional 90-day cure period to complete the cure if such written request is granted by the Non-Breaching Party.

11.3 Other Agreement Termination Events

If any Party (an “Affected Party”) commits, engages in or suffers any of the following events, then the other Party may terminate this Agreement:

(a) Becomes insolvent, is dissolved or liquidated, files or has filed against it (and it is not dismissed within ninety (90) days of filing) a petition in bankruptcy, reorganization, dissolution or liquidation or similar action, is adjudicated as bankrupt, or has a receiver appointed for its business;

(b) Has all or a substantial portion of its capital stock or assets expropriated or attached by any government entity;

(c) Makes an assignment of this Agreement for the benefit of creditors;

(d) Is subject to property attachment, court injunction, or court order materially affecting its ability to honor its obligations under this Agreement; or

(e) Suffers a Change of Control, without the prior approval of the other Party, which approval shall not be unreasonably withheld.

11.4 Effects of Agreement Termination. Party Termination

(a) If a Party’s participation in this Agreement is terminated by another Party in accordance with Sections 11.2 or 11.3, such Party shall be termed a “Terminated Party” herein, and the other Party (as to whose participation in this Agreement has not terminated) shall be termed the “Continuing Party” herein.

(b) Any termination of the entire Agreement shall result in termination of all Projects and all other Program-related activities. Any termination with respect to or withdrawal by a Terminated Party shall terminate the Terminated Party’s current and/or prospective participation in all Project activities as of the effective date of the Terminated Party’s termination, but shall not relieve such Terminated Party of liability under Section 11.5 or as otherwise provided in this Agreement.

(c) Upon termination of a Terminated Party’s participation in this Agreement, the Terminated Party shall destroy or return to the Continuing Party all Confidential Information (as defined in Exhibit F) of the Continuing Party, as well as all copies and resumes thereof (except one (1) copy thereof which may be retained for archival and legal purposes), and the Terminated Party shall so certify such return or destruction in writing to the Continuing Party.

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11.5 Liability upon Termination

(a) If FSMC is the Terminated Party, FSMC’S total cumulative liability for the entirety of any remaining contributions and payments described in Section V of this Agreement shall not, under any circumstances, exceed the total amount of New York State committed contributions that have come due to the Program as of the date of termination minus any payments previously made by FSMC under this Agreement.

(b) If KINEX is the Terminated Party, KINEX’s total cumulative liability for the entirety of any remaining contributions and payments described in Section IV of this Agreement shall not, under any circumstances, exceed the Unamortized Foundation Investment. The “Unamortized Foundation Investment” means an amount equal to (i) the lesser of $225,000,000 and the amount actually expended by FSMC prior to the termination, multiplied by (ii) a percentage, the numerator of which is equal to the difference between (x) $1,620,000,000 and (y) the amount of capital, operational and other costs incurred or spent by KINEX under Section IV through the effective date of termination, and the denominator of which is equal to $1,620,000,000.

11.6 Failure of State Funding

FSMC is reliant on the allocation of NYS funds to satisfy FSMC’s contribution obligations under Section 5.1 of this Agreement. In the event that the requisite NYS funding is not allocated to FSMC, KINEX shall have the right to terminate this Agreement upon thirty (30) days written notice to FSMC. Termination under this Section 11.6 shall not be regarded as termination for breach, default or failure to perform under Section 11.2 or other termination events under Section 11.3, but rather shall be considered termination by reason of impossibility. FSMC shall have no further obligations except those which apply to termination under this Section 11.6 or which otherwise survive termination as set forth in this Agreement.

XII. PUBLICITY

12.1 Any press releases, public announcements, and publicity regarding this Agreement, the relationship between the Parties, or the content and results of Projects must be approved by both Parties in writing prior to any press release, public announcement, or other publicity by either Party, excluding any non-public communication that is internal to any individual Party or used solely by the Parties within the Program.

12.2 FSMC and its Affiliates may publicly reveal the existence of and the total contribution amounts under this Agreement without the prior consent from KINEX notwithstanding the provisions of XIII of this Agreement. If FSMC or its Affiliates publicly disclose the existence of this agreement, then Kinex may refer to or publicly reveal the existence of FSMC-KINEX CONFIDENTIAL this agreement by reference to matters already identified publicly by FSMC or its Affiliates.

12.3 Any public use by either Party of the names or logos associated with the other Party requires the prior written consent of the other Party.

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XIII. CONFIDENTIAL INFORMATION

The Parties agree that the terms set forth in Exhibit F of this Agreement shall govern the handling of Confidential Information disclosed by a Party to another Party during the Term of this Agreement.

XIV. REPRESENTATIONS/WARRANTIES/LIABILITIES/INDEMNIFICATION

14.1 As of the Effective Date, KINEX and FSMC represent and warrant, as applicable, the following:

(a) Each Party has the authority to enter into this Agreement and perform its obligations under this Agreement and any other documents and instruments contemplated hereby to be executed and delivered by such Party.

(b) The signing, delivery and performance by such Party of this Agreement and all of the documents and instruments contemplated hereby to be executed and delivered by such Party are within the legal power and authority of such Party and have been duly authorized by all necessary action of such Party. This Agreement is, and the other documents and instruments required hereby to be delivered by it will be, when signed and delivered, the valid and binding obligations of such Party, enforceable against such Party in accordance with their respective terms.

(c) The signing, delivery and performance of this Agreement and all of the other documents and instruments contemplated hereby to be signed and delivered by such Party does not and will not conflict with or violate any material judgment, order or decree binding on such Party.

(d) Such Party has the full right, power and authority to grant any licenses to be granted by such Party pursuant to this Agreement.

(e) There are no outstanding agreements, assignments or encumbrances that have been made by such Party and by which such Party is bound and that are inconsistent with or are violated by the provisions of or granting of such licenses.

(f) There is no litigation, governmental investigation, suit, action, proceeding or written claim of any kind pending and to the Knowledge of KINEX, none are threatened against KINEX or any of its subsidiaries or affiliates affecting the ability of KINEX to perform its obligations under this Agreement.

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14.2 Injunctive Relief

Notwithstanding the other provisions of this Agreement, either Party may enforce any breach during the term of this Agreement of any of the specific provision(s) of this Agreement by commencing an action for injunctive or other equitable relief at any time.

14.3 Limitations of Liability

(a) Except for (i) a Party’s failure to make the specific payments, contributions, deliveries or provide the services or support under Sections IV and V of this Agreement, (ii) a Party’s respective obligations under Sections VIII and XIII, and (iii) matters or claims in respect of this Agreement that relate to workers compensation, bodily injury, death, sickness, disease, disability and damage or destruction to real or personal property, tools and equipment, each Party’s total cumulative liability for any and all matters, causes of action or indemnifications in any way relating to this Agreement or for the performance or non-performance or breach of any representation, warranty, covenant, duty or obligation under this Agreement, regardless of the form of action, shall be limited to damages and/or payments which shall not exceed $10 Million, in the aggregate.

(b) With respect to only subsections (i) and (iii) of Section 14.3(a) of this Agreement, each Party’s total cumulative liability for any and all matters, causes of action or indemnifications (including, but not limited to, Section 14.5 of this Agreement) in any way relating to such subsections or for the performance or non-performance of any covenant, duty or obligation thereunder, regardless of the form of action, shall be limited to damages and/or payments which shall not exceed in the aggregate (1) with respect to Section 14.3(a)(i) of this Agreement, the limits under Section 11.5, as to matters addressed in Section 11.5 and (2) with respect to Section 14.3(a)(iii) of this Agreement, only for those matters or claims that relate to damage or destruction to real or personal property, tools and equipment to the extent such matters or claims are not covered by insurance that is required to be carried by a party under this Agreement or under the lease or use agreement or similar agreement for the Manufacturing Facility, Manufacturing Equipment, Corporate Headquarters and Innovation Center or Laboratory Equipment, in each case of such damage or destruction, equal to the sum of (i) the insured value of the real or personal property, tools and equipment, and (ii) $5 Million, in the aggregate.

(c) Notwithstanding anything to the contrary contained elsewhere in this Agreement, the Parties agree that any liability or obligations under this Agreement shall not include any special, punitive, indirect, incidental or consequential damages, including, but not limited to, lost profits, even if a Party has been made aware of the possibility of such damages.

14.4 Insurance

KINEX shall obtain the insurance coverage and/or limits in accordance with Exhibit G and agrees to the terms set forth in Exhibit G.

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14.5 Indemnification

(a) Each Party (the “Indemnitor”) to this Agreement, subject to the limitations set forth in Section 11.5 and Section 14.3, shall indemnify, save, hold harmless and defend the other Party and its officers, directors, managers, shareholders, employees, agents, advisors and assigns (collectively, “Party Indemnitee”) and (b) KINEX, as Indemnitor, shall also, subject to the limitations set forth in Section 11.5 and Section 14.3, indemnify, save, hold harmless and defend FRMC, FOUNDATION, SUNY POLY, the State of New York and SUNY, and their officers, directors, managers, shareholders, employees, Affiliates, Subsidiaries, agents, advisors and assigns (“SUNY Indemnity”, and collectively with each Party Indemnitee, “Indemnitee”), in each case from and against any and all claims (including, without limitation, third party claims), damages, demands, actions, judgments, lawsuits, proceedings, assessments, liabilities, losses, penalties, costs and expenses (including, without limitation, reasonable attorneys’ fees, costs and expenses), whether or not subject to litigation (collectively, “Indemnified Claims”), incurred by any Indemnitee in connection with, by reason of, or arising out of (i) the breach, untruthfulness or inaccuracy of any representation or warranty of the Indemnitor that is contained in this Agreement, (ii) the breach or failure to keep, observe or perform any covenant or obligation of the Indemnitor (or its employees or agents) in this Agreement, (iii) any fraud of the Indemnitor (or its employees or agents) in connection with the performance of this Agreement, (iv) any damage or destruction of property, or injury, sickness, disease or death to persons, resulting from the Indemnitor’s or its employees’ or agents’ negligence or misconduct, or (v) any act or omission or violation of statutory duty or regulation by the Indemnitor or any of its employees or agents. KINEX shall also defend, indemnify and hold harmless FSMC and FSMC Affiliates as set forth herein, in connection with any goods and/or services arising under this Agreement, provided, made, sold and/or transferred by KINEX.

(b) An Indemnitee, for purposes of asserting the indemnifications under this Section, will give the applicable Indemnitor written notice of any Indemnified Claim within thirty (30) days after the Indemnitee (a) receives notice of an Indemnified Claim for which indemnification is sought or (b) determines that an event of which it is aware is likely to give rise to an Indemnified Claim for indemnification, and the Indemnitee will give copies to the Indemnitor of all information and documents relating to such Indemnified Claim or potential Indemnified Claim that are received by the Indemnitee within thirty (30) days after the Indemnitee’s receipt thereof or, if applicable, within thirty (30) days after the Indemnitee makes the determination referred to in clause (b); provided, that the failure of the Indemnitee to give notice or deliver copies of information or documents within the specified time periods shall not limit the Indemnitee’s right to claim indemnification hereunder, except to the extent that the Indemnitor can demonstrate that it was actually damaged by the failure to give notice or provide information or documents within the specified time periods. The applicable Indemnitor will be obligated to defend any Indemnified Claim for indemnification hereunder, and to select counsel for any third-party Indemnified Claim, which counsel shall be reasonably satisfactory to the Indemnitee, all at the sole cost and expense of the Indemnitor; provided, that the Indemnitee will be allowed, at its expense, to participate in such defense; provided, further, that no settlement shall be entered into

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without the approval of the Indemnitee; provided further, that in the event the Indemnitor proposes in good faith to settle an Indemnified Claim that requires solely the payment of money damages by the Indemnitor on terms acceptable to the third-party claimant and the Indemnitor is ready, willing and able to completely satisfy the Indemnified Claim on such terms but the Indemnitee does not consent to the settlement on such terms, the Indemnitee shall be responsible for all liability or expenses (including reasonable legal expenses and costs) with respect to such Indemnified Claim that exceed the proposed settlement amount, including all legal expenses and costs incurred after the date the Indemnitee initially gave notice to the Indemnitor withholding its consent to the proposed settlement. Notice of the Indemnitor’s intention to defend any such Indemnified Claim shall be given to the Indemnitee within twenty (20) days after the Indemnitee shall have notified the Indemnitor of the Indemnified Claim (but in all events at least five (5) business days prior to the date that an answer or other response is due to be filed or made), which notice shall contain an acknowledgment in writing of the Indemnitor’s obligation to indemnify the Indemnitee with respect to such Indemnified Claim under this Section. In the event the Indemnitor fails or elects not to defend any such Indemnified Claim hereunder, the Indemnitee shall have the right to so defend such Indemnified Claim at the sole obligation, cost and expense of the Indemnitor.

(c) The indemnifications set forth in this Agreement shall remain operative and in full force and shall survive the execution and performance hereof and the termination or expiration of this Agreement, as well as the withdrawal of either Party from this Agreement for any reason.

14.6 Limitation of FSMC Representations and Warranties

Except to the extent described in this Agreement, FSMC makes no representation or warranty, express or implied, with respect to the condition or suitability of the SUNY POLY Tools, SUNY POLY Facilities or any part thereof in respect of the operations and activities of the Program, including but not limited to any implied warranties of merchantability or fitness for a particular purpose, or warranty of non-infringement of third party intellectual property rights.

14.7 KINEX Assumption of Risk

Except to the extent due to the negligence, willful misconduct or violation of laws or this Agreement by FSMC or its Affiliates or their respective employees, agents or contractors, KINEX assumes all risks involved in the use of and the access to the Manufacturing Facility, Manufacturing Equipment, Headquarters and the Laboratory Equipment and shall be solely responsible for any and all accidents and injuries to persons and property which relate to KINEX’s use of and access to the Manufacturing Facilities, Manufacturing Equipment, Corporate Headquarters and Innovation Center and the Laboratory Equipment in respect of the operations and activities of KINEX under this Agreement and KINEX agrees to accept the Manufacturing Facilities, the Manufacturing Equipment, the Corporate Headquarters and Invention Center and the Laboratory Equipment in the condition required by this Agreement.

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14.8 Execution, Delivery and Performance

The Parties represent and warrant that the signing, delivery and performance of this Agreement does not and will not violate or create any material conflict with any of the terms or conditions of another agreement to which they are parties.

XV. ASSIGNMENT

A Party may not assign this Agreement, or any of rights afforded hereunder, without the prior written consent of the other Party, which consent shall not be unreasonably withheld. In addition, KINEX may not allow any other party, person or entity access to or use of the SUNY POLY Tools or the SUNY POLY Facilities, except employees of KINEX’s wholly owned Subsidiaries or Affiliates, or contractors, suppliers, or customers of KINEX, provided they meet the same requirements imposed on KINEX employees by FSMC. Any assignment made in violation of this Section shall be void ab initio.

XVI. COMPLIANCE WITH LAWS, REGULATIONS AND RULES

16.1 Each Party agrees to comply with all applicable laws, rules and regulations of the State of New York, the United States Government and of any other duly constituted governmental authority having jurisdiction over such Party, to the extent applicable to the activities under this Agreement and as may be updated by the applicable governmental authority from time to time. The transfer of certain technical data and commodities may require a license from the cognizant agency of the United States Government and KINEX represents and warrants that it will not re-export data or commodities to certain foreign countries or nationals of certain foreign countries without prior approval of the cognizant government agency. While FOUNDATION agrees to cooperate in pursuing any license that the cognizant agency deems necessary in connection with this Agreement, FOUNDATION cannot guarantee that such licenses will be granted. Each Party shall do all things necessary (a) to obtain in a timely manner all required licenses and approvals related to the activities under this Agreement and (b) to comply with all applicable laws, rules and regulations, including, but not limited to, the regulations of the United States Government relating to the export and re-export of technical data and commodities, related to the activities under this Agreement. In addition to the foregoing, KINEX covenants that it will provide written certification by an authorized officer of the applicable corporation(s) that any export or re-export of any technical data and commodities related to activities under this Agreement will have a valid United States Department of Commerce export license or that no export license is required. KINEX will not integrate, promote, sell or otherwise transfer any technical data and/or commodities under this Agreement to any customer or end user for use in any military applications. The Parties hereby acknowledge that stricter United States Government regulations may apply to the export and re-export of technical data and commodities to any of the following countries or to the nationals of any of the following countries: Armenia, Azerbaijan, Belarus, Bulgaria, Cambodia, Cuba, Estonia, Georgia, Kazakhstan, Kyrgyzstan, Iran, Iraq, Laos, Latvia, Libya, Lithuania, Macao, Moldova, Mongolia, North Korea, People’s Republic of China, Romania, Russia, Sudan, Syria, Tajikistan, Turkmenistan, Ukraine, Uzbekistan, and Vietnam or as updated by the U.S. Department of Commerce.

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16.2 Each Party represents and covenants that it has, or will have in place, established procedures and/or agreements with its employees, agents or others, including subcontractors, whose services the Party may require to fulfill the terms and conditions of this Agreement, sufficient to enable such employees, agents or others to comply with all the terms and conditions of this Agreement, and covenants that it shall require these employees, agents or others, including subcontractors, and any third-party visitor or guest to the SUNY POLY Facilities, to agree to necessary and sufficient confidentiality and intellectual property provisions in writing. Each Party shall be responsible for the selection and screening of its employees, agents or others who will be assigned to work on the Program. Each Party will ensure, by management direction and if necessary by contract, that its employees, agents or others comply with the laws, rules and regulations of the State of New York, the United States Government and of any other duly constituted governmental authority having jurisdiction over such Party, as well as, the personnel, security and safety practices, procedures and requirements of the SUNY POLY and FSMC while such employees, agents or others are at the SUNY POLY Facilities. Notwithstanding anything in this Agreement to the contrary, nothing in this Agreement shall be interpreted such that any person who is not an actual employee of a Party or, in the case of FSMC, an actual employee of an Affiliate, shall be treated or construed as a common law employee of such Party.

XVII. LITIGATION/ APPLICABLE LAW/ JURISDICTION/ SERVICE

17.1 The Parties shall attempt in good faith to promptly resolve any controversy, claim or dispute arising out of this Agreement, first in accordance with the provisions of Section X of this Agreement, and then, if the provisions of Section X of this Agreement are not successful, either Party may bring a legal action or proceeding to resolve such controversy, claim or dispute only in any United States Federal District Court located in the State of New York or in any state court of the State of New York. Each Party hereby consents to exclusive jurisdiction and venue of such courts. This Agreement shall be construed and the legal relations created herein between the Parties shall be determined in accordance with the substantive laws of the State of New York, without regard to the conflict of laws principles thereof. In such court proceedings, the Parties agree to submit an appropriate protective order to the court to protect each Party’s Confidential Information. The Parties hereby expressly waive any right to a jury trial for any legal action or proceeding brought under this Agreement and agree that any legal action or proceeding hereunder shall be tried by a judge without a jury.

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17.2 All communications, notices and disclosures required or permitted by this Agreement shall be in writing, shall be provided to the other Party and shall be deemed to have been given at the earlier of the date when actually delivered to the other Party or when deposited in the United States mail, certified or registered mail, postage prepaid, return receipt requested, by hand delivery, or by overnight courier service with signed receipt, and addressed as follows, unless and until either Party notifies the other Party in accordance with a change of address:

In the case of FSMC:

NanoFab 300 East

257 Fuller Road

Albany, NY 12203

Attn: Walter Gerald Barber

With a copy to:

NanoFab 300 East

257 Fuller Road

Albany, New York 12203

Attn: Carl J. Kempf, III, Esq.

General Counsel

In the case of KINEX:

Flint Besecker

Chief Operating Officer

701 Ellicott Street

Buffalo, NY 14203

With a copy to:

Frank Muggia

Harris Beach PLLC

726 Exchange Street, Suite 1000

Buffalo, NY 14210

XVIII. MISCELLANEOUS

18.1 Each Party agrees not to use each other’s names, the names of any staff members or employees thereof, or trademark or other designation of either Party hereto, in advertising, sales promotion work, or in any other form of publicity except with the written permission of, and to the extent approved by the Party whose name is to be used.

18.2 If any term or provision of this Agreement or the application thereof to either Party hereto or set of circumstances shall, in any jurisdiction and to any extent, be finally held to be invalid or unenforceable, such term or provision shall only be ineffective as to such jurisdiction, and only to the extent of such invalidity or unenforceability, without invalidating or rendering unenforceable any other terms or provisions of this Agreement or under any other circumstances, so long as the remainder of this Agreement still effectuates the Essential Purposes. If the Essential Purposes cannot be effectuated, this Agreement shall be renegotiated and amended with the unanimous consent of the Parties or may be terminated without cause by either Party.

18.3 The failure of either Party to insist upon strict adherence to any term of this Agreement on any occasion shall not be considered a waiver or deprive that Party of the right to insist later on

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adherence thereto, or thereafter to insist upon strict adherence to that term or any other term of this Agreement. To be effective, any waiver must be in a writing signed by an authorized representative of the Party granting such waiver.

18.4 The headings in this Agreement are intended solely for convenience of reference and shall be given no effect in the construction or interpretation of this Agreement. The terms “herein”, “hereof”, “hereunder” and any similar terms used in this Agreement refer to this Agreement and all references to “this Agreement” refer to this instrument and the Exhibits hereto, as amended from time to time. The terms “including” or “include” shall mean “including, without limitation”, or “include, without limitation.”

18.5 If either Party is rendered wholly or partially unable by Force Majeure to carry out its obligations under this Agreement, and if that Party gives prompt written notice, including a reasonable description of such Force Majeure, to the other Party, the notifying Party shall be excused from performance of its obligations hereunder during the continuance of any inability so caused, but for no longer period. Such cause shall be remedied by the notifying Party as far as possible with reasonable speed and effort, but neither Party shall have any obligation to settle any labor dispute. For the purposes of this Agreement, “Force Majeure” shall mean Acts of God, labor disputes, acts of public enemies or terrorists, war, other military conflicts, blockades, insurrections, riots, epidemics, quarantine restrictions, landslides, lightning, earthquake, fires, conflagration, storms, floods, washouts, arrests, civil disturbances, restraints by or actions of any governmental body (including export or security restrictions on information, material, personnel, equipment or otherwise), industry-wide shortages, industry-wide unavailability, and any other acts or events whatsoever, whether or not similar to the foregoing, not within the control of the Party claiming excuse from performance, which by the exercise of the diligence and reasonable efforts that Party shall not have been able to overcome or avoid. If the notifying Party cannot remedy the Force Majeure situation and resume satisfactory performance within ninety (90) days after delivery of the notice, the other Party may at their option immediately terminate this Agreement and such notifying Party will be treated as a Terminated Party under Section 11.4.

18.6 Each Party shall be responsible for all tax matters, issues or obligations related to the employment of its employees or agents or to the presence of its personal property in any taxing jurisdiction.

18.7 During the Term of this Agreement, neither Party shall solicit for employment purposes any employees of the other Party (and in the case of FSMC, FSMC Affiliates) who have performed or are performing Program-related work under this Agreement. Neither Party shall make any payment or any gift of more than a nominal value to any employee of a Party without the employing Party’s prior concurrence. Neither Party shall make any representation that an employment relationship exists between that Party and an employee of another Party. The above portions of this Section shall not restrict (a) the ability of the Parties to conduct general solicitations for employment, (b) the right of any employee of a Party, on that employee’s own initiative or in response to general solicitations, to seek employment from the other Party, or (c) the ability of KINEX to solicit students employed or working at the SUNY POLY Facilities.

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18.8 To the extent a particular right, obligation, representation, warranty, covenant or indemnity in this Agreement does not have a specifically identified survival period, then such right, obligation, representation, warranty, covenant and/or indemnity shall remain in effect beyond any expiration or termination of this Agreement and shall bind and inure to the benefit of the Parties, their legal representatives, successors and permitted assigns. Particular Sections of this Agreement that survive any termination or expiration of this Agreement include, but are not limited to, Sections VIII, XIII, and XIV.

18.9 No amendment or modification of this Agreement shall be valid or binding upon the Parties unless in a writing signed by both of the Parties.

18.10 Except as otherwise provided for in this Agreement, neither the provisions of this Agreement nor anything done pursuant to this Agreement shall create any partnership, any employer-employee relationship or any agency relationship between the Parties and the Parties are otherwise independent contractors relative to each other.

18.11 Nothing in this Agreement shall obligate either Party to institute any action or suit against third-parties for infringement of any of its patents, or to defend any action or suit brought by a third-party that challenges or concerns the validity of any of its patents. Nothing in this Agreement shall grant either Party the right to institute any action or suit against third-parties for infringement of the other Party’s patents. Nothing in this Agreement shall obligate either Party, nor any of its Subsidiaries, to file any patent application, to secure any patent or patent rights, or to maintain any patent in force.

18.12 This Agreement, together with the Exhibits hereto, any SOW(s) entered into by the Parties pursuant to Section IX, and any follow on contracts and/or amendments entered into by the Parties pursuant to Sections 2.4, 2.6, 2.7, 2.8, 4.2, 4.5, or 5.1 of this Agreement, if and as signed by the Parties, is the complete and exclusive statement of the agreement of the Parties in respect of the subject matter described in this Agreement and shall supersede all prior and contemporaneous agreements, communications, representations, and understandings, either oral or written, between the Parties or any officers, agents or representatives thereof.

18.13 This Agreement may be signed in one or more counterparts, each of which shall be deemed to be an original and all of which when taken together shall constitute the same Agreement. Any signed copy of this Agreement made by photocopy, facsimile or PDF Adobe format shall be considered an original.

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IN WITNESS WHEREOF, the Parties hereto have caused this AGREEMENT FOR MEDICAL TECHNOLOGY RESEARCH, DEVELOPMENT, INNOVATION, AND COMMERCIALIZATION ALLIANCE to be signed and delivered by their duly authorized representatives as of the Effective Date.

FORT SCHUYLER MANAGEMENT CORPORATION		KINEX PHARMACEUTICALS, INC.
By:		By:
Name:	Walter Gerald Barber	Name:	Flint D. Besecker
Title:	Chair	Title:	Chief Operating Officer & Board Director
Date:	May 5, 2015	Date:	May 5, 2015

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EXHIBIT A

MANUFACTURING FACILITY SPECIFICATIONS

[TO BE AGREED UPON AND INSERTED BY THE PARTIES]

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EXHIBIT B

MANUFACTURING EQUIPMENT

[TO BE AGREED UPON AND INSERTED BY THE PARTIES]

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EXHIBIT C

CORPORATE HEADQUARTERS AND INNOVATION CENTER SPECIFICATIONS

[TO BE AGREED UPON AND INSERTED BY THE PARTIES]

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EXHIBIT D

LABORATORY EQUIPMENT

[TO BE AGREED UPON AND INSERTED BY THE PARTIES]

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EXHIBIT E

INTELLECTUAL PROPERTY AND JOINT PROJECTS

1. Definitions

In addition to the terms defined elsewhere in this Agreement, for the purposes of the Agreement, including this Exhibit, the following terms have the described meanings listed below.

a. Foreground Non-Patent IP

Foreground Non-Patent IP” means all know-how, trade secrets, copyrights, rights in computer programs, documentation, and mask layout designs in physical and/or electronic form and other intellectual property (other than Foreground Patent IP) developed during Projects. Foreground Non-Patent IP shall not include the results of any research or project rejected by the Parties and undertaken by a Party or its Representatives outside the Projects, or the results of any other program undertaken by a Party or its Representatives outside the Projects.

b. Foreground Patent IP

Foreground Patent IP means patents and patent applications (including, but not limited to, design, utility, utility model, provisional, continuation, continuation-in-part, divisional, reexamination, reissue or extensions) in any country or jurisdiction of either Party or its Representatives on Project Inventions.

c. FOUNDATION Personnel

FOUNDATION Personnel shall mean the general, administrative and research employees and the independent contractors and consultants of FOUNDATION, SUNY POLY, FSMC, and the faculty, researchers, research assistants, teaching assistants, and students of SUNY POLY, who are or who are expected to be performing activities under or in respect of the Program.

d. Joint Projects

Joint Projects means research program(s) approved by the Parties and/or its Affiliates for performance jointly by the Parties in respect of the Program.

e. Program

Program means the various activities undertaken or conducted by or on behalf of the Parties and/or its Affiliates throughout the Term of and pursuant to the terms and conditions of this Agreement, including, without limitation, activities involving the preparation for and the execution of the Projects.

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f. Project Inventions

Project Invention(s) shall mean an invention(s) conceived and/or first reduced to practice (within the meaning of the prevailing US Patent Laws) by an employee, contractor or consultant of a Party or a Party’s Affiliates in the conduct of a Project(s).

g. Proprietary Technical Projects

Proprietary Technical Project(s) shall mean research programs performed solely for KINEX within the Program that are not Joint Projects.

h. Representatives

Representative(s) shall mean a Party’s agents, contractors, or employees and employees, contractors or agents of a Party’s Affiliates and, in the case of FOUNDATION, FOUNDATION Personnel.

i. US Patent Law(s)

US Patent Law(s) shall mean 35 U.S.C. Section 1 et seq., 37 C.F.R. Section 1 et seq., and the case law interpreting such statutes, regulations and the rights incident thereto.

2. Treatment of SUNY POLY Facilities

The Parties recognize that, in consideration of KINEX’s contributions to be provided pursuant to Section IV of the Agreement, and in conjunction with the SUNY’s Cooperative Use of Equipment Policy, the SUNY POLY Facilities will be made available for access and use by KINEX for Proprietary Technical Projects in accordance with the terms of this Agreement. Further, in recognition of each Party’s respective contributions to the Program, the SUNY POLY Facilities used jointly by the Parties for Projects will be considered a joint use of facilities. FSMC warrants that the treatment of the SUNY POLY Facilities as a joint use of facilities, as set forth in this Section 2 of this Exhibit, is consistent with and facilitates the ownership of intellectual property created under the Program, as set forth in Section 4 of this Exhibit.

3. Reporting of Joint Project Inventions

Representatives of the Parties performing services under the Joint Projects shall promptly report in a reasonably detailed written disclosure all Joint Project Inventions to their applicable Party. Within sixty (60) days after receipt, each Party shall provide a copy of such invention disclosure(s) received on a Joint Project Invention to the other Party. The Program Managers (or their mutually agreed designee) shall maintain a reasonably detailed written log of all Joint Project Inventions.

4. Ownership of Project Intellectual Property

(a) Foreground Patent IP shall be owned by the Party or Parties whose Representatives are inventors of the underlying Project Invention as a matter of US Patent Law. The owning Party or Parties shall retain the entire right, title, and interest throughout the world to such Foreground Patent IP including, without limitation, the right to file (or not

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to file) for patents for such Project Invention(s). Any Foreground Patent IP on Project Inventions invented jointly by the Parties’ Representatives as a matter of U.S. Patent Law shall be jointly owned by the Parties and shall be licensable by each Party without accounting to or permission from the other Party.

(b) Foreground Non-Patent IP shall be owned by the Party or Parties whose Representatives developed such Foreground Non-Patent IP. The owning Party or Parties shall retain the entire right, title, and interest throughout the world to such Foreground Non-Patent IP including, without limitation, the right to register (or not to register) such Foreground Non-Patent IP. Any Foreground Non-Patent IP developed jointly by the Parties’ Representatives shall be jointly owned by the Parties and shall be licensable by each Party without accounting to or permission from the other such Party.

5. Patent Filing for Project Inventions

The decision on filing of patents for Project Inventions shall be made by the Party having an ownership interest in such Project Invention. In the event of a dispute, such Party shall refer the dispute in writing to the senior executives of the Parties, as described in Section X of this Agreement, who shall discuss and meet in person, if necessary, in order to negotiate a resolution of the dispute. If the Parties together own Project Inventions, they shall equitably share the cost of obtaining and maintaining any resulting Foreground Patent IP on such Project Inventions. In the event that a Party owning such a Project Invention elects not to seek patent protection for such Project Invention in any particular country or not to share equally in the expense thereof with the other owning Party, the other owning Party shall have the right to seek or maintain such protection at its own expense in such country and shall have full control over the prosecution and maintenance thereof even though title to any patent issuing therefrom shall be joint among the entities owning such Project Invention. Any election by a Party not to share equally in the expenses associated with seeking patent protection for any Project Invention shall not be construed as a termination event under Section XI.

6. Restriction on Confidential Information in Patent Applications

Neither Party may disclose any Confidential Information of the other Party in any patent application or in the prosecution of such patent application without the written approval of the Party owning such Confidential Information, which approval shall not be unreasonably withheld or delayed.

7. Assistance for Patent Protection

Each Party, at its own expense, shall reasonably assist the other Party in obtaining patent protection for joint Project Inventions. Such assistance shall include, without limitation, provision of invention disclosure documents which include data and examples, causing the execution of assignments and other instruments and provision of such documents as the other Party may reasonably consider necessary or appropriate to the obtaining of patent protection. The Parties shall cooperate to facilitate compliance with the duty of disclosure requirements for patent application filing and/or prosecution.

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8. Project Invention Disclosure Review

At least on an annual basis, during the Term of this Agreement, each Party must report in writing to the other Party on the status of all Project Invention disclosures, any corresponding patent applications, and any corresponding issued patents for which it is responsible. For one (1) year after the expiration or earlier termination of this Agreement, each Party must report in writing to the other Party the status of all Project Invention disclosures, any corresponding patent applications, and any corresponding issued patents for which it is responsible.

9. Activity at Other Facilities

Any intellectual property developed by KINEX in any other FOUNDATION-owned facilities outside of those provided for the Program and/or outside of the SUNY POLY Facilities is not part of this Agreement and shall be subject to the terms and conditions of any separate contract or agreement executed between KINEX and FSMC or its Affiliate.

10. No Restriction on Licensing Owned Patents

Nothing in this Agreement shall be construed as limiting the ability of either Party to grant non-exclusive licenses under any patents in which that Party has an ownership interest and/or otherwise has the right to grant licenses.

11. Joint Project Costs and Personnel

Except as otherwise expressly agreed to in this Agreement or the corresponding SOW, each Party shall be responsible for and shall bear (a) all of its own costs and expenses for a Joint Project and (b) all responsibility for all personnel that it uses for a Joint Project.

12. Project Approval Process

The Parties and/or their Affiliates shall define each new Joint Project by implementing a signed SOW, substantially in the form of the statement of work set forth in this Exhibit, setting forth the appropriate work items for carrying out each respective Joint Project. All Projects which involve the operation of SUNY POLY Tools by FOUNDATION Personnel will also require a signed SOW setting forth the appropriate work items for carrying out each respective Joint Project. Each SOW shall include a start date, a Joint Project Target End Date, a Joint Project tool description, target process development objectives, milestones, the expected roles of the Parties, and the scope of work, with all dates and time periods in each SOW being targets only. The Program Managers shall be responsible for coordinating communications and execution of actions toward achievement of the milestones. Each Party will use commercially reasonable efforts for the successful completion of milestones. The Parties may from time to time, as new SOWs are developed within the budget, amend Exhibit D to add such SOWs as necessary. Upon written acceptance by the Parties, such additional SOWs will become part of this Agreement and attached in this Exhibit. Failure however to formally amend this Exhibit has no bearing on the agreed Joint Project SOW becoming part of the Program and part of this Agreement.

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13. Statement of Work Form

STATEMENT OF WORK

This Statement of Work (“SOW”), effective as of                 , 20     (“SOW Effective Date”), is entered into by THE RESEARCH FOUNDATION FOR THE STATE UNIVERSITY OF NEW YORK (“FOUNDATION”), a non-profit educational corporation existing under the laws of the State of New York, having an office located at 257 Fuller Road, Albany, New York 12203, acting on behalf of the SUNY Polytechnic Institute(“SUNY POLY”), and KINEX PHARMACEUTICALS, INC. (“KINEX”), a Delaware corporation with its principal office located at 701 Ellicott Street, Buffalo, NY 14203, for a project under and pursuant to that certain AGREEMENT FOR MEDICAL TECHNOLOGY RESEARCH, DEVELOPMENT, INNOVATION, AND COMMERCIALIZATION ALLIANCE (“Agreement”) between FOUNDATION and KINEX effective as of            , 2015. Capitalized terms used and not defined in this SOW have the meanings set forth in the Agreement.

All dates and time periods in this SOW are targets only.

1. Start Date:

2. Joint Project Target End Date:

3. Joint Project Tool Description:

4. Target Process Development Objectives:

5. Milestones:

6. Expected Roles of the Parties:

7. Scope of Work:

IN WITNESS WHEREOF, the Parties hereto have caused this SOW to be signed and delivered by their duly authorized representatives as of the SOW Effective Date.

THE RESEARCH FOUNDATION FOR
THE STATE UNIVERSITY OF NEW YORK
By:
Name:	Christine Waller
Title:	Operations Manager
Date:	, 2015
KINEX PHARMACEUTICALS, INC.
By:
Name:
Title:
Date:	, 2015

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EXHIBIT F

CONFIDENTIALITY

1. Disclosure of Confidential Information

(a) Each Party may disclose and receive Confidential Information (defined below) from the other Party.

(b) “Confidential Information” shall mean all information that (i) is maintained in confidence by a Party (“Owning Party”), (ii) is disclosed to or obtained by the other Party in connection with and during the Term of this Agreement, including, but not limited to, information that relates to such Owning Party’s or its Affiliates’ past, present or future research, development, manufacturing, or business activities relating to the Essential Purposes, and (iii) is information that may be exempted from disclosure under Articles 6 and 6-A of the New York Public Officers Law. Either Party (“Disclosing Party”) may disclose its Confidential Information to the other Party (“Receiving Party”) orally, in writing, or by other media or transfer of materials including graphic, photographic, recorded, prototype, sample, or other tangible or permanent form clearly and obviously marked “confidential” or “proprietary”. Electronic information will be adequately marked if the container is marked and if a proprietary legend displays when the information runs on a computer system and when the information is printed from its data file.

(c) When disclosed orally, Disclosing Party shall identify the information as confidential at the time of such disclosure, with subsequent written confirmation to Receiving Party within thirty (30) days of such disclosure indicating the date and type of information disclosed. All restrictions provided herein regarding use and/or disclosure shall apply during such thirty-day period.

2. Protecting confidential information

(a) Receiving Party will retain Disclosing Party’s Confidential Information in confidence for three (3) years from the date of disclosure. Receiving Party will not disclose, disseminate, or publish any of Disclosing Party’s Confidential Information to any person except employees or agents of Receiving Party on a need to know basis, except as consistent with the Receiving Party’s obligations under Articles 6 and 6-A of the New York Public Officers Law, or other applicable law, regulation or legal process. Receiving Party shall ensure that such employees or agents shall be bound by terms at least as protective as the terms of this Exhibit F. Each Party warrants that employees or agents shall comply with the terms of this Exhibit F. Upon the termination or expiration of this Agreement, the Parties shall confer regarding the status of Confidential Information disclosed and/or created under this Agreement.

3. Ownership

All right, title and interest in Disclosing Party’s Confidential Information which is furnished to the Receiving Party shall be and remain the exclusive property of the Disclosing Party.

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4. Standard of Care

The Receiving Party shall be held to the same standard of care in protecting Disclosing Party’s Confidential Information as the Receiving Party normally employs to preserve and safeguard its own Confidential Information of similar kind, but in no event less than reasonable care.

5. Exclusions; Required Disclosure

(a) Receiving Party’s obligations regarding Disclosing Party’s Confidential Information shall not apply to information (a) that was already known to Receiving Party prior to the disclosure of such information to Receiving Party by Disclosing Party, (b) that is or becomes publicly available through no act or fault of Receiving Party, (c) that is rightfully received by Receiving Party from a third-party having no obligation of confidentiality to Disclosing Party, or (d) that is independently developed by Receiving Party.

(b) In the event FOUNDATION is required by law, regulation, or court order to disclose any of KINEX’s Confidential Information, FOUNDATION will notify KINEX in writing prior to making such disclosure in order to facilitate KINEX seeking a protective order or other appropriate remedy from the appropriate legal body. In the event KINEX is required by law, regulation, or court order to disclose any of FOUNDATION’S Confidential Information, KINEX will notify FOUNDATION in writing prior to making such disclosure in order to facilitate FOUNDATION seeking a protective order or other appropriate remedy from the appropriate legal body. The Receiving Party further agrees that if the Disclosing Party is not successful in precluding the requesting legal body from reviewing the Confidential Information, it will furnish only that portion of the Confidential Information which is legally required and will exercise all reasonable efforts to obtain reliable assurances that confidential treatment will be accorded the Confidential Information.

(c) FOUNDATION is required to comply with the New York State Freedom of Information Law, Public Officers Law, Article 6 which provides for public access to information FOUNDATION possesses. Public Officers Law, Section 87(2)(d) provides for exceptions to disclosures for records or portions thereof that are “trade secrets or are submitted to an agency by a commercial enterprise or derived from information obtained from a commercial enterprise and which if disclosed would cause substantial injury to the competitive position of the subject enterprise.” Information submitted to FOUNDATION that KINEX wishes to have treated as proprietary and confidential, should be identified and labeled as “Confidential” or “Proprietary” on each page at the time of disclosure. This information should include a written request to exempt it from disclosure, including a written statement of the reasons why the information should be exempted.

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6. Protection of Plans and Specifications for SUNY POLY Facilities

KINEX agrees that all plans, specifications, drawings and other documents of any kind whatsoever, and in whatever medium expressed, prepared in connection with the SUNY POLY Facilities (collectively, the “SUNY POLY Facilities Documents”) and all rights therein (including trademarks, trade names, rights of use, copyrights and/or other proprietary rights) shall be and remain the sole property of FSMC and shall be treated as FSMC’s Confidential Information (whether or not the Parties terminate or withdraw from this Agreement for any reason whatsoever). Except as expressly provided for in this Agreement, KINEX shall not use (or distribute) the SUNY POLY Facilities Documents without FSMC’s prior written consent. This Section shall survive the term or termination of this Agreement.

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EXHIBIT G

KINEX INSURANCE REQUIREMENTS

KINEX shall obtain the following insurance coverage and/or limits to be effective upon the earlier of Manufacturing Facility Completion or KINEX’s entry into the Manufacturing Facility:

(a) KINEX shall maintain (or cause to be secured and maintained) for the benefit of FSMC, annual comprehensive general public liability insurance (or a combination of commercial general liability insurance, self-insurance and/or umbrella liability insurance) with a combined single limit per occurrence of not less than $15 Million, and an aggregate limitation of not less than $15 Million, which insurance covers bodily injury, disease and death and property damage (including, to the extent such insurance is reasonably available therefor, environmental damage), and which applies to any such liabilities KINEX may have under this Agreement.

(b) Business Automobile Liability with limits of insurance of not less than $1,000,000.00 each accident.

(c) Workers Compensation & Employers Liability with limits of insurance of not less than the amount required by New York State. This policy shall contain an All States Endorsement.

(d) KINEX shall purchase and maintain for the duration of this agreement Property Insurance (PI) in the amount of $65 Million that includes coverage for the personal property/equipment of others and/or property that is in the care, custody and control of KINEX (other than Manufacturing Equipment or Laboratory Equipment). This policy should provide “all-risk” coverage and shall include coverage for the perils of “testing”, “calibrating” and “mechanical breakdown.” FOUNDATION and FSMC shall be named as Loss Payees on the PI policy maintained by KINEX.

(e) KINEX will name FOUNDATION, SUNY POLY, FRMC, FSMC, SUNY and the State of New York, as Additional Insureds. Purchase and maintenance of such insurance shall in no way be interpreted as relieving KINEX of any of its responsibilities or liabilities hereunder, and KINEX may carry, at its expense, such additional insurance amounts and coverage as it deems necessary. The general public liability insurance for the Additional Insureds shall be as broad as the coverage provided for the named insured party. Except due to claims caused by the negligence of the FSMC, it shall apply as primary and non-contributing insurance before any insurance maintained by the Additional Insureds. KINEX shall maintain coverage for itself and all Additional Insureds for the duration of the term of this Agreement.

(g) KINEX shall secure written agreement of its insurance carrier(s) and, upon request, copy same to FSMC and to the parties set forth in the Notice section, agreeing to notify FSMC in writing no less than thirty (30) days prior to any cancellation, termination or material modification of any of the foregoing policies and coverages.

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FSMC shall, at its sole cost, purchase and maintain for the duration of this Agreement Property Insurance (PI) that includes coverage for the Manufacturing Facility, Manufacturing Equipment and Laboratory Equipment, for the replacement cost thereof, including builder’s risk insurance on the Manufacturing Facility while it is under construction. This policy should provide “all-risk” coverage and shall include coverage for the perils of “testing”, “calibrating” and “mechanical breakdown.”

Each Party hereby agrees as follows:

(1) Notwithstanding anything to the contrary in the Agreement, including Sections 14.5 and 14.7, each Party and its respective insurers waives all rights against the other Party, with respect to KINEX, as a Party, and FSMC, as the other Party, SUNY, FRMC, FOUNDATION, SUNY POLY, the State of New York, as well as such entities’ officers, directors, trustees and employees for recovery of damages to the extent these damages are covered by insurance maintained by such Party per the requirements stated above.

(2) Upon signing of this Agreement and immediately upon renewal or replacement of any and all insurance policies required hereunder, each Party shall furnish to the other Party certificates of insurance evidencing all coverages required hereunder, to which copies of all additional named insured endorsements and loss payee endorsements required hereunder, executed by the insurers, shall be attached. FSMC additionally shall have the right to review all insurance policies maintained by KINEX hereunder upon request.

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EX-10

Exhibit 10.18.1

FSMC-KINEX CONFIDENTIAL

FIRST AMENDMENT TO THE AGREEMENT FOR MEDICAL TECHNOLOGY RESEARCH, DEVELOPMENT,

INNOVATION AND COMMERCIALIZATION ALLIANCE

This FIRST AMENDMENT TO THE AGREEMENT FOR MEDICAL TECHNOLOGY RESEARCH, DEVELOPMENT, INNOVATION AND COMMERCIALIZATION ALLIANCE (“First Amendment”) is effective as of July 21, 2015, (“First Amendment Effective Date”) and is between FORT SCHUYLER MANAGEMENT CORPORATION (“FSMC”), a not-for-profit corporation existing under the laws of the State of New York, having its office located at 257 Fuller Road, Albany, New York 12203 and KINEX PHARMACEUTICALS, INC. (“KINEX”), a Delaware corporation with its principal office located at 701 Ellicott Street, Buffalo, New York 14203. Capitalized terms used but not defined in this First Amendment shall have the meanings set forth in the Agreement (as defined below).

WHEREAS, reference is made to that certain Agreement for Medical Technology Research, Development, Innovation and Commercialization Alliance (“Agreement”) entered into by FSMC and KINEX and made effective as of May 1, 2015; and

WHEREAS, the Agreement sets forth the location of the to be constructed Manufacturing Facility; and

WHEREAS, FSMC and KINEX desire to amend the Agreement to amend the location of the Manufacturing Facility.

NOW, THEREFORE, in consideration of mutual promises herein contained, the Parties agree as follows:

1. Section 2.8 of the Agreement shall be deleted in its entirety and replaced as follows with all references to the location of the Manufacturing Facility to be deleted and revised to refer to Dunkirk, New York:

“Manufacturing Facility means the approximately 315,000 square foot state-of-the-art ISO Class 5 high potency oral and sterile injectable pharmaceutical manufacturing facility and related infrastructure to be located at a site in or near Dunkirk, New York. After the Parties sign this Agreement, the Parties will mutually agree on specifications for the design and construction of the Manufacturing Facility to be set forth in Exhibit A by amending this Agreement and on terms for the operation and maintenance of the Manufacturing Facility in a separate written lease agreement between KINEX and FSMC.”

2. Exhibit C annexed to the Agreement is hereby deleted in its entirety and is replaced with the Exhibit C annexed to this First Amendment.

3. Exhibit D annexed to the Agreement is hereby deleted in its entirety and is replaced with the Exhibit D annexed to this First Amendment.

4. Unless otherwise expressly amended by this First Amendment, the terms and conditions of the Agreement shall remain the same and in full force and effect.

5. This First Amendment may be signed in counterparts, each of which shall be deemed an original, and all of which when taken together shall constitute but one and the same First Amendment.

FSMC-KINEX CONFIDENTIAL

Any signed copy of this First Amendment made by reliable means (e.g., photocopy, facsimile, or PDF Adobe Format) is considered an original.

IN WITNESS WHEREOF, the Parties hereto have caused this First Amendment to be signed and delivered by their duly authorized representatives as of the Effective Date.

FORT SCHUYLER MANAGEMENT CORPORATION		KINEX PHARMACEUTICALS, INC.
By:		By:
Name:	Walter Gerald Barber	Name:	Flint D. Besecker
Title:	Chairman	Title:	Chief Operating Officer & Board Director
Date:	August 6, 2015	Date:	July    , 2015

FSMC-KINEX CONFIDENTIAL

EXHIBIT C

FSMC-KINEX CONFIDENTIAL

EXHIBIT D

EX-10

Exhibit 10.18.2

FSMC-KINEX CONFIDENTIAL

SECOND AMENDMENT TO THE AGREEMENT FOR MEDICAL TECHNOLOGY RESEARCH, DEVELOPMENT, INNOVATION AND COMMERCIALIZATION ALLIANCE

This SECOND AMENDMENT TO THE AGREEMENT FOR MEDICAL TECHNOLOGY RESEARCH, DEVELOPMENT, INNOVATION AND COMMERCIALIZATION ALLIANCE (“Second Amendment”) is effective as of June 22, 2016, (“Second Amendment Effective Date”) and is between FORT SCHUYLER MANAGEMENT CORPORATION (“FSMC”), a not-for-profit corporation existing under the laws of the State of New York, having its office located at 257 Fuller Road, Albany, New York 12203 and ATHENEX, INC. (“ATHENEX”), a Delaware corporation with its principal office located at 1001 Main Street, Suite 600, Buffalo, New York 14203. Capitalized terms used but not defined in this Second Amendment shall have the meanings set forth in the Agreement (as defined below).

WHEREAS, reference is made to that certain Agreement for Medical Technology Research, Development, Innovation and Commercialization Alliance, as amended, (“Agreement”) entered into by FSMC and ATHENEX and made effective as of May 1, 2015; and

WHEREAS, KINEX PHARMACEUTICALS, INC. is now known as ATHENEX, INC.; and

WHEREAS, FSMC and ATHENEX desire to amend the Agreement as more fully set forth herein.

NOW, THEREFORE, in consideration of mutual promises herein contained, the Parties agree as follows:

1. A new Section 4.13 is added to the Agreement as follows:

“The Parties acknowledge and agree that the Manufacturing Facility will be located on approximately 12 acres at 3178 Lakeshore Drive East, Town of Dunkirk, Chautauqua County, New York and approximately 21.6 adjacent acres identified by tax map number 80.01-1-3 (collectively the “Real Property”). ATHENEX will provide the funding necessary for the timely closing of the purchase of the Real Property by FSMC, but in no event shall the amount of such funding exceed $275,000. FSMC shall own and take title to the Real Property at closing and, within 120 days of the Second Amendment Effective Date, FSMC shall reimburse ATHENEX for all funding provided for the closing of the purchase of the Real Property pursuant to Section 5.1(a) of the Agreement.”

2. The Parties acknowledge and agree that, in furtherance of the Headquarters Buildout Completion, and with FSMC’s prior request and authorization, Athenex provided the funding necessary for the purchase of certain furniture, appliances and equipment, totaling before taxes an expenditure of $694,788.88, the details of which are set forth in Athenex invoice number 2123 with supporting documentation which has been submitted to FSMC. The Parties expressly agree FSMC shall reimburse ATHENEX for such funding provided within 120 days of the Second Amendment Effective Date.

3. Unless otherwise expressly amended by this Second Amendment, the terms and conditions of the Agreement shall remain the same and in full force and effect.

This Second Amendment may be signed in counterparts, each of which shall be deemed an original, and all of which when taken together shall constitute but one and the same Second Amendment. Any signed copy of this Second Amendment made by reliable means (e.g., photocopy, facsimile, or PDF Adobe Format) is considered an original.

FSMC-KINEX CONFIDENTIAL

IN WITNESS WHEREOF, the Parties hereto have caused this Second Amendment to be signed and delivered by their duly authorized representatives as of the Effective Date.

FORT SCHUYLER MANAGEMENT CORPORATION		ATHENEX, INC.
By:		By:
Name:	Walter Gerald Barber	Name:	Teresa Bair
Title:	Chairman	Title:	SVP Corp. Development & Legal Affairs
Date:	6/28/16	Date:	June 22, 2016

EX-10

Exhibit 10.19

FORT SCHUYLER MANAGEMENT CORPORATION

as Landlord

And

KINEX PHARMACEUTICALS, INC.

as Tenant

SUBLEASE AGREEMENT

Dated as of July 21, 2015

SUBLEASE AGREEMENT

THIS SUBLEASE AGREEMENT, is made and entered into on July 21, 2015, by and between FORT SCHUYLER MANAGEMENT CORPORATION, a New York not-for-profit corporation having a mailing address at 259 Fuller Road, Albany, New York 12203, (the “Landlord”) and Kinex Pharmaceuticals, Inc. a corporation duly organized under the laws of Delaware, and having its principal place of business at 701 Ellicott Street, Buffalo, NY 14203, (the “Tenant”).

RECITALS:

A. Conventus Partners, LLC (“Prime Landlord’) is ground lessee of the real property commonly known as 1001 Main Street, Buffalo, New York (the “Property”) which Property is described on Exhibit A attached hereto and made a part hereof.

B. Landlord, as tenant, leases certain space, including the Leased Premises (as defined below in Section 1), under that certain Lease Agreement, as amended, with Prime Landlord, dated as of December 4, 2014 (“Prime Lease”).

C. In accordance with that certain Agreement for Medical Technology Research, Development, Innovation, and Commercialization Alliance, effective as of May 1, 2015, between Landlord and Tenant (“Alliance Agreement”), Landlord desires to sublease to Tenant and Tenant desires to sublease from Landlord the Leased Premises on the terms and conditions set forth herein.

NOW, THEREFORE, in consideration of the foregoing and of the representations and agreements contained in this Sublease Agreement, the parties agree as follows:

1. Leased Premises. Landlord hereby leases to Tenant and Tenant agrees to lease from Landlord approximately Fifty-One Thousand (51,000) rentable square feet (the “Leased Premises”), including 14,000 square feet for a formulation testing lab and pilot plan, 2,000 square feet for a chemistry lab for a biological and analytical testing lab, 24,000 square feet for office and training space, 3,000 square feet for mechanicals, and related infrastructure, located on the sixth (6^th) floor of the building (“Building”) located on the Property, upon the terms and conditions set forth in this Sublease Agreement, which Leased Premises are depicted with more particularity on Exhibit B attached hereto.

The net rentable area shall include a common area factor which shall be included in the calculation of Base Rent (hereinafter defined), and Additional Rent (hereinafter defined) for the Leased Premises.

In determining the number of rentable or useable square feet, all measurements shall be performed pursuant to the standards and methods of measurement set forth by the Building Owners and Managers Association International (BOMA) Office Buildings: Standard Methods of Measurement and Calculating Rentable Area (2010) (“BOMA 2010”). If the amount of rentable square feet of the Leased Premises is adjusted by Landlord and Prime Landlord under the Prime Lease, then Landlord and Tenant shall amend this Sublease Agreement in accordance with the adjustment under the Prime Lease.

2. Landlord’s Work. Consistent with Sections 5.1(e)-(f) and Exhibit C of the Alliance Agreement, Landlord’s obligation with respect to the Leased Premises shall be as set forth on Exhibit C, attached hereto and incorporated herein. Landlord will use its best efforts to have the office space included within the Leased Premises substantially completed no later than October 1, 2015 and the lab/technical space included within the Leased Premises substantially completed no later than March 31, 2016. In accordance with Section 5.1(g) of the Alliance Agreement, under no circumstances will Landlord’s costs for the Premises and the Laboratory Equipment identified in Exhibit C exceed $25 million in the aggregate.

3. Term. The term of this Sublease Agreement shall be for ten (10) Lease Years (the “Term”), commencing on August 1, 2015 (“Commencement Date”) and ending on the last day of the tenth (10^th) Lease Year unless sooner terminated as permitted in this Lease. Tenant shall begin to pay Landlord Base Rent and Additional Rent for the Leased Premises on August 1, 2015 (the “Rent Commencement Date”). If fit-up for the Leased Premises is not completed by August 1, 2015, then Tenant will be allowed to begin moving into the Leased Premises while fit-up is being finalized. The term “Lease Year” as used herein shall mean a period of twelve (12) consecutive full calendar months (except for the first Lease Year, which may be longer). The first Lease Year shall commence on the Commencement Date. The first Lease Year shall expire at midnight on the last day of the twelfth (12th) full month following Rent Commencement Date. Succeeding Lease Years shall each commence on the first (1st) day following the end of the preceding Lease Year. Tenant shall have the option to extend the Term of the Sublease Agreement for an additional ten (10) year period. This option to extend the Term may be exercised by Tenant by providing written notice to Landlord at least forty-eight months prior to the end of the Term. If Tenant does not timely exercise its option to extend the Term of this Sublease Agreement, or if an event of default has occurred and remains uncured by Tenant, then such option is null and void and be of no further force or effect. In no event shall the Term of this Sublease Agreement extend beyond the term of the Prime Lease.

4. Use.

Tenant shall occupy, use and operate the Leased Premises solely for uses permitted under the terms of the Ground Lease (as hereinafter defined), and no other purposes (collectively the “Permitted Uses”). Tenant shall not use or allow the Leased Premises or any part thereof to be used or occupied for an unlawful purpose or in violation of any certificate of occupancy or completion affecting the Leased Premises or in any manner which may constitute a nuisance, public or private, or make void or voidable any insurance then in force with respect thereto.

Tenant shall at its own cost and expense promptly observe and comply with all laws, ordinances, requirements, orders, directives, rules and regulations of the federal, state, county, or municipal governments and of all governmental authorities (collectively, “Laws”) affecting its occupancy of and conduct of its business at the Leased Premises, whether the same are in force at the commencement of the term of this Sublease Agreement or may be in the future passed, enacted or directed.

5. Rent.

Tenant covenants and agrees to pay to Landlord base rent (“Base Rent”) as follows:

Lease Years	Base Rent Per Rentable Square Foot Per Lease Year
1-3	$	8.15
4-10	$	25.30

If Tenant’s option to extend the term is exercised Tenant covenants and agrees to pay to Landlord base rent (“Base Rent”) as follows:

11-15	$	27.32
16-20	$	29.35

One-twelfth of annual Base Rent and Additional Rent shall be paid in advance by Tenant to Landlord without notice on the first day of each month without offset or deduction to Landlord, in its name, at 257 Fuller Road, Albany, New York 12203, or to such other address or payee as Landlord may designate in writing. In the event that the Commencement Date is other than on the first of the month, then Base Rent and Additional Rent for the balance of the month shall be pro-rated accordingly and paid on or prior to the Commencement Date and the full term of the Lease shall commence on the first day of the following month.

Tenant shall be required to pay any applicable taxes levied against rental payments made hereunder including, but not limited to, any sales, use or similar tax imposed on rent, if any.

Tenant agrees to pay all rents and other charges under the terms of this Lease when they are due and payable. Any Base Rent or Additional Rent or other sums due and payable pursuant to this Lease remaining unpaid five (5) days after due date or any other charges remaining unpaid ten (10) days after receipt of invoice shall accrue interest at the Interest Rate as defined in Section 12 below from such tenth (10^th) day, until paid.

6. Tenant’s Pro Rata Share of Operating Costs.

(a) Beginning effective as of the Rent Commencement Date, Tenant shall pay to Landlord as Additional Rent its pro rata share of (i) all state and local real estate taxes and assessments (including any sewer charges included in the tax bill), and payments in lieu thereof, and all other charges and assessments imposed upon the Property, (ii) premiums for fire, casualty, rent, liability and other insurance maintained by Landlord, including, without limitation, coverage for such perils as may be reasonably required by Landlord’s lender as may exist from time to time (“Mortgagee”) or as is desired by Landlord and is, in Landlord’s opinion, prudent for the Building and Property and (iii) the costs of all services performed by Landlord, including, without limitation, those set forth in Exhibit D [(i), (ii) and (iii) collectively being “Operating Costs”]. Operating Costs shall include a management fee of not more than five percent (5%). If Landlord or Tenant secures a reduction or exemption from real property taxes related solely to the Leased Premises, Tenant will be solely entitled to such reduction or abatement. Any other reduction or

abatement shall be allocated among all tenants of the Building proportionately in accordance with their respective rentable square footage.

(b) Beginning effective as of the Commencement Date and thereafter prior to December 15th of each calendar year Landlord shall deliver to Tenant Landlord’s reasonable estimate of the aggregate amount which will be incurred by Landlord for the Operating Costs during the forthcoming calendar year or, in the first or last year of the term, the applicable part thereof. Tenant shall pay as Additional Rent by the first day of each month of a full or partial calendar year during the term of this Sublease Agreement, that fraction of Tenant’s pro rata share for such full or partial calendar year, the numerator of which shall be one (1) and the denominator of which shall be twelve or the number of months in the term occurring in such year. As soon as reasonably possible after the completion of each year, but in no event later than April 1st, or, in the final year of the term, as soon as reasonably possible after completion of the term, Landlord shall deliver to Tenant a statement of the actual Operating Costs incurred during such year or applicable part thereof and Tenant shall remit to Landlord within thirty (30) days thereafter the amount, if any, by which Tenant’s pro rata share thereof exceeds the aggregate amount paid by Tenant toward the Operating Costs during such year or applicable part thereof. In the event that the aggregate amount paid by Tenant exceeds its actual pro rata share, Landlord shall credit such excess against Tenant’s estimated payments toward its pro rata share of the Operating Costs for the next year or, except that if in the final Lease Year, the amount paid by Tenant as estimated Operating Costs for such final Lease Year exceeds the actual Operating Costs for such Lease Year, Landlord shall remit such excess to Tenant no later than thirty (30) days after expiration of the final Lease Year.

(c) For purposes of this Section 6, Tenant’s pro rata share of each component of Operating Costs shall be that fraction, the numerator of which is the number of rentable square feet leased by Tenant and the denominator of which is the number of rentable square feet of space in the Building or (if any service is not applicable to all tenants), in that portion of the Building to which such component is applicable. Not less than thirty (30) days prior to the Commencement Date, Landlord shall provide Tenant with written confirmation as to the rentable square footage.

The obligations of the parties relating to Tenant’s payment of its pro rata share of the Operating Costs for the year in which this Sublease Agreement expires shall survive the expiration of this Sublease Agreement.

7. Landlord’s Services. Provided that Tenant is not in default of any of the terms, conditions or provisions contained in this Sublease Agreement, Prime Landlord shall, during the Term of this Sublease Agreement, and subject to Tenant’s obligation to pay its pro rata share thereof in accordance with Section 6, provide those services listed in Exhibit D attached hereto and made a part hereof. Unless otherwise specified, such services shall be provided from 8:00 a.m. to 6:00 p.m. Mondays through Fridays and from 9:00 a.m. to 1:00 p.m. on Saturdays, holidays excluded (“Normal Business Hours”). Prime Landlord shall generally provide janitorial services after Normal Business Hours. Landlord shall not be required to provide or perform any services except as specifically set forth herein and in Exhibit D.

8. Utilities. Tenant shall be responsible for obtaining and shall pay for all gas, water, telephone service, information technology services, sewer (to the extent not included in the tax bill as sewer rent), electricity and other utility services used in or to be supplied for the Leased

Premises, including any deposits for meters and/or service. Prime Landlord will install a “check” or “sub” meter at Prime Landlord’s expense to measure Tenant’s water and/or other utility usage within the Leased Premises. Tenant shall pay for water and/or other utility usage as Additional Rent within thirty (30) days after receipt of an invoice from Landlord. Electricity usage by Tenant shall be pursuant to the terms and conditions set forth in the Electricity Rider attached hereto as Exhibit E.

9. Maintenance and Repairs.

(a) Tenant shall, at its sole expense, be responsible for maintaining the Leased Premises in a good, orderly and safe condition and shall notify Landlord of all repairs required to be made thereto.

(b) Prime Landlord or Landlord shall, at Tenant’s sole expense: (i) make all repairs required to the Leased Premises, including, without limitation, repairs to those components of the heating, ventilating and air-conditioning (“HVAC”), plumbing, water, electrical, and sprinkler (if any) systems which are located within the Leased Premises or serve the Leased Premises exclusively; and (ii) repair any damage to the Property, the Leased Premises, the Building or any appurtenances thereto caused by the misuse or negligence of Tenant, its employees or invitees. The cost of any services provided by Landlord or Prime Landlord at Tenant’s expense shall be payable by Tenant as Additional Rent within 30 days after receipt of a statement for same.

(c) Prime Landlord shall, at Prime Landlord’s sole expense, provide structural repairs to the foundation roof, loadbearing walls, exterior walls, loadbearing columns of the Building and the common areas of the Property as needed in its reasonable judgment, unless caused by the misuse or negligence of Tenant, its employees or invitees.

(d) Subject to Tenant’s obligation to pay its pro rata share of Operating Costs, Prime Landlord shall provide the maintenance and repairs listed on Exhibit D.

(e) Tenant shall not be entitled to any partial or total abatement of Base Rent for periods during which repairs are required to be made pursuant to Section 9, whether such repairs are the responsibility of Landlord or Tenant.

10. Access to the Leased Premises. Tenant agrees that Landlord or Prime Landlord and their agents shall have the right to enter the Leased Premises: (a) during normal business hours upon giving Tenant least 24 hours advance notice to inspect, show to existing or prospective mortgagees, purchasers or, during the last nine (9) months of the Term hereof, tenants; (b) in the event of a bona fide emergency at any time and without notice; and (c) at such times as may be necessary or desirable to provide repairs or janitorial services, if applicable.

11. Quiet Enjoyment. Landlord covenants that so long as Tenant is not in default hereunder, it shall and may peaceably and quietly have, hold and enjoy the Leased Premises during the Term of this Sublease Agreement and any renewal or extension hereof, subject to the provisions hereof, and any easements, restrictions or agreements to which the Leased Premises are now or shall hereafter be subject.

12. Alterations. Except for normal office decorations which do not damage the Leased Premises (whether upon their installation, removal or otherwise), Tenant shall make no alterations, additions or improvements (collectively, “Alterations”) in or to the Leased Premises without Landlord’s prior written consent. Landlord shall not unreasonably condition, withhold or delay its consent to any Alteration subject to Prime Landlord and/or Mortgagee approval (if such consent is required). In the event that Landlord consents to any Alterations they shall be made at Tenant’s sole expense, and Tenant shall, before making any such Alterations, obtain all permits, approvals and certificates required by any governmental body or agency, and certificates of final approval thereof, and shall deliver promptly duplicates of all such permits, approvals and certificates to Landlord. Tenant agrees to carry, or to cause its contractor and subcontractors to carry, such workers’ compensation, general liability, personal and property damage insurance as Landlord may require. Tenant shall compensate Landlord for Landlord’s reasonable out-of-pocket expenses in reviewing any plans and/or specifications for any proposed Alteration, whether or not Landlord consents to the making of same. Any amounts due from Tenant and not paid within thirty (30) days of when invoiced shall incur interest at a rate that is the greater of five percent (5%) above the then prime interest rate or twelve percent (12%) per annum (the “Interest Rate”).

Notwithstanding anything to the contrary in this Sublease Agreement, Tenant agrees to defend, indemnify and hold Landlord harmless from and against all losses, expenses, costs (including reasonable attorneys’ fees), claims, fines, penalties, suits, causes of action and damages, including, without limitation, personal injury or death, arising from or connected with any Alterations or other work done by Tenant or any contractor or subcontractor retained by or on behalf of Tenant, regardless of whether such Alteration or other work was performed with Landlord’s consent, except to the extent caused by the gross negligence or willful misconduct of Landlord.

Tenant has no authority or power to cause or permit any lien or encumbrance, created by act or omission of Tenant to be attached to or be placed upon the Property, and any and all liens and encumbrances created by Tenant shall be attached only to its interest in the Leased Premises. Any lien or claim of lien filed against the Leased Premises for work claimed to have been done for, or for materials claimed to have been furnished to, Tenant shall, within thirty (30) days thereafter, be discharged by Tenant, or, at the discretion of Tenant, be bonded pursuant to the New York Lien Law, at Tenant’s expense. If Tenant fails to discharge (or, if permitted, bond) any such liens, then Landlord may, at its option, bond or discharge such lien, and the costs incurred by it in such discharge or bonding shall be due from Tenant on demand and shall bear interest at the Interest Rate.

13. Liability. Tenant shall defend, indemnify and hold harmless Landlord, Prime Landlord, each Mortgagee, the State University of New York Polytechnic Institute, The Research Foundation for the State University of New York (collectively the “Landlord Parties”) and their respective members, agents and employees (collectively, together with the Landlord Parties, the “Indemnified Parties”) from and against all causes of action, claims, damages, losses and expenses, including reasonable attorneys’ fees, resulting from or arising out of bodily injury or death, or damage to or destruction of property, in connection with Tenant’s use or occupancy of the Leased Premises, whether the same be asserted by third parties, Tenant or Tenant’s agents, contractors, employees, invitees or licensees, except, as to Landlord Parties, to the extent caused by Landlord Parties or Landlord Parties’ agents, contractors, employees, invitees or licensees

negligence or intentional misconduct and except, as to a Mortgagee, to the extent caused by the gross negligence or intentional misconduct of such Mortgagee or its agents, contractors, employees, invitees or licensees.

Moreover, Landlord Parties shall not be liable for any damage or injury to any improvements to the Leased Premises made by Tenant, to any property in the Leased Premises, or to Tenant, its agents, contractors, employees, invitees or licensees, arising from any use or condition of the Leased Premises including, without limitation, any injury or damage to persons or property resulting from fire, explosion, collapse, falling plaster, steam, gas, electricity, water, rain or snow or leaks from any part of the Leased Premises or from the pipes, sprinklers, appliances or plumbing works or from the roof, street or subsurface or from any other place or by dampness or by any other cause whatsoever, except, as to Landlord or Prime Landlord, to the extent caused by Landlord or Prime Landlord or their agents, contractors, employees, invitees or licensees negligence or intentional misconduct.

In no event shall Landlord Parties be responsible for consequential or indirect damages.

14. Insurance.

(a) Tenant shall, at its expense, at all times during the Term of this Sublease Agreement maintain in force a policy or policies with insurance carriers acceptable to Mortgagee of (i) commercial general liability insurance, including contractual liability for Tenant’s obligations of indemnity hereunder and liability for both bodily injury and property damage, against claims for loss of life, bodily injury and property damage occurring in, on or about the Leased Premises or with respect to the operations of Tenant in the Leased Premises, in which the limit of public liability coverage shall be not less than Five Million Dollars ($5,000,000) for combined single limit bodily injury, death, and property damage liability (the “CGL Policy”), (ii) fire, casualty and extended risk insurance covering Tenant’s property and inventory used or stored at the Leased Premises and (iii) worker’s compensation and employer’s liability coverage providing statutorily required benefits. The CGL Policy shall be written on ISO Occurrence form CG 00 01 10/01 or a substitute form providing equivalent coverage and shall cover liability arising from premises and operations, independent contractors, [products-completed operations and personal and advertising injury] and liability assumed under an insured contract (including tort liability of another assumed in a business contract). If the CGL Policy contains a General Aggregate limit, such General Aggregate limit shall apply separately to each location. Landlord Parties shall be included as additional insureds, using ISO Additional Insured Endorsement CG 20 10 11/85 or both CG 20 10 10/01 and CG 20 37 10/01 or equivalent coverage to the additional insured. Coverage for Landlord and each other additional insured shall be as broad as the coverage for Tenant and shall apply as primary insurance on a non-contributory basis before any other insurance or self-insurance, including any deductible, maintained by or provided to Landlord or such other additional insured. Each such policy of insurance shall be written by one or more insurance companies licensed to do business in the State of New York with an AM Best rating of A-VIII or better, shall name Landlord Parties as additional insureds and as the certificate holders thereof, with express waivers of subrogation against Landlord Parties, and shall provide that if the insurers cancel such insurance for any reason whatsoever, or the same is allowed to lapse or expire, or there be any reduction in amount, or any material change is made in the coverage, such

cancellation lapse, expiration, reduction or change shall not be effective as to Landlord Parties until thirty (30) days after receipt by Landlord Parties, as the case may be, of written notice thereof. A copy of each policy and endorsement shall be delivered to Landlord Parties on or before the commencement of the Term of this Sublease Agreement, and copies of all policies and endorsements with respect to all renewals, extensions or replacements thereof shall thereafter be furnished to Landlord Parties at least thirty (30) days prior to the expiration or cancellation of any policies and endorsements which they replace. Tenant shall promptly (and in any event at least five (5) business days prior to the date on which notice is required to be given to the insurer under such policies) notify both Landlord and the insurer in writing of any occurrence which might give rise to a claim under any of the policies required to be maintained by Tenant under this Sublease Agreement. Tenant further agrees to comply in timely fashion with all of the obligations of the insured under each such policy and shall defend, indemnify and hold Landlord Parties harmless from any liability, loss, cost and/or expense suffered or incurred by Landlord Parties as a result of Tenant’s failure to comply with the provisions of this Section 14(a).

(b) Subject to Tenant’s obligation to pay a portion of the cost thereof as a component of the Operating Costs, Prime Landlord will carry the insurance described in item 5 of Exhibit D.

(c) Tenant shall also give Landlord written notice thereof as soon as reasonably practical after it becomes aware of any occurrence or incident which might give rise to a claim against Landlord, including, without limitation, any incident or occurrence within the Leased Premises, the common areas of the Building, the parking lot or elsewhere on the Property.

15. Fire or Other Casualty. In the event that the Leased Premises shall be rendered untenantable by fire or other casualty, Landlord shall be entitled to the proceeds of all applicable insurance maintained by Landlord, and shall, at its option, either (a) terminate this Sublease Agreement by giving Tenant written notice thereof within forty-five (45) days from the later to occur of (i) the date of said damage or destruction or (ii) notification from a Mortgagee that it shall not permit the entire insurance proceeds required for restoration of the Building to be used for such purpose (the “Notice Date”), or (b) repair or replace the Leased Premises to substantially the same condition as prior to the damage or destruction (exclusive of Alterations made by Tenant). If Landlord fails to commence to repair the damage or destruction to the Property within seventy-five (75) days following the date of such damage or destruction, or if the Leased Premises shall not have been substantially replaced or repaired as expeditiously as possible, but in no event more than three hundred sixty five (365) days after the date Landlord commences the repair of such damage or destruction, Tenant may at its option, terminate this Sublease Agreement by giving written notice to Landlord within fifteen (15) days after Landlord’s failure to commence or substantially complete said repairs within the applicable time period. The Base Rent and Additional Rent herein required to be paid shall abate during the period of such untenantability, to the extent that such abatement is covered by Prime Landlord’s rent insurance (or, if Prime Landlord has failed to obtain rent insurance in accordance with item 5 of Exhibit D, to the extent that the abatement would have been covered had Prime Landlord obtained such insurance). Whether or not all or any part of the Leased Premises has been rendered untenantable thereby, Landlord shall also have the option to terminate this Sublease Agreement if such a substantial portion of the Building is damaged by fire or other casualty that Landlord decides not to rebuild. Landlord may exercise its option by giving Tenant written notice thereof on or before the Notice Date.

If the Leased Premises shall be damaged in part by fire or other casualty, but still remain partially tenantable, Landlord shall repair the Leased Premises to substantially the same condition as prior to the damage (exclusive of Alterations made by Tenant). Landlord shall commence repair of the damage or destruction within sixty (60) days from the date of occurrence and complete them with reasonable diligence. During the period of such repairs and restorations, this Sublease Agreement shall continue in full force and effect, and Tenant shall be required to pay the Base Rent and Additional Rent herein reserved, abated by the percentage of area the Leased Premises destroyed as compared to the total area of the Leased Premises, to the extent that such abatement is covered by Prime Landlord’s rent insurance (or, if Prime Landlord has failed to obtain rent insurance in accordance with item 5 of Exhibit D, to the extent that the abatement would have been covered had Prime Landlord obtained such insurance).

16. Eminent Domain. In the event that all or any portion of the Building shall be taken by any governmental authority under the exercise of its right of eminent domain or similar right (or by act in lieu thereof), all right, title and interest in and to any award granted (or sums paid in lieu thereof) shall belong entirely to Landlord, and Tenant hereby assigns to Landlord all of its interest, title or claim, if any, in and to such award (or sums paid in lieu thereof), including, but not limited to, any part of such award attributable to Tenant’s leasehold interest, if any. Nothing contained herein shall preclude Tenant from seeking a separate award from the condemning authority for its relocation expenses and loss of any trade fixtures. In the event of a partial permanent taking, Base Rent and Additional Rent shall be reduced as of the date of such taking by an amount which shall equitably reflect the portion of the Leased Premises taken. If the taking is permanent and of such a substantial nature that (a) it includes more than 25% of the Leased Premises and (b) Tenant cannot conduct its operations in the Leased Premises, Tenant shall have the option, to be exercised by notice in writing to Landlord within thirty (30) days after such taking, of terminating this Sublease Agreement, or, if such taking be total, this Sublease Agreement shall terminate upon the taking. In the event that this Sublease Agreement is terminated pursuant to this Section 16, Tenant shall not have any claim against Landlord for the balance of the unexpired Term of this Sublease Agreement.

17. Subordination; Non-Disturbance. This Sublease Agreement is subject and subordinate to each Mortgage which now encumber or shall hereafter encumber the Property. On the Commencement Date, Prime Landlord shall furnish Tenant with an executed, nondisturbance agreement in the form attached hereto as Exhibit F from the holder of each mortgage encumbering the Building as of such date.

18. Estoppel Certificate. Tenant shall, once annually, upon not less than twenty (20) days’ prior written request by Landlord, execute, acknowledge and deliver to Landlord a written estoppel certificate in such form as Landlord may reasonably require, certifying that this Sublease Agreement is unmodified and in full force and effect (or if there have been modifications that the same is in full force and effect as modified and stating the modifications), the dates to which the Base Rent and Additional Rent have been paid, whether or not to the best of Tenant’s knowledge Landlord is in default hereunder (and if so, specifying the nature of the default), and such other matters as may be required by any Mortgagee or purchaser of the Property, it being intended that any such statement delivered pursuant to this Section 18 may be relied upon by a prospective purchaser of Landlord’s interest or by a Mortgagee, prospective Mortgagee or any assignee or prospective assignee of any Mortgage.

19. Default.

(a) Any one or more of the following events shall constitute an “Event of Default” hereunder:

(i) If any representation or warranty made by Tenant herein or in connection with any Mortgage shall prove to be false, misleading or incorrect in any material respect as of the date made; or

(ii) If Tenant fails to pay any installment of Base Rent or Additional Rent or any other sum to be paid by Tenant within ten (10) days after it is due (any monetary amounts due Landlord pursuant to this Sublease Agreement shall be considered to be Additional Rent); or

(iii) If Tenant fails to remedy a default by it with respect to any of the other covenants, conditions and agreements contained herein or in any rider, exhibit or other addendum hereto, within thirty (30) days after notice thereof; provided, however, that if the default is of such a nature that it cannot reasonably be cured within thirty (30) days, the foregoing shall not be an Event of Default provided that Tenant: (A) within said thirty (30) day period delivers to Landlord written notice of its intention to cure; (B) commences the cure within said thirty (30) day period; and (C) diligently continues to prosecute the cure; and (D) completes the cure prior to the expiration of the applicable grace period under any Mortgage; or

(iv) If Tenant abandons or vacates the Leased Premises or ceases to conduct its business therein; provided, however, that the foregoing shall not constitute an Event of Default if and for so long as Tenant (A) notifies Landlord at least thirty (30) days prior to vacating the Leased Premises; and (B) continues to pay all Base Rent and Additional Rent due hereunder and to perform all of its obligations hereunder in timely fashion; and (C) pays increased insurance premiums, if any, occasioned by its vacating the Leased Premises; and (D) provides reasonable security measures for the Leased Premises reasonably satisfactory to Landlord; or

(v) If (A) a petition in bankruptcy is filed by Tenant, any guarantor, or any other person or entity that becomes liable for the performance of the obligations of Tenant (any guarantor or such other person or entity being a “Responsible Party’’), or (B) proceedings under any bankruptcy or debtor’s relief law or seeking the appointment of a receiver or similar relief are commenced against Tenant or a Responsible Party and are not dismissed within thirty (30) days, or (C) Tenant or a Responsible Party becomes insolvent or admits in writing its inability to pay its debts as they become due, or (D) proceedings are commenced by Tenant or a Responsible Party seeking the appointment of a receiver or similar relief.

(b) If an Event of Default shall occur, Landlord may, in addition to any other right or rights or damages which Landlord may have pursuant to subsection (c) below, serve a written three (3) days’ notice of cancellation of this Sublease Agreement upon Tenant, and upon the expiration of said three (3) days, this Sublease Agreement and the Term hereunder shall end and expire as fully and completely as if the date of expiration of such three (3) days period were the day herein definitely fixed for the end and expiration of this Sublease Agreement and the Term thereof, and Tenant shall then quit and surrender the Leased Premises to Landlord, but Tenant shall remain liable as hereinafter provided. If the three (3) day notice of cancellation shall have been

given, and the Term shall expire as aforesaid, or if any execution or attachment shall be issued against Tenant or any of Tenant’s property whereupon the Leased Premises shall be taken or occupied by someone other than Tenant, then and in either of such events Landlord may, without notice, re-enter the Leased Premises and dispossess Tenant and the legal representative of Tenant or other occupant of the Leased Premises by summary proceedings or otherwise, and remove their effects and hold the Leased Premises as if this Sublease Agreement had not been made, but Tenant shall remain liable hereunder as hereinafter provided.

(c) Should an Event of Default occur Landlord shall have the following options in addition to any rights or remedies set forth above:

(i) Landlord may collect from Tenant any other loss or damage Landlord may sustain by reason of any breach and any diminished value of the Leased Premises resulting from said breach;

(ii) in the event of a breach by Tenant of any of the covenants or provisions of this Sublease Agreement, Landlord shall have the right to enjoin any such; or

(iii) Landlord may cure such default by Tenant at Tenant’s expense, and upon completion of such cure by Landlord Tenant shall, upon demand and as Additional Rent, reimburse Landlord for all costs in connection therewith.

(d) Any and all rights and remedies which Landlord may have under this Sublease Agreement and any rider hereto attached and made a part hereof and at law or in equity shall be cumulative and shall not be deemed inconsistent with each other, and any two or more or all of such rights and remedies may be exercised at the same time. Notwithstanding anything contained herein to the contrary, Landlord hereby agrees, following the occurrence of an Event of Default, to use commercially reasonable efforts to mitigate its damages.

20. Failure to Insist on Strict Performance. The failure of either party to insist, in any one or more instances, upon strict performance of any covenant, term, provision or agreement of this Sublease Agreement shall not be construed as a waiver or relinquishment thereof, but the same shall continue and remain in full force and effect, notwithstanding any law, usage or custom to the contrary. The receipt by Landlord of Base Rent and/or Additional Rent with knowledge of the breach of any covenant or agreement hereunder shall not be deemed a waiver of the rights of Landlord with respect to such breach. No waiver by a party of any provision hereof shall be deemed to have been made unless expressed in writing and signed by the waiving party.

21. Surrender of Leased Premises.

(a) Tenant shall, upon the termination of this Sublease Agreement, by lapse of time or otherwise, return the Leased Premises to Landlord in as good condition as when received, loss by fire or other unavoidable casualty and reasonable wear and tear excepted. It is understood and agreed that the exception made as to “loss by fire or other unavoidable casualty” does not include damages, fires or casualties caused or contributed to by the act or neglect of Tenant, its servants, agents, employees, invitees or licensees, and not compensated for by insurance. Tenant shall surrender all keys to the Leased Premises and inform Landlord of all combinations on locks, safes and vaults therein.

(b) All installations, additions, fixtures, and permanent improvements in or upon the Leased Premises, whether placed there by Landlord or Tenant, including, without limitation, paneling, permanent partitions, railings, wall-to-wall carpeting and flooring, shall, at Landlord’s option, become the property of Landlord and shall remain upon the Leased Premises at the termination of this Sublease Agreement without compensation, allowance or credit to the Tenant. Notwithstanding the aforesaid, Tenant shall remove any or all installments, additions, fixtures (whether or not trade fixtures) and/or improvements if so directed by Landlord at least thirty (30) days prior to the expiration or termination of the Term and shall repair any damage caused by such removal. Unless Landlord otherwise directs at least thirty (30) days prior to the expiration or termination of the Term, Tenant shall remove all telecommunications and data cabling installed by Tenant and repair all damage caused thereby.

(c) Any furniture, equipment, machinery or movable property owned by Tenant and brought onto the Leased Premises during Tenant’s occupancy thereof and not removed at the termination of the Sublease Agreement shall be deemed to have been abandoned by Tenant and shall without any further act by Tenant, be conclusively deemed to have been conveyed by Tenant to Landlord as by bill of sale without further payment or credit by Landlord to Tenant and may be sold by Landlord or disposed of by Landlord as it sees fit. Any amount realized upon any such a sale shall be the property of Landlord. If Landlord directs Tenant to remove any or all of such property, Tenant shall remain liable for the cost of its removal and for the cost of restoring the Leased Premises after such removal.

(d) The provisions of this Section 21 shall survive the termination or expiration of this Sublease Agreement, for the period of one (1) year.

22. Holding Over. Should Tenant fail to vacate the Leased Premises at the termination hereof, such holding over shall operate and be construed to be a tenancy from month to month only, at a base monthly rental equal to the base monthly rental paid for the last month of the Term of this Sublease Agreement plus fifty percent (50%) of such amount, unless otherwise agreed in writing, plus Additional Rent as provided herein and otherwise subject to the conditions, obligations and provisions of this Sublease Agreement. No such holding over or payment or acceptance of Base Rent or Additional Rent resulting therefrom shall constitute or be deemed reconfirmation or renewal of this Sublease Agreement. Nothing in this Section 22 shall be construed as consent by Landlord to the possession of the Leased Premises after the expiration or termination of this Sublease Agreement.

23. Expenses and Attorneys’ Fees. Tenant shall pay to Landlord as Additional Rent hereunder all reasonable attorneys’ fees and expenses and all other expenses which may be incurred by Landlord (to the extent that same are not paid to Landlord pursuant to any insurance policies maintained by Tenant in accordance with this Sublease Agreement) in enforcing any of the obligations of Tenant under this Sublease Agreement or in any other litigation or dispute in which Landlord shall become involved through or because of Tenant’s use or occupancy of the Leased Premises, any action or omission of Tenant, or the breach of any representations, warranties, covenants or agreements of Tenant contained in or relating to this Sublease Agreement.

24. Assignment and Subletting.

(a) Tenant shall not, without the prior written consent of Landlord, Prime Landlord and each Mortgagee (if its Mortgage so requires), have the right to assign this Sublease Agreement, or sublet, or encumber the Leased Premises in whole or in part, or permit any other person or entity to occupy or use same, which consent shall not be unreasonably conditioned withheld or delayed. No attempted assignment or subletting, whether with the consent of Landlord, Prime Landlord and each Mortgagee whose consent is required or in violation of this Section 24, shall relieve the original Tenant from liability for payment of rent or other sums due hereunder, or from being bound by any of the terms, conditions, covenants and agreements of this Sublease Agreement. No partial assignment of this Sublease Agreement will be permitted without Landlord’s consent, which Landlord may grant or deny in Landlord’s sole discretion.

(b) In the event that Landlord consents to any assignment, Tenant shall pay to Landlord 100% of the amount paid by the assignee for the assignment [net of Tenant’s actual and reasonable costs for advertising, legal fees and broker’s commissions in connection therewith (“Costs”)]. In the event that Landlord consents to any sublease, Tenant shall pay to Landlord the amount, if any, by which the rentals thereunder exceed the rentals due from Tenant hereunder (net of Costs). Acceptance of rent from any other person or entity shall not be deemed a waiver of any of the provisions of this Sublease Agreement or to be a consent to the assignment of this Sublease Agreement or to the subletting, encumbrance or use or occupancy by another of the Leased Premises.

(c) In the event that Landlord, Prime Landlord and Mortgagees whose consent is required consent to any proposed assignment, subletting, encumbrance, or granting of a right of use or occupancy, such consent shall not be deemed to be a consent to any other or further assignment, subletting, encumbrance or granting of a right of use or occupancy.

25. Broker. The parties agree that this agreement was not brought about without the assistance of any broker. Each party shall indemnify the other with respect to the claim of any broker alleging to have acted on behalf of the indemnifying party.

26. Rules and Regulations. Tenant agrees to follow all rules and regulations set forth in Exhibit G attached hereto and such rules and regulations as may be promulgated from time to time by Landlord or Prime Landlord with respect to the Building and the Property.

27. Miscellaneous.

(a) This Sublease Agreement shall inure to the benefit of, and shall be binding upon, Landlord and Tenant, and their respective successors and assigns.

(b) This Sublease Agreement shall be governed by, and construed in accordance with, the laws of the State of New York without reference to the principles of conflicts of laws. Each party hereby irrevocably consents to the exclusive jurisdiction of the courts of the City of Buffalo, County of Erie and State of New York and of the federal courts located in the

Western District of New York for all purposes in connection with any action, suit or proceeding which arises out of or relates to this Sublease Agreement. To the fullest extent it may effectively do so under applicable law, each party hereby irrevocably waives and agrees not to assert, by way of motion, as a defense or otherwise, any claim that it is not subject to the jurisdiction of any such court, any objection which it may now or hereafter have to the laying of the venue of any such action, suit or proceeding brought in any such court and any claim that any such action, suit or proceeding brought in any such court has been brought in an inconvenient forum.

(c) Tenant hereby waives the provision of Section 227 of the New York Real Property Law, or any law of like import now or hereafter in effect.

(d) All notices, certificates or other communications hereunder shall be addressed:

To Landlord:	Fort Schuyler Management Corporation
	257 Fuller Road
	Albany, New York 12203
	Attn: Walter G. Barber
To Tenant:	Kinex Pharmaceuticals, Inc.
	701 Ellicott Street
	Buffalo, New York 14203
	Attn:

or to such other person or address as Landlord or Tenant may hereafter direct by giving notice as provided herein. Notices shall be deemed to have been received upon the earlier to occur of (i) actual receipt or attempted delivery and refusal of the addressee to accept same (ii) on the first business day after the notice has been deposited with a recognized overnight courier or the third business day after the notice has been deposited in a mail box or office of the U.S. Postal Service, postage prepaid or (iii) upon receipt if sent by receipted facsimile followed by delivery by one of the methods set forth in (i) or (ii) above.

(e) This Sublease Agreement shall completely and fully supersede all other prior understandings or agreements, both written and oral, between Landlord and Tenant relating to the rental of the Leased Premises.

(f) If any clause, provision or Section of this Sublease Agreement shall be ruled invalid by any court of competent jurisdiction, the invalidity of such clause, provision or Section shall not affect any of the remaining provisions thereof.

(g) This Sublease Agreement may be simultaneously executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument.

(h) Tenant does hereby expressly waive all rights to trial by jury on any cause of action directly or indirectly involving the terms, covenants or conditions of this Sublease Agreement or the Leased Premises or any matters whatsoever arising out of or in any way connected with this Sublease Agreement.

(i) The provisions of this Sublease Agreement relating to indemnification and to waivers of a jury trial and the right of redemption shall survive the termination or expiration of this Sublease Agreement.

28. Construction. In this Sublease Agreement, unless the context otherwise requires:

(a) The terms “hereby”, “hereof’, “hereto”, “herein”, “hereunder” and any similar terms shall refer to this Sublease Agreement, and the term “hereafter” shall mean after, and the term “heretofore” shall mean before, the date of the execution and delivery of this Sublease Agreement.

(b) Words of each gender shall mean and include correlative words of each other gender and words importing the singular number shall mean and include the plural number and vice versa.

(c) Words importing persons shall include firms, associations, partnerships (including limited partnerships), trusts, corporations, limited liability companies, and other legal entities, including public bodies, as well as natural persons.

(d) Any headings preceding the texts of the several Sections of this Sublease Agreement, and any table of contents appended to copies hereof, shall be solely for convenience of reference and shall not constitute a part of this Sublease Agreement, nor shall they affect its meaning, construction or effect.

29. Force Majeure. This Sublease Agreement and the obligation of Tenant to pay Additional Rent hereunder and to perform all of the other covenants and agreements hereunder on part of Tenant to be performed shall not be affected, impaired or excused because Landlord is unable to supply or is delayed in supplying any service expressly or impliedly to be supplied or is unable to make or is delayed in making any repairs, additions, alterations or decorations or is unable to supply, or is delayed in supplying any equipment or fixtures if Landlord is prevented or delayed from so doing by reason of a strike or labor trouble, or governmental preemption in connection with a National Emergency or in connection with any rule, order or regulation of any department or subdivision thereof or of any governmental agency, or by reason of the condition of supply and demand which have been or are affected by war or other emergency, or by weather conditions or by any other condition beyond the control of Landlord.

30. Memorandum of Lease. This Sublease Agreement shall not be recorded but at the request of either party, Landlord and Tenant shall execute a Memorandum of Lease which may be recorded in the Erie County Clerk’s Office.

31. Representation and Warranty of Authorization. Each party hereto represents and warrants to the other that the execution, delivery and performance of this Sublease Agreement

and the consummation of the transactions herein contemplated have been duly authorized by all requisite action on the part of the that party and will not violate any provision of Law applicable to that party or the certificate of incorporation, by-laws, partnership agreement or operating agreement of the that party (as applicable).

32. Intentionally Omitted.

33. Financial Statements. Upon request, Tenant agrees to furnish to Landlord, Prime Landlord and each Mortgagee, a copy of the annual financial statements of Tenant (including balance sheets as at the end of such year, and the related statements of income, earnings, retained earnings and changes in financial position) for its most recently completed fiscal year, prepared, on a reviewed basis, in accordance with generally accepted accounting principles and practices, and reviewed by independent certified public accountants reasonably acceptable to the Mortgagees.

34. No Recourse. This Sublease Agreement shall be non-recourse to Landlord, and Tenant shall look only to Landlord’s equity in the Property in the event of any damages or claims which Tenant may assert against Landlord arising out of or in connection with this Sublease Agreement except those for which Landlord is specifically required to maintain insurance as provided in this Sublease Agreement, in which event Tenant may also look to any insurance proceeds received in connection therewith or to other assets of Landlord in the event Landlord breaches its obligation to maintain insurance.

35. Execution and Delivery of Sublease Agreement. In order to avoid delay, this Sublease Agreement has been prepared and submitted to Tenant by Landlord with the understanding that it shall not bind Landlord unless and until it is signed by Landlord and thereafter delivered to Tenant.

36. Heavy Equipment. Tenant shall not move any safe, heavy machinery, heavy equipment, bulky matter or fixtures (“Heavy Equipment”) that exceeds the calculation in the following sentence into or out of the Building without Landlord’s prior written consent, which consent shall not be unreasonably withheld, conditioned or delayed. Floors 2 through 7 of the Building will be designed for a live load of 100 pounds per square foot, with live load reduction to accommodate flexibility in usage of the space. Live load reduction will not be permitted to exceed 35 pounds per square foot, for a minimum live load of 65 pounds per square foot. If such safe, machinery, equipment, bulky matter or fixtures requires special handling, all work in connection therewith shall comply with all applicable municipal rules and regulations applicable thereto, shall be subject to reasonable restrictions imposed by landlord and shall be done during such hours as Landlord may reasonably designate. Tenant shall deliver a set of plans and specifications, as required by Landlord, which must be approved by Landlord, prior to Landlord’s providing any consent to the movement of such Heavy Equipment into the Building.

37. Intentionally Omitted.

38. E-Mail Address. Tenant shall provide Landlord with the electronic mailing address of the person responsible for making Tenant’s payments of Additional Rent or other sums due under this Sublease Agreement and shall promptly notify Landlord of any changes thereto.

39. Obligations of Tenant. If Tenant fails to perform any of its obligations hereunder, Landlord may (but shall not be obligated to) perform same, and in such event, Tenant shall reimburse Landlord for the cost thereof, and said reimbursement shall be due and payable upon demand by Landlord and shall bear interest at the Interest Rate.

40. Signage. Tenant shall have the right to signage inside and outside the Building provided such signage is (i) consistent with Landlord’s overall sign plan and (ii) is approved by Landlord. Tenant shall be solely responsible for the cost of fabrication and installation of Tenant’s signage. If and for as long as Landlord maintains a Building directory, Landlord, at Tenant’s request, shall maintain listings on such directory of the name of Tenant.

41. Mutual Cooperation. It is the intention of Landlord and Tenant that Landlord shall consult with Tenant on a regular basis regarding the construction and occupancy of the Building by Tenant. Landlord shall provide regular updates to Tenant and shall consult with Tenant regarding the planning, design and construction of the Building, it being the intention of the parties hereto that Tenant’s input shall be obtained by Landlord in connection with the planning, design and construction of the Building. Notwithstanding the foregoing, nothing herein shall be deemed to require Tenant’s consent in connection with the planning, design and construction of the Building except for Tenant Improvements, to the extent required in this Sublease Agreement.

42. Special Provisions.

(a) Pursuant to the Ground Lease between Kaleida Properties, Inc., as landlord, and Prime Landlord’s predecessor in interest, as tenant, dated as of December 2, 2011 (the “Ground Lease”) pursuant to which Prime Landlord ground leases the Property, Landlord is obligated to include the following paragraph in all leases:

Tenant agrees that it will not engage in any uses of the Leased Premises except as expressly set forth herein, without the prior written consent of Prime Landlord and Kaleida Properties, Inc. (“Kaleida Prime Landlord”), Prime Landlord under that certain Ground Lease dated as of December 2, 2011 between Prime Landlord as tenant and Kaleida Properties, Inc. as landlord, which consent may be withheld or denied in accordance with the Terms of the Ground Lease. Tenant further agrees that Kaleida Prime Landlord is an intended third party beneficiary of the provisions of this Sublease Agreement defining and restricting the uses permitted hereunder. Accordingly, Kaleid Prime Landlord will have all rights and remedies available at law or in equity to enforce such provisions directly against Tenant or anyone claiming by or through Tenant. Furthermore, Tenant agrees that, notwithstanding anything set forth in this Lease, Tenant shall not violate any of the use restrictions set forth in Article IV of the Ground Lease, which use restrictions are also set forth in that certain Memorandum of Ground Lease recorded December 22, 2011 in the Erie County Clerk’s Office in Liber 11214 of deeds at page 4078, a copy of which is attached as Exhibit H.

(b) Notwithstanding anything in this Sublease Agreement to the contrary, Landlord shall not agree to any amendment, modification or supplement to the Ground Lease which reduces the existing term of the Ground Lease, increases rent payable thereunder, further restricts the permitted uses of the Building thereunder or otherwise materially decreases the rights or materially increases the responsibilities of the ground lessee thereunder, without the prior consent of Tenant during the term of this Sublease Agreement.

[Remainder of Page Intentionally Left Blank – Signature Page Follows]

IN WITNESS WHEREOF, the parties have executed this Sublease Agreement as of the date first written above.

Landlord:	Fort Schuyler Management Corporation
	By
		Name: Walter G. Barber
		Title: Chairman
Tenant:	Kinex Pharmaceuticals, Inc.
	By
		Name: Flint D. Besecker
		Title: COO & Director

Sublease Agreement

STATE OF NEW YORK	)
	SS:
COUNTY OF Erie    )

On the 21 day of July in the year 2015, before me, the undersigned, a notary public in and for said state, personally appeared Flint D. Besecker, personally known to me or proved to me on the basis of satisfactory evidence to be the individual(s) whose name(s) is (are) subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their capacity(ies), and that by his/her/their signature(s) on the instrument, the individual(s) or the person upon behalf of which the individual(s) acts, executed the instrument.

Notary Public

STATE OF NEW YORK	)
	SS:
COUNTY OF Albany	)

On the 6 day of August in the year 2015, before me, the undersigned, a notary public in and for said state, personally appeared Walter G. Barber personally known to me or proved to me on the basis of satisfactory evidence to be the individual whose name is subscribed to the within instrument and acknowledged to me that she executed the same in her capacity, and that by her signature on the instrument, the individual or the person upon behalf of which the individual acts, executed the instrument.

Notary Public

Sublease Agreement

EXHIBITS

Exhibit A	Site Plan
Exhibit B	Floor Plan Showing Leased Premises
Exhibit C	Base Building Specifications
Exhibit D	Prime Landlord’s Services
Exhibit E	Electricity Rider
Exhibit F	Non-Disturbance Agreement
Exhibit G	Rules and Regulations
Exhibit H	Memorandum of Ground Lease

Exhibit A

Site Plan

Exhibit B

Floor Plan Showing Leased Premises

Exhibit C

Base Building Specifications

1001 Main Street, Buffalo, NY

Shell & Core – Work Letter

CONTENTS
General Notes	Page 1
Site	Page 1
Parking	Page 1
Structure	Page 2
Exterior	Page 3
Interior	Pages 3 - 4
MEP&FP	Pages 5 - 7

General Notes

• All aspects of the scope of work addressed herein will be in compliance with all applicable codes and accessibility standards.

Site

• Storm Sewer

• Sanitary Sewer

• Potable Water

• Natural Gas

• Fire Line Water

• Electric Service

• Phone & Data

• Landscaping

• Site Lighting

Parking

• Building users and tenants will have controlled access to 2 levels of below grade parking immediately below the building at market rates.

• Direct access from parking to the 1^st Floor lobby via vertical cores.

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Structure

• Occupancy Category II; Seismic Design Category B.

• Resistance to lateral wind and seismic forces will be provided by rigid frame action of the structural steel columns and beams. The lateral load-resisting frames will not extend to the perimeter of the building, but will be limited to the typical 30-foot by 30-foot bays, resulting in a lateral load-resisting “core” measuring approximately 120-feet by 180-feet.

• Floor girders and beams located on the column centerlines will have moment connections to the columns. These connections are anticipated to have field-welded flange-to-column connections and field-bolted single-sided shear connections. To simplify steel fabrication, the building will be designed without special seismic steel detailing.

• Floors 2 through 7 will be designed for a live load of 100 pounds per square foot, with live load reduction to accommodate flexibility in usage of the space. Live load reduction will not be permitted to exceed 35 pounds per square foot, for a minimum live load of 65 pounds per square foot.

• The mechanical penthouse will be designed to safely support a live load of 150 pounds per square foot, or the actual mechanical unit weights, whichever is greater.

• Roofs will be designed for code-required snow loads, including drifted snow, as applicable.

• Additional loads for any green roof areas and roof mechanical units outside the penthouse will be added at the roof above the seventh floor and above the mechanical penthouse.

• Supported floor construction on levels 2 through 7 will consist of 3,5-inch thick lightweight concrete over 2- inch, 20-gauge galvanized composite steel deck.

• The concrete will be reinforced with 6x6 W2.1 x W2.1 welded wire fabric, or Novomesh 850 steel and polypropylene fiber reinforcing, as manufactured by Propex.

• Typically, the floor beams will be 18 to 21 inches deep and spaced at 10-feet on center.

• The girders will be approximately 24 to 27 Inches deep and will be located at the column centerlines.

• Estimated steel weight for the typical bay / typical floor construction is 12 pounds per square foot. Sizes and weights will increase somewhat at the mechanical room floor.

• Bar reinforcing will be Installed over the floor beams to resist cracking of the slab.

• Beams will require cementitious spray fireproofing to meet anticipated fire-resistance requirements.

• The deck construction will not require fireproofing.

• Column bays will vary within the footprint, with the typical bay measuring 30-feet by 30-feet.

• Columns will be nominally 14-inch deep. At the lower levels, the columns will likely measure approximately 16-inches square.

• Bases will be considered pinned – transferring only axial and shear forces – to simplify coordination with the reinforced concrete columns of the below-grade parking garage. Bases will be exposed above the first floor slab and will likely measure 2-feet square.

• Columns will require cementitious spray fireproofing.

• Column splices are anticipated above the second, fourth, and mechanical penthouse floors.

• Coatless connections (pedestrian bridges) to adjacent building are not in the scope of this building. Criteria for any future coatless connections will be established by the landlord. Loads from any future coatless connections to the north and to the south that comply with the aforementioned criteria will be accommodated by the superstructure of this building at specific designated locations at the 2^nd Floor. Any proposed future coatless connections to this building must be approved by the landlord.

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Exterior

Thermal & Moisture

• Exterior envelope which exceeds current NYS Energy Code requirements for thermal and moisture barriers.

• insulated fully adhered TPO membrane roof.

• Caulking of control and expansion joints, doors and windows.

Doors & Windows

• Aluminum storefront doors at exterior 1^st Floor entrances.

• Aluminum storefront windows.

• Exterior glazing will be low-E coated glass.

• Steel doors at emergency exits in hollow metal frames.

Walls

• Insulated composite metal panel.

Signage

• Exterior building signage will be universally and easily identifiable as determined by design.

Entry

• Entries at High Street and Main Street.

• Drop-off on High Street.

INTERIOR

Doors & Windows

• Tenant suite doors on the common corridor will be solid core wood with hollow metal frames; adjacent sidelights will be provided as determined by design.

• Egress stairs will have hollow metal doors with hollow metal frames.

• Public restrooms will have solid core wood doors with hollow metal frames.

• Hollow metal door frames provided will be painted.

• Door hardware will be of commercial quality and accessibility compliant.

• Tenant doors and door hardware will be the building standard.

• No windowsills are included; tenant windowsills will be the building standard.

Walls

• Vertical shafts, public restrooms and common corridor partitions will be constructed with metal studs and gypsum wallboard.

• Gypsum wallboard will be taped, sealed and painted only at public side of common corridors and at public restrooms.

• Paints will be low to no VOC content.

• Sound attenuation will be provided within the wall cavity of public restrooms only.

• The interior face of exterior walls in tenant spaces will only be framed with metal studs; sound attenuation and gypsum wallboard will not be provided.

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• The tenant side of common area partitions will only be framed with metal studs; sound attenuation and gypsum wallboard will not be provided.

• At multi-tenanted floors only, fire-rated corridor passage partitions will be provided as required by code.

Columns

• Columns in tenant spaces will be exposed and unfinished.

Cellings

• Acoustic celling panels will be typical throughout common corridors, common passages and public restrooms.

• Common nodes, such as elevator lobbies, will have finished ceilings.

• Ceilings in tenant spaces will be exposed to the underside of slab above and unfinished.

Flooring and Bases

• The 1^st floor lobby will have ceramic tile and base.

• Public restrooms will have ceramic tile and base.

• Floors in tenant spaces will be broom-cleaned, steel troweled, unfinished concrete slab with no finish flooring.

Window Treatments

• Tenant window treatments will be the building standard.

Signage

• Interior building signage will be universally and easily identifiable as determined by design.

• Tenant signage will be the building standard.

Vertical Cores

• Egress stairs and public elevators will be provided as required by code.

• Freight elevator adjacent to the Loading Dock area.

Public Restrooms

• Typically, each above grade floor will have one men’s public restroom and one women’s public restroom.

• No public restrooms are included on the 2^nd and 3^rd Floors, which are to be occupied by Kaleida, per Kalelda’s direction.

Janitors’ Closets

• Each floor above grade will have one (1) custodial closet with mop-sink.

Loading Dock

• There will be a loading dock off of Goodrich Street. The loading dock is provided with one 10’-0” wide by 14’-0’’ high overhead door and one 12’-0” wide by 14’-0” high overhead door. The loading dock bay provides space for a maximum 36’-0” long vehicle to be parked inside with the overhead door closed. A 2’-0” elevated dock is provided along with a delivery ramp. The space will be conditioned during the winter months with unit heaters.

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MEP&FP

HVAC

• Ceiling mounted high efficiency water-to-air heat-pumps will be provided for heating and air conditioning of all Common Area Spaces. Dedicated heat pumps will be provided to address heat gains from data and electrical equipment.

• Water-to-water heat pumps will be provided to supply warm glycol to under slab piping for snow melting of the parking garage entry ramp.

• High efficiency boilers and cooling towers, located on the roof, will add heat to and reject heat from the heat pump loop to maintain optimal loop temperature.

• Variable speed heat-pump loop pumps, located in the mechanical penthouse, will circulate water through piping risers that will have branches to serve tenant spaces valved and capped at each floor. Distribution piping at each floor will be provided under tenant fit-out.

• Ventilation air will be supplied and conditioned by two (2) roof mounted heat recovery air handling units with variable speed supply and exhaust fans. Supply and exhaust duct risers will be provided to feed each floor. Ventilation air will be ducted from the risers directly to each space under tenant fit-out.

• Variable speed supply and exhaust fans will provide ventilation for the Parking Garage. The fans will be controlled by carbon monoxide (CO) and nitrogen dioxide (NO₂) sensors.

• An Energy Management System (EMS) will be provided for automatic temperature control, energy management, lighting control and other mechanical and electrical system monitoring and alarms as well as recording and monitoring all building and tenant electric power and water.

• Stairwell pressurization fans and associated ductwork will be provided as necessary for a High Rise Building.

• A separate exhaust system may be provided for Copy and Fax Machine Rooms, Janitors Closets and other chemical storage spaces in order to meet LEED requirements.

Plumbing/Fire Protection

• A domestic cold water service will be provided from the City of Buffalo Municipal Main. Upon entering the building a main house meter and backflow preventers will be installed on the First Floor.

• A variable speed pressure booster system will be provided to supply cold water mains throughout.

• Stacked Public Toilet Rooms and common spaces will have cold water piping as required. Point of use instantaneous electric water heaters located on each floor will provide domestic hot water.

• Water will be provided as necessary for make-up water to central mechanical equipment such as cooling towers, etc.

• Domestic Hot Water will be provided by point of use electric water heaters for core and shell. Tenants will provide point of use electric water heaters of gas fired heaters from tenant supplied utility meters in location as established by the building owner.

• Cold water risers will be provided at each floor with valves and caps for future development of fit-outs (sub- metering for Tenant consumption will be provided by the tenant at the connection to each riser.)

• Soil, waste and vent piping from the facility will connect to the City of Buffalo Municipal sewers at High Street and connect to all Shell and Core plumbing fixtures and equipment in the common spaces.

• Multiple soil, waste and vent stacks will be provided to all floors for connection and development of tenant spaces.

• The Parking Floors will have drains to collect any water from outside sources and direct it to sump pits with pumping systems discharging the storm water to the municipal sewer system in Goodrich and High Streets.

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• The foundation drainage system will collect and direct water to sump pits located in each corner of the lowest parking level. Each sump pit will have sump pumps to discharge the water to the municipal sewer system in Goodrich and High Streets.

• Natural gas will be provided from a street main and connect to a meter setting located within a louvered meter alcove near the northeast corner of the facility on Goodrich Street, Gas piping will be connected to gas fired equipment used for the facility heating system and space will be provided within the meter alcove to accommodate the tenant’s natural gas utility meters.

• A fire water service will be provided to the facility from the City of Buffalo water main located in the street. A double detector check valve assembly will be installed just inside the building wall to provide backflow protection for the city water supply and will be located on the First Floor.

• An electric fire pump fed from the emergency generator will be provided to deliver water at the flow and pressure required.

• A wet standpipe system will be installed in the stair-halls and selected areas as required for proper hose coverage of all parts of the floors.

• An automatic wet type sprinkler system will be provided on all occupied floors with all valves and alarms In accordance with NFPA #13, The Parking Floors and all unheated spaces will be provided with dry type sprinkler systems Including air compressors, valves and alarms in accordance with NFPA #13.

• Medical gas systems are not provided as part of the Shell and Core.

Electrical

• A National Grid 23kV spot network service will be provided with three (3) 1500kVA Transformers for N + 1 operation in a below grade transformer vault on the northwest side of the building on Goodrich Street.

• A Collector Bus Room and Power Distribution Room will be located on Parking Level 1 directly in line with the transformer vaults.

• A nominal 4000 ampere secondary metered service at 480Y/277 volt, 3-phase, 4-wire will be provided.

• Two (2) 480Y/277 volt switchboards will provide normal power for Parking up to the Seventh Floor.

• Two (2) 750kVA 208Y/120 volt Unit Substations will provide power for the Parking up to the Seventh Floor and Penthouse.

• A 480Y/277 volt switchboard located in the Penthouse will provide power for Mechanical Penthouse.

• The fire pump service connection will be directly connected off a 480 Volt Collector Bus.

• Power will be provided for all Shell and Core common areas for lighting, receptacle loads, and mechanical equipment.

• Two (2) vertical 480Y/277 volt bus ducts and two (2) vertical 208Y/120 volt bus ducts located in Electrical Rooms at north and south stair locations will be provided on each floor for tenant use. Bus ducts will include provisions only for the tenants feeder circuit breakers to plug in. Each tenant feeder will be monitored and recorded utilizing current transformers for tenant usage of lighting, heat pumps, receptacles, miscellaneous equipment, power, etc.

• Three (3) indoor 500kW diesel standby generators located in the Penthouse will be supplied by a 2,000 gallon double walled fuel tank (8 hours run time) located below grade. The generator paralleling gear includes provisions for a fourth generator which will be provided for future tenant fit-out.

• Emergency power will be provided for: Egress lighting, fire alarm systems, access control/security/duress system, generator room lighting and accessories and fire pump, etc.

• Emergency 480Y/277 volt and 208Y/120 volt distribution panels in two (2) stair locations will be provided on each floor for Shell and Core use.

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• Legally required emergency branch 480Y/277 volt distribution will be provided for elevators, sewage ejector, sump pumps stairwell pressurization, water booster System, data processing and communications equipment, etc.

• Two (2) vertical 480Y/277 volt bus ducts located In the north and south Electrical Rooms will be provided on each floor for optional stand-by emergency power for tenant use.

• The interior Building Shell and Core lighting will consist of high efficiency and efficacy fluorescent and LED luminaires in the following common areas; Lobby, Stairwells, Corridors, Passages, Public Rest Rooms, Electrical/Mechanical Rooms, Loading Dock/Receiving, Parking Garage, Management Offices, Temporary Lighting in Fit-out Areas, site illumination and building facade illumination. Unless otherwise specifically requested by the Owner, it is planned to utilize light fixtures that qualify for NYSERDA incentives.

• Energy saving lighting control will consist of the following; tri-level or bi-level switching, occupancy sensor control, day-lighting controls and centrally time controlled from the Building Management System (BMS). Each tenant fit-out will be required to meet the Building Standards for Lighting Controls.

• All Interior and exterior illumination levels will meet the recommended illumination levels as published by the Illuminating Engineering Society (IES).

• The lighting power budget will be below that set by the Energy Conservation Construction Code of New York State and ASHRAE 90.1 to achieve LEED Credits.

• The interior tenant fit-out lighting will consist of building standard style luminaires in all tenant spaces with exterior windows. This will make the interior lighting appear uniform from the street.

• All other tenant fit-out lighting will be required to meet or exceed an established luminaire high efficiency and efficacy in order to meet the U.S. Green Building Council’s LEED Gold Program.

• All means of egress emergency lighting will be powered from the emergency source.

• Fire alarm system will be point addressable type and full smoke detection provided in the means of egress, storage areas, telephone equipment, Data Rooms, Mechanical Rooms, Electrical Rooms, Elevator Lobby shaft, etc. Audio speaker/visual and visual only devices will be provided in all public areas. Manual pullstations will be located at each exit stair on each floor.

• Air handling unit supply and return duct smoke sensors will be provided along with return duct smoke sensors at each floor. Each floor will have a centrally located terminal cabinet. Fire Alarm Control Panel (FACP) will be provided as required and will be connected in a loop with fiber optic cable.

• The main Fire Alarm Graphic Command Center will be located in the security area located in the Main Lobby. Due to the building being a High Rise classification the fire alarm system is required to also include for emergency voice evacuation, stairwell pressurization system, fire command center on First Floor, fire fighter’s two-way radio repeater, AHU controls, ATS annunciation, generator annunciation, etc.

• Close circuit television surveillance will be provided for exterior perimeter, parking level, main lobby, elevator lobby on each floor, main corridors on each floor, etc.

• The main Telecommunications Room will be located on Parking Level 1 on the west side of the Building. This will be the demark location for telephone service, internet service, television service, etc.

• Internet service pathways only will be provided to Tele/Data Rooms at two (2) locations on each floor.

• Cable television service pathways only will be provided to Tele/Data Rooms at two (2) locations on each floor.

• Telephone service (Verizon) pathways only will be provided to Tele/Data Rooms at two (2) locations on each floor.

• Lightning protection will be provided for the building including surge protection on the main distribution switchboards and Branch Distribution Panel boards.

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Exhibit D

Landlord’s Services

EXHIBIT D

Landlord’s Services

1. Repairs to, replacements of and maintenance for the roof and repairs to and maintenance of elevators (if applicable) of the Building, as needed in the reasonable judgment of Landlord unless caused by the misuse or negligence of Tenant, its employees or invitees.

2. Repairs to and replacements of those components of the HVAC, plumbing, water, electrical and sprinkler (if any) systems which extend beyond the Leased Premises or which serve both the Leased Premises and other portions of the Building, as needed in the reasonable judgment of Landlord unless caused by the misuse or negligence of Tenant, its employees or invitees, and maintenance contracts for the routine maintenance of the HVAC system.

3. Snow plowing; parking lot lighting, striping and maintenance; landscaping; garbage removal, maintenance of fences (if any); lawn and yard care; maintenance of Building exterior and Building sign (if any); exterior window cleaning; cleaning and maintenance of, repairs to, utilities for and cleaning and janitorial services for any common hallways, lobbies, elevators, entrances, walks and restrooms and other areas of facilities which service both the Leased Premises and other portions of the Building.

4. Any security guard or the installation and maintenance of any security system which Landlord may, at its option, elect to provide (it being understood that Landlord shall not be required to provide either a security guard or security system).

5. Insurance policies providing coverage for (a) fire, casualty and extended risk for the Building for the full replacement value thereof or such lesser amount as Landlord may elect and is acceptable to the Mortgagees, (b) liability of Landlord for personal injury and property damage caused by occurrences on or connected with the Property, (c) loss of rent by Landlord for twelve (12) months following fire or casualty damage and (d) such other insurance or coverage as may be required by any Mortgagee or is desired by Landlord and is in Landlord’s opinion, prudent for the Property.

Exhibit E

ELECTRICITY RIDER

(a) Landlord and Tenant acknowledge and agree that there is one existing electrical “check” or “sub” meter serving the Leased Premises. Tenant shall, at its sole cost and expense, maintain, repair and replace such electrical meter during the term of the Lease. Tenant shall pay for its own utilities, including electricity, as shown on such meter(s) as and when bills are rendered.

(b) Tenant shall furnish and install all lighting tubes, lamps, bulbs and ballasts required in the Leased Premises, at Tenant’s expense. Tenant shall also pay for the cost of electricity consumed by any air conditioning equipment located in or servicing the Leased Premises, irrespective of whether any such equipment is located in the Leased Premises or in any other portion of the Building, The term “air conditioning equipment” as used herein shall be deemed to include, without limitation, all components and auxiliary equipment used in connection with the Supplemental A/C System, and the A/C System including Tenant’s pro rata share of the cost of the electricity (or other utility) for the operation of the cooling tower(s) used in connection therewith.

(c) Tenant’s use of electric energy in the Leased Premises shall not at any time exceed the capacity of any of the electrical conductors, machinery and equipment in or otherwise serving the Leased Premises. In order to ensure that such capacity is not exceeded and to avert possible adverse effects upon the Building’s electric service, Tenant shall not, without Landlord’s prior written consent in each instance, connect any additional fixtures, machinery, appliances or equipment to the Building electric distribution system or make any alteration or addition to Tenant’s machinery, appliances or equipment, or the electric system of the Leased Premises existing on the Commencement Date hereof. Should Landlord grant such consent, all additional risers and/or other equipment required therefor shall be provided by Landlord and the cost thereof shall be paid by Tenant upon Landlord’s demand.

(d) Landlord shall not be liable for any loss, damage or expense or in any other way to Tenant for any failure, interruption or defect of any kind in the supply or character of electric service furnished to the Leased Premises by reason of any requirements of law, act or omission of the utility serving the Building (including without limitation the Current Service Provider and any Alternate Service Provider (as each such term is hereinafter defined)) or for any other reason, nor shall there be any allowance to Tenant for a diminution of rental value, nor shall the same constitute an actual or constructive eviction of Tenant, in whole or in part, or relieve Tenant from any of its Lease obligations, and no liability shall arise on the part of Landlord by reason of inconvenience, annoyance or injury to business.

(e) Landlord shall have the right at any time and from time to time during the term, to the extent permitted by law, to either contract for electricity service with the current utility company providing electricity service to the Building (the “Current Service Provider”) or to contract for service from an alternate company or companies providing comparable electricity service (each an “Alternate Service Provider”). Tenant shall cooperate with Landlord, the Current Service Provider and any Alternate Service Provider at all times, and as reasonably necessary, to

allow Landlord, Current Service Provider and any Alternate Service Provider reasonable access to any and all electric lines, feeders, wiring and other machinery within the Leased Premises, subject to the restriction and limitations on Landlord’s access to the Leased Premises expressly set forth in this Lease. Tenant may not utilize the services of any Alternate Service Provider, and no such Alternate Service Provider shall be permitted to provide service to Tenant or to install its lines or other equipment within the Building, without the prior written consent of Landlord, which may be given or withheld in Landlord’s sole discretion. Tenant shall pay Landlord its pro-rata share of electricity usage based on usage evidenced by the “sub” or “check” meter serving the Leased Premises. Tenant shall pay Landlord within ten (10) days after receipt of a bill from Landlord for Tenant’s electricity usage

(f) If any tax is imposed upon Landlord with respect to electrical energy furnished as a service to Tenant by any federal, state, municipal or other authority, Tenant covenants and agrees that unless prohibited by law or applicable regulations, Tenant’s pro rata share of such taxes, shall be reimbursed by Tenant to Landlord within ten (10) days after being billed therefor.

Exhibit F

Non-Disturbance Agreement

SUBORDINATION, NONDISTURBANCE AND ATTORNMENT AGREEMENT

New York

AGREEMENT dated as of the      day of             , 20        , between                     , a                      whose address is                      (“Tenant”), and M&T BANK, a New York banking corporation with its principal banking office at One M&T Plaza, Buffalo, NY 14203. Attention: Office of General Counsel (the “Mortgagee”).

WHEREAS,                    , a                      whose address is                      (“Landlord”), owns the real property located at                      (such real property, including all buildings, improvements, structures and fixtures located thereon, “Landlord’s Premises”), as more particularly described in Schedule A;

WHEREAS, Mortgagee has made or will be making a loan to Landlord in the original principal amount of$          as the loan may be modified or amended from time to time (the “Loan”);

WHEREAS, to secure the Loan, Landlord has encumbered Landlord’s premises by entering into a mortgage dated on or about                     , 19        / 20         in favor of Mortgagee (as amended, increased, renewed, extended, spread, consolidated, severed, restated, or otherwise changed from time to time the “Mortgage”) recorded on                     , 19         /20        , at Book         , Page         , in the Official Records of the County of                     , State of New York or to be recorded in such Land Records (the “Land Records”);

WHEREAS, pursuant to a Lease dated as of                     , 19         / 20        , as such lease may have been, or may be amended from time to time (the “Lease’), Landlord demised to Tenant all or a portion of Landlord’s Premises (“Tenant’s Premises”) effective as of                     , 19        /20        . Tenant’s Premises are commonly known as                     ;

WHEREAS, ☐ (check and complete if appropriate) a memorandum of the Lease is to be recorded in the Land Records prior to the

recording of this Agreement or was recorded in the Land Records on                     , 19        /20        , at Book         , Page        ; and

WHEREAS, Tenant and Mortgagee desire to agree upon the relative priorities of their interests in Landlord’s Premises and their rights and obligations if certain events occur.

NOW, THEREFORE, for good and sufficient consideration, the receipt and sufficiency of which is hereby acknowledged, Tenant and Mortgagee agree as follows:

1. DEFINITIONS.

The following terms shall have the following meanings for purposes of this Agreement:

1.1 “Construction-Related Obligation” means any obligation of Landlord under the Lease to make, pay for, or reimburse Tenant for any alterations, demolition or other improvements or work at Landlord’s Premises, including Tenant’s Premises. Construction-Related Obligations shall not include: (a) reconstruction or repair following fire, casualty or condemnation; or (b) day-to-day maintenance and repairs.

1.2 “ Foreclosure Event” means (a) foreclosure under the Mortgage; (b) any other exercise by Mortgagee of rights and remedies (whether under the Mortgage or under applicable law, including bankruptcy law) as holder of the Loan and/or the Mortgage, as a result of which Successor Landlord becomes owner of Landlord’s Premises; or (c) delivery by Landlord to Mortgagee (or its designee or nominee) of a deed or other conveyance of Landlord’s interest in Landlord’s Premises in lieu of any of the foregoing.

1.3 “ Former Landlord” means Landlord and any other party that was landlord under the Lease at any time before the occurrence of any attornment under this Agreement.

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1.4 “Offset Right” means any right or alleged right of Tenant to any offset, defense (other than one arising from actual payment and performance, which payment and performance would bind a Successor Landlord pursuant to this Agreement), claim, counterclaim, reduction, deduction, or abatement against Tenant’s payment of Rent or performance of Tenants other obligations under the Lease, arising (whether under the Lease or other applicable law) from Landlord’s breach or default under the Lease.

1.5 “Rent” means any fixed rent, base rent or additional rent under the Lease.

1.6 “Successor Landlord” means any party that becomes owner of Landlord’s Premises as the result of a Foreclosure Event.

1.7 “Termination Right” means any right of Tenant to cancel or terminate the Lease or to claim a partial or total eviction arising (whether under the Lease or under applicable law) from Landlord’s breach or default under the Lease.

2. SUBORDINATION. The Lease and all of Tenant’s rights thereunder shall be, and shall at all times remain, subject and subordinate to the Mortgage, the lien imposed by the Mortgage, and all indebtedness secured by the Mortgage.

3. NONDISTURBANCE, RECOGNITION AND ATTORNMENT.

3.1 No Exercise of Mortgage Remedies Against Tenant. So long as the Lease has not been terminated on account of Tenant’s default that has continued beyond applicable cure periods (an “Event of Default”), Mortgagee shall not name or join Tenant as a defendant in any exercise of Mortgagee’s rights and remedies arising upon a default under the Mortgage unless applicable law requires Tenant to be made a party thereto as a condition to proceeding against Landlord or prosecuting such rights and remedies. In the latter case, Mortgagee may join Tenant as a defendant in such action only for such purpose and not to terminate the Lease or otherwise adversely affect Tenant’s rights under the Lease or this Agreement in such action.

3.2 Nondisturbance and Attornment. If the Lease has not been terminated on account of an Event of Default by Tenant, then, when Successor Landlord takes title to Landlord’s Premises (“Attornment Date”): (a) Successor Landlord shall not terminate or disturb Tenant’s possession of Tenant’s Premises under the Lease, except in accordance with the terms of the Lease and this Agreement; (b) Successor Landlord shall be bound to Tenant under all the terms and conditions of the Lease (except as provided in this Agreement); (c) Tenant shall recognize and attorn to Successor Landlord as Tenant’s direct landlord under the Lease as affected by this Agreement; and (d) the Lease shall continue in full force and effect as a direct lease, in accordance with its terms (except as provided in this Agreement), between Successor Landlord and Tenant

3.3 Further Documentation. The provisions of this Article shall be effective and self-operative without any need for Successor Landlord or Tenant to execute any further documents. Tenant and Successor Landlord shall, however, confirm the provisions of this Article in writing upon request by either of them.

4. PROTECTION OF SUCCESSOR LANDLORD. Notwithstanding anything to the contrary in the Lease or the Mortgage, neither Mortgagee nor the Successor Landlord shall be liable for or bound by any of the following matters:

4.1 Claims Against Former Landlord. Any Offset Right that Tenant may have against any Former Landlord relating to any event or occurrence before the Attornment Date, including any claim for damages of any kind whatsoever as the result of any breach by Former Landlord that occurred before the Attornment Date. The foregoing shall not limit either (a) Tenant’s right to exercise against Successor Landlord any Offset Right otherwise available to Tenant because of events occurring after the Attornment Date; or (b) Successor Landlord’s obligation to correct any conditions that existed as of the Attornment Date and violate Successor Landlord’s obligations as Landlord under the Lease.

4.2 Prepayments. Any payment of Rent that Tenant may have made to Former Landlord more than thirty days before the date such Rent was first due and payable under the Lease with respect to any period after the Attornment Date other than, and only to the extent that, the Lease expressly required such a prepayment.

4.3 Payment; Security Deposit. Any obligation: (a) to pay Tenant any sum(s) that any Former Landlord owed to Tenant; or (b) with respect to any security deposited with Former Landlord. This paragraph is not intended to apply to Landlord’s obligation to make any payment that constitutes a “Construction-Related Obligation”.

4.4 A Modification, Amendment, or Waiver. Any modification or amendment of the Lease, or any waiver of any terms of the Lease, made without Mortgagee’s written consent.

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4.5 Surrender, Etc. Any consensual or negotiated surrender, cancellation, or termination of the Lease, in whole or in part, agreed upon between Landlord and Tenant, unless effected unilaterally by Tenant pursuant to the express terms of the Lease.

4.6 Construction-Related Obligations. Any Construction-Related Obligation of Former Landlord, except as expressly provided for in Schedule B (if any) attached to this Agreement.

5. EXCULPATION OF SUCCESSOR LANDLORD. Notwithstanding anything to the contrary in this Agreement or the Lease, upon any attornment pursuant to this Agreement, the Lease shall be deemed to have been automatically amended to provide that Successor Landlord’s obligations and liability under the Lease shall never extend beyond Successor Landlord’s (or is successors’ or assigns’) interest, if any, in Landlord’s Premises from time to time, including insurance and condemnation proceeds, Successor Landlord’s interest in the Lease, and the proceeds from any sale or other disposition of Landlord’s Premises by Successor Landlord (collectively, “Successor Landlord’s Interest”). Tenant shall look exclusively to Successor Landlord’s Interest (or that of its successors and assigns) for payment or discharge of any obligations of Successor Landlord under the Lease as affected by this Agreement. If Tenant obtains any money judgment against Successor Landlord with respect to the Lease or the relationship between Successor Landlord and Tenant, then Tenant shall look solely to Successor Landlord’s Interest (or that of its successors and assigns) to collect such judgment Tenant shall not collect or attempt to collect any such judgment out of any other assets of Successor Landlord.

6. MORTGAGEE’S RIGHT TO CURE.

6.1 Notice to Mortgagee. Notwithstanding anything to the contrary in the Lease or this Agreement, before exercising any Termination Right or Offset Right, Tenant shall provide Mortgagee with notice of the breach or default by Landlord giving rise to same (the “Default Notice”) and, thereafter, the opportunity to cure such breach or default as provided for below.

6.2 Mortgagee’s Cure Period. After Mortgagee receives a Default Notice, Mortgagee shall have a period of thirty (30) days beyond the time available to Landlord under the Lease in which to cure the breach or default by Landlord, Mortgagee shall have no obligation to cure (and shall have no liability or obligation for not curing) any breach or default by Landlord, except to the extent that Mortgagee agrees or undertakes otherwise in writing.

6.3 Extended Cure Period. In addition, as to any breach or default by Landlord the cure of which requires possession and control of Landlord’s Premises, provided only that Mortgagee undertakes to Tenant by written notice to Tenant within thirty (30) days after receipt of the Default Notice to exercise reasonable efforts to cure or cause to be cured by a receiver such breach or default within the period permitted by this paragraph, Mortgagee’s cure period shall continue for such additional time (the “Extended Cure Period”) as Mortgagee may reasonably require to either (a) obtain possessions and control of Landlord’s Premises and thereafter cure the breach or default with reasonable diligence and continuity; or (b) obtain the appointment of a receiver and give such receiver a reasonable period of time in which to cure the default.

7. CONFIRMATION OF FACTS. Tenant represents to Mortgagee and to any Successor Landlord, in each case as of the date of this Agreement (“Effective Date”):

7.1 Effectiveness of Lease. The Lease is in full force and effect, has not been modified, and constitutes the entire agreement between Landlord and Tenant relating to Tenant’s Premises. Tenant has no interest in Landlord’s Premises except pursuant to the Lease. No unfulfilled conditions exist to Tenant’s obligations under the Lease.

7.2 Rent. Tenant has not paid any Rent that is first due and payable under the Lease after the Effective Date.

7.3 No Landlord Default. To the best of Tenant’s knowledge, no breach or default by Landlord exists and no event has occurred that, with the giving of notice, the passage of time, or both, would constitute such a breach or default.

7.4 No Tenant Default. Tenant is not in default under the Lease and has not received any uncured notice of any default by Tenant under the Lease.

7.5 No Termination. Tenant has not commenced any action nor sent or received any notice to terminate the Lease. Tenant has no presently exercisable Termination Right(s) or Offset Right(s).

7.6 Commencement Date. The “Commencement Date” of the Lease was     , 19    /20    .

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7.7 Acceptance. Except as set forth in Schedule B (if any) attached to this Agreement: (a) Tenant has accepted possession of Tenant’s Premises; and (b) Landlord has performed all Construction-Related Obligations related to Tenant’s initial occupancy of Tenant’s Premises and Tenant has accepted such performance by Landlord.

7.8 No Transfer. Tenant has not transferred, encumbered, mortgaged, assigned, conveyed or otherwise disposed of the Lease or any interest therein, other than sublease(s) made in compliance with the Lease.

7.9 Due Authorization. Tenant has full authority to enter into this Agreement, which has been duly authorized by all necessary actions.

8. TENANT COVENANTS. Tenant covenants with the Mortgagee that now and continuing as long as the Mortgage shall remain unsatisfied of record as follows:

8.1 Rent Payment Notices. From and after Tenant’s receipt of written notice from Mortgagee (a “Rent Payment Notice”), Tenant shall pay all Rent to Mortgagee or as Mortgagee shall direct in writing, until such time as Mortgagee directs otherwise in writing. Tenant shall comply with any Rent Payment Notice notwithstanding any contrary instruction, direction or assertion from Landlord. Mortgagee’s delivery to Tenant of a Rent Payment Notice, or Tenant’s compliance therewith, shall not be deemed to: (a) cause Mortgagee to succeed to or to assume any obligations or responsibilities as Landlord under the Lease, all of which shall continue to be performed and discharged solely by Landlord unless and until any attornment as occurred pursuant to this Agreement; or (b) relieve Landlord of any obligations under the Lease.

8.2 Tenant shall not subordinate the Lease to the lien of any other mortgage other than the Mortgage in favor of the Mortgagee.

8.3 If requested by the Mortgagee or the Successor Landlord, Tenant shall deliver to Mortgagee or the Successor Landlord (as the case may be) the same periodic deliveries (e.g., updated financial reports, updated estoppel certificates) it delivers to Landlord pursuant to the Lease.

9. MISCELLANEOUS.

9.1 Notices. Any demand or notice hereunder or under any applicable law pertaining hereto shall be in writing and duly given if delivered to any party (at the address on page one). Such notice or demand shall be deemed sufficiently given for all purposes when delivered (i) by personal delivery and shall be deemed effective when delivered, or (ii) by mail or courier and shall be deemed effective three (3) business days after deposit in an official depository maintained by the United States Post Office for the collection of mail or one (1) business day after delivery to a nationally recognized overnight courier service (e.g., Federal Express). Notice by e-mail is not valid notice under this agreement.

9.2 Successors and Assigns. This Agreement shall bind and benefit the parties, their successors and assigns, any Successor Landlord, and its successors and assigns, if Mortgagee assigns the Mortgage, then upon delivery to Tenant of written notice thereof accompanied by the assignee’s written assumption of all obligations under this Agreement, all liability of the assignor shall terminate.

9.3 Interaction with Lease and with Mortgage. If this Agreement conflicts with the Lease, then this Agreement shall govern as between the parties and any Successor Landlord, including upon any attornment pursuant to this Agreement. This Agreement supersedes, and constitutes full compliance with, any provisions in the Lease that provide for subordination of the Lease to, or for delivery of nondisturbance agreements by the holder of, the Mortgage. Mortgagee confirms that Mortgagee has consented to Landlord’s entering into the Lease.

9.4 Mortgagee’s Rights and Obligations. Except as expressly provided for in this Agreement, Mortgagee shall have no obligations to Tenant with respect to the Lease. If an attornment occurs pursuant to this Agreement, then all rights and obligations of Mortgagee under this Agreement shall terminate, without thereby affecting in any way the rights and obligations of Successor Landlord provided for in this Agreement.

9.5 Interpretation; Governing Law. The interpretation, validity and enforcement of this Agreement shall be governed by and construed under the internal laws of the State of New York, excluding its principles of conflicts of laws. TENANT HEREBY IRREVOCABLY CONSENTS TO THE EXCLUSIVE JURISDICTION OF ANY STATE OR FEDERAL COURT IN THE STATE OF NEW YORK IN A COUNTY OR JUDICIAL DISTRICT WHERE THE MORTGAGEE MAINTAINS A BRANCH, AND CONSENTS THAT THE MORTGAGEE MAY EFFECT ANY SERVICE OF PROCESS IN THE MANNER AND AT TENANT’S ADDRESS SET FORTH ABOVE. Tenant acknowledges and agrees that the venue provided above is the most convenient forum for both the Mortgagee and Tenant. Tenant waives any objection to venue and any objection based on a more convenient forum in any action instituted under this Agreement.

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9.6 Miscellaneous. This Agreement constitutes the entire agreement between Mortgagee and Tenant regarding the subordination of the Lease to the Mortgage and the rights and obligations of Tenant and Mortgagee as to the subject matter of this Agreement. This Agreement may be amended, discharged or terminated, or any of its provisions waived, only by a written instrument executed by the party to be charged. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original and all of which together shall constitute one and the same instrument. Mortgagee represents that Mortgagee has full authority to enter into this Agreement, and Mortgagee’s entry into this Agreement has been duly authorized by all necessary actions. No provisions of this Agreement may be amended, waived or modified except by an instrument in writing signed by the party to be bound. The headings and captions in this Agreement are for convenience of reference only and in no way define, limit or describe the scope or the intent of any provision or section of this Agreement and shall not be deemed to have any substantive effect. Inapplicability or unenforceability of any provisions of this Agreement shall not limit or impair the operation or validity of any other provision of this Agreement.

9.7 Counterparts. This Agreement may be executed in any number of counterparts, each of which, when executed and delivered, shall be an original, but such counterparts shall together constitute one and the same instrument.

9.8 No Agency Relationship. The Mortgagee is not the agent or representative of Landlord and this Agreement shall not make the Mortgagee liable to materialmen, contractors, craftsmen, laborers or others for goods delivered to or services performed by them upon the Landlord=s Premises, or for debts or claims accruing to such parties against Landlord and there is no contractual relationship, either expressed or implied, between the Mortgagee and any materialmen, subcontractors, craftsmen, laborers, or any other person supplying any work, labor or materials for the Improvements.

9.9 WAIVER OF JURY TRIAL. TENANT AND THE MORTGAGEE HEREBY KNOWINGLY, VOLUNTARILY, AND INTENTIONALLY EACH WAIVE ANY RIGHT TO TRIAL BY JURY THEY MAY HAVE IN ANY ACTION OR PROCEEDING, IN LAW OR IN EQUITY, IN CONNECTION WITH THIS AGREEMENT OR THE TRANSACTIONS RELATED THERETO. TENANT REPRESENTS AND WARRANTS THAT NO REPRESENTATIVE OR AGENT OF THE MORTGAGEE HAS REPRESENTED, EXPRESSLY OR OTHERWISE THAT THE MORTGAGEE WILL NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THIS RIGHT TO JURY TRIAL WAIVER. THE TENANT ACKNOWLEDGES THAT THE MORTGAGEE HAS BEEN INDUCED TO ACCEPT THIS AGREEMENT BY, AMONG OTHER THINGS, THE PROVISIONS OF THIS SECTION.

IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the first date set forth above.

	By:
Signature of Witness	Name:
	Title:
Typed Name of Witness
	M&T BANK
	By:
Signature of Witness	Name:
	Title:
Typed Name of Witness

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Landlord Consent

Landlord consents and agrees to the foregoing Agreement, which was entered into at Landlord’s request. The foregoing Agreement shall not alter, waive or diminish any of Landlord’s obligations under the Mortgage or the Lease. The above Agreement discharges any obligations of Mortgagee under the Mortgage and related loan documents to enter into a nondisturbance agreement with Tenant. Landlord is not a party to the above Agreement.

Landlord irrevocably directs Tenant to comply with any Rent Payment Notice, notwithstanding any contrary direction, instruction or assertion by Landlord. Tenant shall be entitled to rely on any Rent Payment Notice, Tenant shall be under no duty to controvert or challenge any Rent Payment Notice. Tenant’s compliance with a Rent Payment Notice shall not be deemed to violate the Lease. Landlord hereby releases Tenant from, and shall indemnify and hold Tenant harmless from and against, any and all loss, claim, damage, liability, cost or expense (including payment of reasonable attorneys’ fees and disbursements) arising from any claim based upon Tenant’s compliance with any Rent Payment Notice. Landlord shall look solely to Mortgagee with respect to any claims Landlord may have on account of an incorrect or wrongful Rent Payment Notice.

	LANDLORD
	By:
Signature of Witness	Name:
	Title:
Typed Name of Witness
Dated:             , 20

Guarantor Consent

Each of the undersigned, a guarantor of Tenant’s obligations under the Lease (a “Guarantor”), consents to Tenant’s execution, delivery and performance of the foregoing Agreement. From and after any attornment pursuant to the foregoing Agreement, that certain Guaranty dated              , 19     /20     (the “Guaranty”) executed by Guarantor in favor of                      shall automatically benefit and be enforceable by Successor Landlord with respect to Tenant’s obligations under the Lease as affected by the foregoing Agreement. Successor Landlord’s rights under the Guaranty shall not be subject to any defense, offset, claim, counterclaim, reduction or abatement of any kind resulting from any act, omission or waiver by any Former Landlord for which Successor Landlord would, pursuant to the foregoing Agreement, not be liable or answerable after an attornment. The foregoing does not limit any waivers or other provisions contained in the Guaranty. Guarantor confirms that the Guaranty is in full force and effect and Guarantor presently has no offset, defense (other than any arising from actual payment or performance by Tenant, which payment or performance would bind a Successor Landlord under the foregoing Agreement), claim, counterclaim, reduction, deduction or abatement against Guarantor’s obligations under the Guaranty.

	GUARANTOR
	By:
Signature of Witness	Name:
	Title:
Typed Name of Witness
Dated:             , 20

CM-025 NY (11/06)		© M&T Bank, 2006
	6

ACKNOWLEDGMENT

(Tenant)

STATE OF NEW YORK	)
	: SS.
COUNTY OF	)

On the      day of             , in the year 20    , before me, the undersigned, a Notary Public in and for said State, personally appeared                     , personally known to me or proved to me on the basis of satisfactory evidence to be the individual(s) whose name(s) is (are) subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their capacity(ies), and that by his/her/their signature(s) on the instrument, (the individuals), or the person upon behalf of which the individual(s) acted, executed the instrument.

Notary Public

ACKNOWLEDGMENT

(Mortgagee)

STATE OF NEW YORK	)
	: SS.
COUNTY OF	)

On the      day of             , in the year 20    , before me, the undersigned, a Notary Public in and for said State, personally appeared                     , personally known to me or proved to me on the basis of satisfactory evidence to be the individual(s) whose name(s) is (are) subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their capacity(ies), and that by his/her/their signature(s) on the instrument, the individual(s), or the person upon behalf of which the individual(s) acted, executed the instrument.

Notary Public

ACKNOWLEDGMENT

(Guarantor)

STATE OF NEW YORK	)
	: SS.
COUNTY OF	)

On the      day of             , in the year 20    , before me, the undersigned, a Notary Public in and for said State, personally appeared                     , personally known to me or proved to me on the basis of satisfactory evidence to be the individual(s) whose name(s) is (are) subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their capacity(ies), and that by his/her/their signature(s) on the instrument, the individual(s), or the person upon behalf of which the individual(s) acted, executed the instrument.

Notary Public

ACKNOWLEDGMENT

(Landlord)

STATE OF NEW YORK	)
	: SS.
COUNTY OF	)

On the      day of             , in the year 20    , before me, the undersigned, a Notary Public in and for said State, personally appeared                     , personally known to me or proved to me on the basis of satisfactory evidence to be the individual(s) whose name(s) is (are) subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their capacity(its), and that by his/her/their signatures) on the instrument, the individual(s), or the person upon behalf of which the individual(s) acted, executed the instrument.

Notary Public

CM-025 NY (11/06)		© M&T Bank, 2006
	7

SCHEDULE A

DESCRIPTION OF LANDLORD’S PREMISES

ALL THAT CERTAIN REAL PROPERTY lying, being and situated in the City of                     , County of                     , and State of New York, more particularly described as follows.

CM-025 NY (11/06)		© M&T Bank, 2006
	8

SCHEDULE B

CONSTRUCTION-RELATED OBLIGATIONS

Construction-Related Obligations remaining to be performed as of             , 19    /20    , if any

[Summarize and Describe]

Successor Landlord’s Construction-Related Obligations after attornment, if any:

[Negotiate and Describe]

CM-025 NY (11/06)		© M&T Bank, 2006
	9

Exhibit G

Rules and Regulations

Exhibit G

RULES AND REGULATIONS

1. The rights of tenants in the entrances, corridors, elevators and escalators of the Building are limited to ingress and egress for the tenants and their employees, licensees and invitees, and no tenant shall use the entrances, corridors, escalators or elevators for any other purpose, Fire exits and stairways are for emergency use only, and they shall not be used for any other purpose by the tenants, their employees, licensees or invitees. No tenant shall encumber or obstruct, or permit the encumbrance or obstruction of, any of the sidewalks, plazas, entrances, corridors, escalators (if any), elevators, fire exits or stairways of the Building. The Landlord reserves the right to control and operate the public portions of the Building and the public facilities, as well as facilities furnished for the common use of the tenants, in such manner as it deems best for the benefit of the tenants generally.

2. Landlord may refuse admission to the Building outside of Normal Business Hours to any person not known to the watchman, in charge or not having a pass issued by the Landlord or the tenant whose premises are to be entered or not otherwise properly identified, and may require all persons admitted to or leaving the Building outside of ordinary business hours to register. Any person whose presence in the Building at any time shall, in the judgment of Landlord, be prejudicial to the safety, character, reputation and interests of the Building or of its tenants may be denied access to the Building or may be ejected therefrom. In case of invasion, riot, public excitement or other commotion, Landlord may prevent all access to the Building during the continuance of the same, by closing the doors or otherwise, for the safety of the tenants and protection of property in the Building. Landlord may require any person leaving the Building with any package or other object to exhibit a pass from the tenant from whose premises the package or object is being removed, but the establishment and enforcement of such requirement shall not impose any responsibility on Landlord for the protection of any tenant against the removal of property from the premises of the tenant Landlord shall, in no way, be liable to any tenant for damages or loss arising from the admission, exclusion or ejection of any person to or from the tenant’s premises or the Building under the provisions of this rule. Canvassing, soliciting or peddling in the Building Is prohibited, and every tenant shall cooperate to prevent the same.

3. No tenant shall obtain or accept for use in its premises towel, barbering, boot blacking, floor polishing, lighting maintenance or other similar services from any persons not authorized by Landlord in writing to furnish such services, provided that the charges for such services by persons authorized by Landlord are not excessive and, where appropriate and consonant with the security and proper operation of the Building, sufficient persons are so authorized for the same service to provide tenants with a reasonable competitive selection. Such services shall be furnished only at such hours, in such places within the tenant’s premises and under such reasonable regulations as may be fixed by Landlord.

4. The cost of repairing any damage to the public portions of the Building or the public facilities or to any facilities used in common with other tenants, caused by a tenant or the employees, licensees or invitees of the tenant, shall be paid by such tenant as additional rent.

5. No lettering, sign, advertisement, notice or object shall be displayed in or on, the exterior windows or doors, or on the outside of any tenant’s premises without the prior written consent of Landlord. The inscription of the name of the tenant on the door of the tenant’s premises shall be done by Landlord at the Tenant’s expense; any other listings shall be at the discretion of Landlord.

6. No awnings or other projections over or around the outside of any windows shall be installed by any tenant, Linoleum, tile or other floor covering shall be laid in a tenant’s premises only in a manner approved by Landlord.

7. Landlord shall have the right to prescribe the weight and position of safes and other objects of excessive weight, and no safe or other object whose weight exceeds the lawful load for the area upon which it would stand shall be brought into or kept upon a tenant’s premises. If, in the judgment of Landlord, it is necessary to distribute the concentrated weight of any heavy object, the work involved in such distribution shall be done at the expense of the tenant and in such manner as Landlord shall determine. The moving of safes and other heavy objects shall take place only outside of ordinary business hours upon previous notice to Landlord, and the persons employed to move the same in and out of the Building shall be reasonably acceptable to Landlord and, if so required by law, shall hold a Master Rigger’s license, Freight, furniture, business equipment, merchandise and bulky matter of any description shall be delivered to and removed from the premises only in the freight elevators and through the service entrances and corridors, and only during hours and in a manner approved by Landlord. Arrangements will be made by Landlord with any tenant for moving large quantities of furniture and equipment into or out of the Building.

8. No machines or mechanical equipment of any kind, other than ordinary business machines or equipment related to tenants’ medical practice, if applicable, may be installed or operated in any tenant’s premises without Landlord’s prior written consent, and in no case (even where the same are of a type so excepted or as so consented to by Landlord) shall any machines or mechanical equipment be so placed or operated as to disturb other tenants, Machines and mechanical equipment which may be permitted to be installed and maintained by such tenant shall be installed and maintained so as to prevent any disturbing noise, vibration or electrical or other interference from being transmitted from such premises to any other area of the Building.

9. No noise, including the playing of any musical instruments, radio or television, which, in the judgment of the Landlord, might disturb other tenants in the Building, shall be made or permitted by any tenant, and no cooking (exclusive of microwave ovens) shall be done in any tenant’s premises, except as expressly approved by Landlord. Nothing shall be done or permitted in any tenant’s premises, and nothing shall be brought into or kept in any tenant’s premises, which would impair or interfere

with any of the Building services or the proper and economic heating, cleaning or other servicing of the Building or the premises, or the use or enjoyment by any other tenant of any other premises, nor shall there be installed by any tenant any ventilating, air-conditioning, electrical or other equipment of any kind which, in the judgment of Landlord, might cause any such impairment or interference. No dangerous, flammable, combustible or explosive object or material shall be brought into the Building by any tenant or with the permission of any tenant.

10. No acids, vapors or other materials shall be discharged or permitted to be discharged into the waste lines, vents or flues of the Building which may damage them. The water and wash closets and other plumbing fixtures in or serving any tenant’s premises shall not be used for any purpose other than the purpose for which they were designed or constructed, and no sweepings, rubbish, rags, acids or other foreign substances shall be deposited therein.

11. No additional locks or bolts of any kind shall be placed upon any of the doors or windows in any tenant’s premises and no lock on any door therein shall be changed or altered in any respect, unless such addition, change or alteration is made at tenant’s expense and, upon making same, a key or keys to the additional, changed or altered lock or bolt is delivered to Landlord. Upon the termination of a tenant’s lease, all keys of the tenant’s premises and toilet rooms shall he delivered to Landlord.

12. All entrance doors in each tenant’s premises shall be left locked and all windows shall be left closed by the tenant when the tenant’s premises are not in use.

13. Hand trucks not equipped with rubber tires and side guards or other means of protecting against damage to the Building shall not be used within the Building.

14. All windows in each tenant’s premises shall be kept closed and all blinds therein above the ground floor shall be closed when and as reasonably required because of the position of the sun, during the operation of the Building air-conditioning system to cool or ventilate the tenant’s premises.

15. A directory in a conspicuous place, and containing the names of the tenants in the Building will be provided by Landlord. Changes, alterations or additions in lettering upon the directory, and upon doors within the tenants’ respective premises, when required, will be made for the tenants by Landlord at the respective tenant’s expense.

16. The Landlord reserves the right to make such other and further reasonable rules and regulations, or make changes in the same, as in its judgment may from time to time be needed for the safety, care and cleanliness of the Building, and for the preservation of good order therein, provided that such additional rules and regulations (a) shall not unreasonably restrict Tenant’s use of the Leased Premises or the nature of Tenant’s business, (b) shall not limit any of the services already provided by the Landlord and (c) shall be provided to Tenant in writing prior to being implemented or enforced.

17. Except as an aid to the handicapped, no dogs or other animals, reptiles or birds will be allowed in the Building.

18. Landlord shall have the light to designate one or more areas on the Property for smoking. Tenant shall restrict its employees and visitors from smoking in any areas other than those designated by Landlord for such purpose. Landlord may, from time to tune, change the designated smoking area(s).

19. Except in the ordinary course of its business and in strict compliance with all applicable Laws, Tenant shall not bring or permit to be brought or kept in or on the Leased Premises, Building, or surrounding yards, areas, or parking lots any inflammable, combustible, or explosive or otherwise hazardous fluid, material, chemical or substance or cause or permit any odors to permeate in or emanate therefrom.

20. Tenants may accept deliveries via the building loading dock. Delivery and the transport of received items to the tenant space must be scheduled to occur either before 8:00 a.m. or after 6:00 p.m. on weekdays or before or after established business hours on weekends. All deliveries must be scheduled and coordinated by the tenant with the Landlord’s designated Property Management Representative. The tenant must contact the Landlord’s designated property management representative regarding the scheduling of any deliveries between 8:00 a.m. and 6:00 p.m. on weekdays or during established business hours on weekends. Deliveries must be broken down at the loading dock into a size that can be easily transported to the tenant space on a dolly cart approved by the Landlord’s designated Property Management Representative. The use of pallet jacks is prohibited. The tenant shall be responsible to provide all necessary protection of finishes for the transport of the delivery from the loading dock to the tenant space. The tenant will be responsible to pay for the repair of any damages caused by the transport of the delivery from the loading dock to the tenant space. The Landlord’s designated property management representative will assess any damages and will coordinate any needed repair work.

21. All capitalized terms set forth in this Exhibit E shall be as defined in the Lease.

Exhibit H

Memorandum of Ground Lease

076494.00000 Business 12305717v13

ERIE COUNTY CLERK’S OFFICE
County Clerk’s Recording Page
Return to:	Book Type:	D Book: 11214 Page: 4078
BOX 139	Page Count:	7
	Doc Type:	LEASE/MEMO
	Rec Date:	12/22/2011
	Rec Tim:	12:45:21 PM
Party 1:	Control #:	2011258809
KALEIDA PROPERTIES INC	UserlD:	Danielle
	Receipt#:	11182404
Party 2:	Document Sequence Number
FLC 50 HIGH STREET CORPORATION	TT2011008173

Recording Fees:		Consideration Amount: 1.00
Fee 1	$55.00	BASIC	0
Fee 2	$1.00	SONYMA	0
COE STATE $14.25 GEN	$14.25	ADDL	0
COE STATE $4.75 RM	$4.75	NFTA MT	$0.00
TP584	$10.00	TRANSFER	$0.00
		NFTA TT	$0.00

Total: $85.00

STATE OF NEW YORK

ERIE COUNTY CLERK’S OFFICE

WARNING – THIS SHEET CONSTITUTES THE CLERK’S ENDORSEMENT REQUIRED BY SECTION 319&316-a (5) OF THE REAL PROPERTY LAW OF THE STATE OF NEW YORK. DO NOT DETACH. THIS IS NOT A BILL.

Christopher L. Jacobs

COUNTY CLERK

Book11214/Page4078 Page 1 of 7

MEMORANDUM OF GROUND LEASE

NAME AND ADDRESS OF LANDLORD:

Kaleida Properties Inc.

726 Exchange Street, Suite 200

Buffalo, New York 14210

NAME AND ADDRESS OF TENANT:

F.L.C. 50 High Street Corporation

350 Essjay Road

Williamsville, New York 14221

DATE OF EXECUTION OF LEASE:

December 2, 2011

DESCRIPTION OF DEMISED PREMISES IN THE FORM CONTAINED IN THE LEASE:

Approximately 61,226 square feet of land more particularly described on Exhibit A attached hereto.

DATE OF COMMENCEMENT OF LEASE TERM:

The original term of the Lease commenced on December 2, 2011.

DATE OF TERMINATION OF LEASE TERM:

The original term of the Lease shall terminate on the last day of the forty ninth lease year after the rent commencement date as set forth the lease.

RENEWAL TERMS: None

USE RESTRICTIONS: The lease contains the following provisions as to uses of the premises:

Tenant may use the Premises for medical office, related services and other ancillary uses, subject to the terms set forth below. Ancillary uses shall include general office use, retail shops, parking facilities, hotel, residential, recreational, child care and restaurants servicing patients, tenants, guests, invitees and the general public.

Notwithstanding the foregoing, Tenant shall not lease retail space to a Subtenant for use as a pharmacy for the retail sale to the public of prescription and non-prescription medications (a “Retail Pharmacy”) only for so long as Landlord or a wholly owned subsidiary of Landlord solely owns and operates such Retail Pharmacy and such Retail Pharmacy is open for

Book11214/Page4079 Page 2 of 7

business to the general public within the Premises. Landlord must notify Tenant in writing prior to the commencement of construction of the Tenant’s Improvements whether or not it intends to operate a Retail Pharmacy within the Premises. In the event the Retail Pharmacy is not owned and operated solely by Landlord or a wholly owned affiliate of Landlord, Landlord’s right to operate a Retail Pharmacy within the Premises shall immediately terminate and the Retail Pharmacy operated by Landlord shall immediately close. In the event the Retail Pharmacy otherwise ceases operations for any reason (except to the extent resulting damage or destruction pursuant to Article XXIV below) Landlord’s right to operate a Retail Pharmacy within the Premises shall immediately terminate.

Tenant shall not lease space within the Premises: (i) to physicians, physician practice groups or other medical providers (“Competing Medical Providers”) employed by, or involved in any contractual relationship with, a hospital corporation directly competing for patients with Landlord or with Kaleida Health, a New York State not for profit corporation (“Kaleida”) (“Competing Hospital Provider”) unless such Competing Physician Providers are also employed by Kaleida Health, Great Lakes Health, General Physicians, P. C., or any subsidiary professional corporation of General Physicians, P. C. or an affiliate of any of the foregoing, (ii) to a Competing Hospital Provider, (iii) to others providing outpatient medical services (“Outpatient Medical Services”) offered by Kaleida within the Medical Campus (“Competing Outpatient Services”, as defined below). A prospective Subtenant shall be considered to be providing Competing Outpatient Services to the extent the primary use or any significant ancillary use proposed by such prospective Subtenant is being provided by Kaleida within the Medical Campus at the time a Proposed Use Summary (defined below) is submitted to Landlord for its approval and such primary or ancillary use would be competing directly with the service then being provided by Kaleida. By way of example only, it shall not be considered a significant ancillary use if a physician or medical provider is drawing blood from his/her patients incidental to his/her practice or, if, in the regular course of practice, a physician or medical provider provides limited diagnostic testing through the use of such portable diagnostic tools as a portable sonogram.

The prohibition against Tenant subleasing space within the Premises to Competing Medical Providers, to Competing Hospital Providers, or to others providing Competing Outpatient Services, as set forth in (i) through (iii) above shall terminate if Kaleida does not own or operate a major hospital facility within the Medical Campus, as shall the restrictions set forth below.

Notwithstanding the foregoing, Tenant may sublease space within the Premises to (A) medical providers offering medical services at the Medical Campus as of the Effective Date or, (B) if Landlord or Kaleida (or an affiliate thereof) ceases to sublease at least 85,000 square feet of rentable square feet at the Premises, to any medical provider other than a Competing Medial Provider or a Competing Hospital Provider, but in such case, only for uses other than the following: (i) a diagnostic therapeutic imaging center, (ii) surgery, other than “Outpatient Surgery”, as defined below, (iii) urgent care, (iv) emergency services, (v) birthing of babies, (vi) pediatric in-patient invasive services, (vii) dedicated center for performance of gastrointestinal procedures, or (viii) ambulatory surgical centers, being defined as a service organized to provide those surgical procedures which need to be performed for safety reasons in an operating room on anesthetized patients requiring a stay of less than 24 hours. “Outpatient Surgery” is defined as a

Book11214/Page4080 Page 3 of 7

procedure which may be performed on an outpatient basis, is a diagnostic test or treatment, including certain surgical procedures, that carries a low patient risk, requires minimal pre- and post-procedure observation and treatment, is not likely to be time consuming or followed by complications, and is not associated with a condition which would require hospitalization.

Provided Kaleida owns, controls or operates a full service hospital facility at the Medical Campus, Tenant shall not sell the Tenant’s Improvements or assign its rights pursuant to this Lease to a Competing Medical Provider, a Competing Hospital Provider, or to a party providing Competing Outpatient Services.

Each of the Subleases into which Tenant enters at the Premises will contain the following language: “Tenant agrees that it will not engage in any uses of the premises except as expressly set forth herein, without the prior written consent of Landlord and Prime Landlord, which consent may be withheld or denied in accordance with the Terms of the Prime Lease. Tenant further agrees that Prime Landlord is an intended third party beneficiary of the provisions of this Lease defining and restricting the uses permitted hereunder. Accordingly, Prime Landlord will have all rights and remedies available at law or in equity to enforce such provisions directly against Tenant or anyone claiming by or through Tenant”.

Book11214/Page4081 Page 4 of 7

IN WITNESS WHEREOF, the parties hereto have respectively executed this Memorandum of Lease as of this 2^nd day of December, 2011.

LANDLORD:
KALEIDA PROPERTIES INC.
By:
Name:	Joseph M. Kessler
Title:	EVP and CFO
TENANT:
F.L.C. 50 HIGH STREET CORPORATION
By:
Name:	Frank L. Ciminelli
Title:	President

Book11214/Page4082 Page 5 of 7

ACKNOWLEDGMENT

STATE OF New York	)
	:ss. Amherst
COUNTY OF Erie	)

On the 2^nd day of December, in the year 2011, before me, the undersigned, a notary public in and for said state, personally appeared Joseph Kessler, personally known to me or proved to me on the basis of satisfactory evidence to be the individual(s) whose name(s) is (are) subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their capacity(ies), and that by his/her/their signature(s) on the instrument, the individual(s), or the person upon behalf of which the individual(s) acted, executed the instrument.

Notary Public

STATE OF New York	)
	:ss.Amherst
COUNTY OF Erie	)

On the 2^nd day of December, in the year 2011, before me, the undersigned, a notary public in and for said state, personally appeared Frank Ciminelli, personally known to me or proved to me on the basis of satisfactory evidence to be the individual(s) whose name(s) is (are) subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their capacity(ies), and that by his/her/their signature(s) on the instrument, the individual(s), or the person upon behalf of which the individual(s) acted, executed the instrument.

Notary Public

026342/00009 Business 8794288v1
Book11214/Page4083	Page 6 of 7

Exhibit A

(Suggested Description)	1.402±Acres
Job No. 7669-C

ALL THAT TRACT OR PARCEL OF LAND situate in the City of Buffalo, County of Erie, State of New York, and Being part of Lot 29, Township 11, Range 6 of the Holland Land Company survey (so-called), bounded and described as follows:

BEGINNING AT the intersection of the east line of Main Street and the south line of Goodrich Street;

RUNNING THENCE: Easterly, along the south line of Goodrich Street, a distance of 191.58 feet to a point:

RUNNING THENCE: Southerly, at an interior angle of 89°-46° with the last described line, a distance of 274, 85 foot to a point on the north line of High street;

RUNNING THENCE: Westerly, along the north lice of High Street and at an interior angle of 90°-16°-10” with the last described line, a distance of 281.96 feet to the POINT OR PLACE OF BEGINNING containing 1,402 Acres, be the same , more or less.

SUBJECT to assessment, rights of way and restrictions of record.

026342/00009 Business 8716276v7   - 44 -

Book11214/Page4084 Page 7 of 7

EX-10

Exhibit 10.20

The Athenex Pharmaceutical Base Project

Located in the Chongqing Maliu Riverside Development Zone

Agreement

Chongqing Maliu Riverside Development and Investment Co., Ltd.

October 16, 2015

1

Investment Agreement

Party A: Chongqing Maliu Riverside Development and Investment Co., Ltd. (referred to below as Party A)

Party B: Athenex, Inc. (referred to below as Party B)

Article I — After carefully inspecting and investigating the investment environment associated with the Chongqing Maliu Riverside Development Zone (referred to below as the Zone), Party B has determined to invest capital in the Zone for the construction of an Athenex Pharmaceutical Base (referred to below as the Project). Party A welcomes investment from Party B. Pursuant to relevant State laws, regulations, and policies, and after thorough consultation, this Agreement is executed by and between the two parties in accord with the principles of equality, voluntariness, mutual benefit, and the pursuit of common development.

Article II — The Project complies with State industrial policies, State environmental protection requirements, and the overall planning and industrial planning of the Zone. The Project will feature the world’s most advanced innovative technologies with respect to new pharmaceutical R&D in the construction of a pharmaceutical manufacturing plant and active pharmaceutical ingredient (API) plant, wherein:

The pharmaceutical manufacturing plant will be furnished with three oral preparation technology platforms, i.e. Orascovery, Mimetica, and OPAL. The manufacturing plant will feature world-class pharmaceutical innovation platforms and 8 production lines for the formulation of high potency pharmaceuticals, and will manufacture drugs in the form of high-level sterile injectables, oral dosages, and other formulations.

The API plant will be involved in the research, development, and production of high value-added active pharmaceutical ingredients, including high potency oncology active pharmaceutical ingredients, which require low energy consumption and low emissions. From the day on which the plant construction is completed, a “Pharmaceutical Production License” shall be obtained within 2 years, and domestic and international registration applications shall be completed for at least 10 products, including existing products Paclitaxel and Docetaxel, within 5 years. In addition, provided that certification is obtained for compliance with the updated GMP

2

regulations of the People’s Republic of China (“China”), the U.S. Food and Drug Administration (FDA), the European Directorate for the Quality Control of Medicines (EDQM), and the Japanese Pharmaceuticals and Medical Devices Agency (PMDA), and the requirements for all the active pharmaceutical ingredients and intermediates required for the drugs in connection with Party B’s pharmaceutical manufacturing platform are met, the construction of an internationally renowned base for the research, development, production, and export of high potency oncology and other active pharmaceutical ingredients shall be completed within 10 years.

Article III — The plot for the pharmaceutical manufacturing plant associated with the Project is located in the Mudong section of the Zone and covers approximately 500 mu of land. The plot for the API production plant associated with the Project is located in the Maliu section of the Zone and covers approximately 45 mu of land. The final measurements shall be based on the limits as demarcated by the red lines in the [land allocation] plan, and the land is intended for industrial use. Refer to the figure(s) attached for details.

Article IV — The pharmaceutical manufacturing plant associated with the Project will cover a building area of 40,000 square meters, and the API production plant will cover a building area of 20,800 square meters. The two will allow a differential increase of no more than 20%. For the construction plans (which include public facilities and decorations), upon approval from Party B and relevant competent authorities in the industry, Party A will invest in the plant construction and will be responsible, with the assistance of Party B, for completing the decorations in accordance with U.S. CGMP standards. The work will conclude on December 31, 2016.

Party A will exercise ownership rights over the land and buildings. Party A will not be required to pay rent for the first 10 years. Once the term is up, Party B may continue renting for an additional 10 years. During the renewal period, if Party B achieves profitability, it shall pay rent once each year equivalent to RMB 5 per square meter of building area per month; or it may purchase the property based on the cost of the land and plant construction, plus the appraised value of the decorations, plus annual interest based on the current benchmark interest rate for bank lending. If, after 20 years, Party B has still not purchased the property for the cost of the land and plant construction (including decoration expenses) as set forth above, the property will be leased for the current market rate based on the building area.

3

Article V — Party B is responsible for the equipment, technology, and other investments. Party B shall complete the equipment commissioning and launch production within 6 months of the day on which Party A delivers the plant to Party B, and production will officially launch within 12 months thereafter.

Article VI — Party B shall achieve sales revenue of RMB 915 million in the second year after the Project is up and running. Within 10 years after the Project is up and running, sales revenue shall reach a cumulative total of RMB 52 billion, and value-added taxes (VAT), surtaxes, and income taxes shall reach a cumulative total of more than RMB 10 billion. See the tables below for the specific sales revenues and tax amounts for each year (these figures allow a differential decrease of 20%):

Table 1:

Estimated Sales Revenue (in RMB 10,000s)

Year	1st year		2nd year		3rd year		4th year		5th year		6th year		7th year		8th year		9th year		10th year
Manufacturing		46500		156000		320000		432050		495872		543758		570670		587550		604937		622845
API		45000		63000		81000		91000		93000		93000		93000		93000		93000		93000
Total		91500		219000		401000		523050		588872		636758		663670		690550		697937		715845

Table 2:

Estimated Taxes (in RMB 1,000,000s)

Year	1st year		2nd year		3rd year		4th year		5th year		6th year		7th year		8th year		9th year		10th year
Total VAT and surtax		56		187		384		518		595		653		685		705		726		747
Income tax		9		50		114		157		183		200		210		217		223		230
Total		65		237		498		675		778		853		895		922		949		977

Article VII — Party A shall ensure that water supply, water discharge, natural gas (for clients requiring the construction of a dedicated pipeline for high gas usage, Party A shall lend assistance to Party B in filing an application, and Party B shall assume the costs for the design and construction), communications, cable television, and broadband network facilities are set up 1 meter outside the limits of Party B’s land allotment as demarcated by red lines, and the power lines shall be connected to a designated 10 kV switching station; further discussion will be required for power levels exceeding 10 kV. Party B shall be solely responsible for fees associated with the water, electricity, natural gas, and other utility accounts as well as the construction and use thereof, and it shall pay the fees in a timely manner. In addition to ensuring the water, power, and gas supply as set forth above, Party A undertakes to provide water, power, and gas at the best discounted rates.

4

Article VIII — Within 3 months of the signing of this Agreement, Party B will register a new independent corporation in the Banan District, and it shall be responsible for the operation of the Project. The registered capital for the Project shall be no less than US $30 million (in cash contributions), and Party A shall assist with the registration. The Project owner shall be responsible for performing all the obligations associated with the production and operation of the Project. If the Project owner fails to perform all obligations in accordance with this Agreement, Party B shall be held jointly and severally liable for the legal consequences arising therefrom. The Project owner is required to declare taxes to the grassroots taxation authority and truthfully report statistical information to the service center with jurisdiction over the area in which the Chongqing Maliu Riverside Development Zone is located.

Article IX — Within 30 business days following the signing of this Agreement, Party B shall pay to Party A a performance bond in the amount of US $1 million. The performance bond shall be returned to Party B the day on which the Project is up and running, and no interest shall accrue during the interim period.

Article X — Party B is required to obtain the written consent of Party A to transfer the Project, unless said transfer is made to an affiliated Group Company under Athenex (i.e. a subsidiary of which Party B directly and/or indirectly owns no less than 50% of the equity or management rights, and/or a direct and/or indirect holding company of Party B, and/or a subsidiary of which said direct and/or indirect holding company directly and/or indirectly owns no less than 50% of the equity or management rights; collectively referred to as “Group Company”).

Article XI — Party B shall be entitled to preferential policies for the Project as follows:

1. After [the Project] is confirmed by relevant departments to be included in the industries encouraged by the State, [Party B] shall be entitled to the preferential policies for western Chinese development in accordance with applicable provisions, i.e. income taxes are reduced by 15% for enterprises engaged in western Chinese development.

2. After Party B is confirmed to be a hi-tech enterprise, it shall be entitled to the relevant preferential policies available for hi-tech enterprises in urban areas.

5

3. Party A shall lend assistance to Party B in applying for preferential policies from the Chongqing municipality in various areas of the pharmaceutical industry including R&D, marketing, product import & export, and talent acquisition (including but not limited to making tax incentives or exemptions for a certain proportion of income (including benefits) available to senior management of Party B which are located in Chongqing and/or assigned to Chongqing from another province and/or country).

Article XII — Party B undertakes that, before the Project is up and running, it shall not construct or use any product production lines which are of the same type as or related to the three oral preparation technology platforms of Orascovery, Mimetica, and OPAL in China. Party B shall be given priority negotiation rights for a maximum of 6 months for any other projects associated with Party B’s products.

Article XIII — Default liability and withdrawal mechanism:

1. Party A shall be considered in breach of contract if it fails to perform all the stipulations contained in this Agreement, in which case Party B shall have the right to terminate this Agreement; Party A shall return to Party B the performance bond and pay to Party B the equivalent amount in liquidated damages.

2. Party B shall be considered in breach of contract if it fails to perform all the stipulations contained in this Agreement, in which case Party A shall have the right to terminate this Agreement, and Party A shall not return the performance bond.

3. If Party B fails to achieve the sales revenue or annual tax amount as stipulated in Article 6 hereunder, Party A shall have the right to notify Party B in writing and require Party B to achieve the sales revenue or annual tax amount as stipulated in Article 6 within 2 years of the day on which such notice is provided. If Party B is still unable to achieve the sales revenue or annual tax amount as stipulated in Article 6 by the expiration of the term, Party A shall have the right to dispose of the plants at its own discretion.

Article XIV — Party A shall actively assist in enrolling the Project as a municipal-level key projects, and shall actively coordinate with relevant municipal bodies to provide applicable industry support policies.

Article XV — Miscellaneous:

1. The two parties shall engage in separate discussion for laboratories and office spaces required during the early stages of the construction for the Project.

6

2. If Party B intends to convert the Chinese construction into a medical center project, it should give priority consideration to working with Party A and allow Party A to have priority negotiation rights for a period of 6 weeks.

3. This Agreement shall be made in sextuplicate, with Party A, Party B, and the witnessing party each holding three copies carrying equal legal effect.

4. For any matters not covered hereunder, Party A and Party B may enter into a supplemental agreement, which shall carry the same legal effect as this Agreement.

5. Party A and Party B hereby irrevocably promise to the other party that they will do everything within their power to keep as confidential the existence of this Agreement and/or any terms contained herein, and they further promise to the other party that, without the prior written approval of the other party, they shall not disclose to any third party the existence of this Agreement and/or any terms contained herein, unless said disclosure is:

(i). Provided to their employees, directors, advisors, bankers, and/or agents, and said person(s) and/or organization(s) have a corresponding confidentiality liability thereto;

(ii). Related to any market launch of Party B and/or its affiliated Group Company;

(iii). Provided for the purpose of complying with any applicable regulations and/or guidelines in China locally and/or in other provinces and/or countries (including but not limited to rules for securities listings);

(iv). Already public information due to (ii) or (iii) as shown above.

Party A and Party B agree and undertake that they shall not unreasonably and intentionally delay and/or refuse the submission of said prior written consent. Party A and Party B agree and undertake that the confidentiality liabilities described above shall continue to be executed and remain in effect upon the termination of this Agreement.

6. This Agreement shall be governed by relevant Chinese legislation and shall be construed accordingly.

7. Any disputes arising in connection with this Agreement during the execution hereof should be resolved through consultation. Should such consultation fail, the two parties may initiate and carry out arbitration proceedings remotely (in Shenzhen) pursuant to the rules of arbitration of the China International Economic and Trade Arbitration Commission (CIETAC) in place and in force at the time the application for arbitration is filed. The arbitral award shall be final and binding on the two parties.

7

8. Party A

    Address: Technology Incubation Building, Mudong Town, Banan District, Chongqing

    Fax no.: +86-23-86953595

    Recipient: Peng Yong

    Party B

    Address: 701 Ellicott Street Buffalo New York

                14203 USA;

                    or beginning October 26, 2015

                    Conventus Building 1001 Main Street Sixth

                Floor Buffalo, New York 14203 USA

    Fax no.: +716-898-8588

    Recipient: Flint D. Besecker

    Copies to be delivered to: Comprehensive Drug Enterprises Limited

                                           Units 608-613, No. 6 Science Park West Avenue,

                                           Hong Kong Science Park, Sha Tin, Hong Kong

    Fax no.: +852 3996 7454

    Recipient: Yang Yikuang

Unless otherwise stipulated, Party A and Party B agree to make contact using the addresses and fax numbers provided above.

9. This Agreement shall take effect once it is signed and sealed by Party A, signed by Party B, and Party B reaches US $4 million in registered capital and pays the performance bond in full.

(There is no main text below)

8

Party A: Chongqing Maliu Riverside		Party B: ATHENEX, INC.
Development and Investment Co., Ltd.
(signature and seal)	[Seal: Chongqing Maliu Riverside Development and Investment Co., Ltd. [illegible]]
Representative: [Signature: [illegible]]		Representative: Flint D. Besecker

                         Place signed: Chongqing

                    Date signed: October 16, 2015

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EX-10

Exhibit 10.21

FOIA CONFIDENTIAL TREATMENT REQUESTED

Confidential Materials omitted and filed separate with the Securities and Exchange Commission

Triple asterisks denote omissions

NANG KUANG PHARMACEUTICAL CO., LTD

December 29, 2016

VIA E-MAIL

Athenex API limited

Hong Kong

Re: Binding Term Sheet — Pemetrexed License and Distribution

To whom it may concern,

This binding term sheet (this “Term Sheet”) contains the basic terms that the Parties hereto may incorporate into a definitive License, Supply and Distribution Agreement (the “Definitive Agreement”) to be negotiated by and between Athenex API Limited (“Athenex”) organized under the law of Hong Kong on the one hand and Nang-Kuang, Pharmaceutical Co., LTD (“NK”) organized under the law of Taiwan and CANDA NK-2, LLC (“CANDA”) organized under the law of Texas on the other hand (Athenex, NK and CANDA are each sometimes individually referred to herein as a “Party” and collectively the “Parties”) for the Product (as defined below). The proposed transaction is subject to due diligence by Athenex and the negotiation, execution, signature and delivery of the Definitive Agreement and any other agreements related thereto. With this understanding, please either respond with any objections, corrections, and suggested revisions to the proposed terms, or acknowledge your desire to move forward in the negotiations generally as set forth herein by signing and returning a copy of this letter.

GENERAL TERMS:

Product: Pemetrexed Disodium Injection, the generic equivalent of Alimta^®, in 100mg and 500mg presentations as described in ANDA No. 207352 (the “Regulatory Submission”).

Territory: The United States of America, including all of its possessions, territories and dependencies.

Term/Termination: The term of the Definitive Agreement shall commence on the date of complete execution of the Definitive Agreement and continue for a period of ten (10) years from the date of the first commercial sale of the Product in the Territory by Athenex (the “Initial Term”), which shall automatically renew for successive two (2) year periods (each a “Renewal Term” and

*** = Portions of this exhibit have been omitted pursuant to a request for confidential treatment. An unredacted version of this exhibit has been filed separately with the Commission.

  NANG KUANG PHARMACEUTICAL CO., LTD

together with the Initial Term, the “Term”), unless either Party delivers written notice to the other Party, at least six (6) months prior to the expiration of the Initial Term or any Renewal Term, of its election not to renew the Definitive Agreement.

The Definitive Agreement may be terminated prior to the expiration of the Term for reasons including, but not limited to, the following:

(a) Athenex may terminate, immediately upon written notice to NK, if NK materially breaches any of the terms of the Quality Agreement to be executed by the Parties.

(b) Either Party may terminate upon sixty (60) days prior written notice if the other Party materially breaches any of its covenants, representations or warranties contained or incorporated by reference in the Definitive Agreement and such breach is not cured within such 60-day period after receiving written notice of the breach from the other Party.

(c) Either Party may terminate immediately upon written notice to the other Party in the event that the other Party: (i) is or becomes insolvent; (ii) files, or has filed against it, a petition in bankruptcy, insolvency, liquidation or dissolution of assets, which, in the case of a petition filed against it, has not been dismissed within ninety (90) days; (iii) fails generally to pay its debts as they become due or admits in writing its inability to pay its debts; (iv) makes any assignment for the benefit of creditors; (v) has appointed a receiver of its property or a substantial portion thereof; or (vi) voluntarily takes advantage of any other law or procedure for the protection of debtors.

(d) Athenex may terminate upon thirty (30) days prior written notice to NK in the event the Transfer Price Formula B calculation (described below) results in an amount equal to or less than zero, and the Parties are unable to reach agreement on reductions to the actual cost of the Products to Athenex’s satisfaction.

Development: NK has completed the development of the Product according to current Good Manufacturing Practices (“cGMPs”) and filed the Regulatory Submission with the FDA for the commercialization of the Product in the Territory, which Regulatory Submission is pending approval from the FDA.

Supply: NK shall be responsible, at its expense, for the following: (i) ensuring that the Product is manufactured according to cGMPs and (ii) ensuring that any facility or facilities used in the manufacture of the Product (each a “Facility”) is prepared for and ready to pass FDA inspections, and are, at all times designed, maintained, operated and updated as necessary to ensure compliance with cGMPs and in fact remain so compliant.

*** = Portions of this exhibit have been omitted pursuant to a request for confidential treatment. An unredacted version of this exhibit has been filed separately with the Commission.

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  NANG KUANG PHARMACEUTICAL CO., LTD

Ownership;

License;

Regulatory Fees: All right, title and interest in the Regulatory Submission is currently owned by NK. Notwithstanding the foregoing, NK/CANDA will grant to Athenex an exclusive, royalty-free, non-cancellable, sub-licensable license in and to all intellectual property, know-how and any other proprietary rights associated with the Product and the Regulatory Submission for the Product to promote, use, sell, have sold, offer for sale, market, distribute, import and otherwise commercialize the Product in the Territory (the “License”). Subject to the terms of the License, Athenex shall have the sole and absolute discretion as to all matters pertaining to the promotion, marketing, sale and commercialization of the Product in the Territory. Athenex would be responsible for determining the price to advertise and charge its customers for the Product in its sole discretion. Each Party shall cooperate with the other Party and shall provide each other with all support reasonably requested by the other Party in connection with the maintenance of such Regulatory Submission. NK/CANDA shall be responsible for maintaining the Regulatory Submission associated with the Product, and shall pay all GDUFA or other fees, costs and expenses associated with the Regulatory Submission.

Exclusive Supply: NK/CANDA would appoint Athenex as its sole and exclusive distributor for marketing and selling or otherwise commercializing the Product in the Territory. During the Term, NK/CANDA shall not market, distribute, sell or supply the Product in the Territory, nor shall NK/CANDA appoint, license, authorize, or permit any party other than Athenex or Athenex’s designee, as the case may be, to market, distribute, sell, or supply the Product in the Territory. In addition, NK/CANDA would not sell or supply Product to any person or entity that NK/CANDA knows or reasonably should know intends to resell the Product in the Territory. Athenex shall purchase all of its requirements for the Product from NK based upon Transfer Price Formula A (defined below), subject to NK’s ability to meet Athenex’s forecasted requirements, and Athenex shall be entitled to maintain a qualified back up source for the Product in the event of a failure of NK to supply the Product without prejudice to any other rights available to NK under this term sheet and applicable law including the rights provided in the Financial Terms section of this term sheet. For the avoidance of doubt, in the event that Athenex obtains Product from such back up supplier, Athenex would not be required to make any Second Payments (as defined below) to NK in connection with such Product.

Labeling, Marketing: The Product would be marketed on a private label basis under the “Athenex” brand. Athenex would design the label for the Product and

*** = Portions of this exhibit have been omitted pursuant to a request for confidential treatment. An unredacted version of this exhibit has been filed separately with the Commission.

3

  NANG KUANG PHARMACEUTICAL CO., LTD

market the Product in its sole discretion, subject to applicable law, and would be responsible for all regulatory submissions required in connection with such labeling and marketing. NK would label the Product in accordance with Athenex’s instructions, and Athenex would provide to NK all materials necessary for such labeling, including designs and artwork. All intellectual property created, generated, developed, or derived by or on behalf of Athenex in connection with the labeling and marketing of the Product would be the exclusive property of Athenex.

Third Party Infringement Claims: If any third-party claim, demand, or cause of action (“Action”) claiming patent infringement arises out of or results from the Regulatory Submission or sale of the Product by Athenex in the Territory, the Parties shall jointly defend and control any such action by counsel mutually acceptable to the Parties, and the legal fees and related costs and expenses of such defense (“Defense Costs”) shall be paid by Athenex. Athenex shall have the right, but not the obligation, at its sole expense to retain separate counsel in defense of any third-party claim of patent infringement relating to the Regulatory Submission or sale of the Product. Without limiting the foregoing, Athenex shall indemnify and hold harmless NK and CANDA for any damages resulting from any Action made or brought against NK/CANDA by any third party as a result of (a) any negligent act or omission or intentional misconduct of Athenex in relation to its obligations under the Definitive Agreement to market and sell the Product in the Territory; (b) any breach of the Definitive Agreement by Athenex; or (c) any infringement of any third party patent based upon the sale of the Product by Athenex in the Territory. Notwithstanding the foregoing, in the event that Athenex incurs any Defense Costs, and/or a third-party infringement claim results in a settlement or a final, non-appealable judgment that Athenex’s sales of the Product infringe at least one valid claim of a third-party patent and Athenex is required to make any payments as a result of such settlement or judgment (“Infringement Payments”), or Athenex is obligated to indemnify NK/CANDA for any damages or other losses resulting from Athenex’s sale of the Product in the Territory (“Indemnification Payments”), Athenex would be entitled to keep and retain 100% of the Transfer Price Formula B from sales of the Product (i.e., the Third Payment would be eliminated going forward) until after the later of (y) the respective patent expires, and (z) the amount of Transfer Price Formula B retained by Athenex equals the sum of any Defense Costs, Infringement Payments and Indemnification Payments.

NK/CANDA would indemnify, defend, and hold Athenex harmless from and against all damages, liabilities, obligations, settlements, costs and expenses, including reasonable legal fees (collectively, “Damages”)

*** = Portions of this exhibit have been omitted pursuant to a request for confidential treatment. An unredacted version of this exhibit has been filed separately with the Commission.

4

  NANG KUANG PHARMACEUTICAL CO., LTD

incurred by Athenex arising in connection with any Action made or brought against Athenex by any third party as a result of (a) any negligent act or omission or intentional misconduct of NK/CANDA in relation to its obligations under the Definitive Agreement to manufacture and supply the Product to Athenex, (b) any breach of the Definitive Agreement by NK/CANDA, or (c) any alleged or actual defects in the Product supplied by NK/CANDA to Athenex.

Stoppage: Athenex would have the right, without liability, to suspend its obligations to market and sell the Product under the Definitive Agreement in the event (i) of an injunction or other court order being issued which prohibits or restricts the marketing or sale of the Product in the Territory, (ii) the FDA or another applicable regulatory authority prohibits or restricts the marketing or sale of the Product in the Territory, or (iii) Athenex becomes aware of any potential adulteration, misbranding and/or other issues regarding the safety of the Product.

Launch Date: Athenex shall utilize its commercially reasonable efforts to launch the Product within ten (10) days of the lifting or dissolution of the preliminary injunction entered in Case No. 1:14-CV-1647-TWP-DKL (“Pending Litigation”) currently pending in the United States District Court for the Southern District of Indiana, Indianapolis Division (“Preliminary injunction”); provided there are no external barriers to Athenex’s launch of the Product (i.e. regulatory approval, manufacturing, inventory, or legal proceeding). In the event that (i) the Preliminary Injunction has been lifted or dissolved, (ii) the Regulatory Submission has final FDA approval; (iii) there is sufficient launch inventory available to Athenex to supply at least 10% of the market in the Territory; (iv) there are no other external barriers to Athenex’s launch of the Product; and (v) Athenex, in its sole discretion, refuses to launch the Product within such ten (10) day period, Athenex shall provide NK with written notice of its intent not to launch the Product and, within thirty (30) days of receipt of such notice, NK/CANDA shall be entitled to terminate the Definitive Agreement and the License to the Product associated therewith. In such event, Athenex shall transfer to NK free and clear title to any commercial launch quantities produced pursuant to Purchase Orders (defined below) submitted by Athenex, provided that Athenex shall be responsible for paying NK/CANDA any outstanding amounts owed under said Purchase Orders. Moreover, all Prepayments paid by Athenex shall be retained by NK/CANDA. Nothing in this term sheet shall require Athenex to launch the Product prior to a finding of unpatentability by the Patent Trial and Appeal Board in any combination of IPR2016-00237, IPR2016-00240 and IPR2016-00318 of all claims that the Parties reasonably determine the Product infringes.

*** = Portions of this exhibit have been omitted pursuant to a request for confidential treatment. An unredacted version of this exhibit has been filed separately with the Commission.

5

  NANG KUANG PHARMACEUTICAL CO., LTD

Purchase Orders;

Forecasts: Athenex will purchase the Product from NK by submitting purchase orders which will include the quantity (which must be multiples of the validated batch size), delivery information (including destination) and desired delivery date (each a “Purchase Order”). Purchase Orders for the initial commercial launch quantities of Product shall be submitted to NK no less than one-hundred and eighty (180) days prior to the requested delivery date and Purchase Orders for subsequent quantities of Product shall be submitted to NK no less than ninety (90) days prior to the requested delivery date. Athenex shall provide forecast estimates (each a “Forecast”) to NK of its supply needs of the Product at least ninety (90) days prior to the submission of a Purchase Order to allow NK sufficient time to acquire API and other required supplies. NK shall review and reasonably approve the Forecasts and Purchase Orders. Upon NK’s approval of a Purchase Order, (i) NK shall be obligated to supply to Athenex the quantities of the Product within the time frames required pursuant to the relevant Forecasts and Purchase Orders; and (ii) Athenex shall pay to NK the Second Payment of the Transfer Price as defined in the section of Financial Terms below within 30 days thereafter. If the quantity of the Product requested in a Purchase Order is increased by more than ten percent (10%) compared to the most recently submitted Forecast, then NK shall use commercially reasonable efforts to supply such increased amount to Athenex; however, NK shall not be subject to any penalty if it is unable to supply such increased amount. If the quantity of the Product requested is lower than the forecast, resulting in the waste of API and other supplies, Athenex will be responsible for the cost of any wasted materials, including API. In furtherance of the foregoing, Athenex anticipates placing Purchase Orders in Q1 2017 to establish necessary inventory to support commercial launch.

***

Shipping: NK shall pay for shipping (shipments to be made FOB Destination (Incoterms 2010)) and will be liable and responsible for any loss or damage while shipments FOB are in transit.

Publicity: The Parties agree that there will be no press release or other public statement issued by either Party relating to this Term Sheet without the written consent of the other Parties, which consent may be withheld in the absolute discretion of any Party. Notwithstanding the foregoing, in the event either Party is required by applicable law (as determined by counsel of such Party) to make a public disclosure, the Parties shall cooperate and agree on the language of such disclosure. Nothing in this paragraph shall preclude NK from making all necessary public disclosures required by its listing on the Taiwan Stock Exchange (“Press Release”). Athenex shall have the right to review the Press Release prior to publication. NK shall

*** = Portions of this exhibit have been omitted pursuant to a request for confidential treatment. An unredacted version of this exhibit has been filed separately with the Commission.

6

  NANG KUANG PHARMACEUTICAL CO., LTD

engage in good faith negotiations with Athenex regarding the content of the Press Release in the event that Athenex objects to the content of the Press Release.

Confidentiality: NK, CANDA and Athenex are parties to a Confidential Disclosure Agreement dated as of December 13, 2016 (the “Confidentiality Agreement”), which includes obligations of the Parties to maintain in confidence all Confidential Information (as defined in the Confidentiality Agreement) of the other Parties, and the Parties agree that the terms of the Confidentiality Agreement shall not be amended, supplemented, abridged or terminated by this Term Sheet. The Confidentiality Agreement shall apply to the terms contained in this Term Sheet and the information exchanged by the Parties in connection with the negotiations and/or discussions regarding this Term Sheet.

***: ***

Governing Law: This Term Sheet and the Definitive Agreement shall be governed by the laws of the state of Delaware, without regard to conflict of law provisions.

Miscellaneous: The Parties will make good faith efforts to execute the Definitive Agreement within sixty (60) days of the execution of this Term Sheet. The Parties acknowledge that the terms set forth in this Term Sheet are not exhaustive and the Definitive Agreement shall include such other terms as are customary in a transaction of this nature, including such representations, warranties, covenants and insurance and indemnification obligations as shall be mutually agreed to by the Parties.

FINANCIAL TERMS:

Transfer Price: Overview (Components of the Transfer Price). Athenex would purchase the Product from NK at a transfer price (“Transfer Price”) to be agreed upon by both Parties. The Transfer Price would be divided into three types of payments: (1) one, two or three prepayments as specified in a below (collectively referred to as the “Prepayments”), (2) a payment after confirmation of each Purchase Order (the “Second Payment”), and (3) a payment after delivery of the Product pursuant to each Purchase Order (the “Third Payment”).

a. Prepayments

Athenex is required to make the First Prepayment and Second Prepayments as indicated below. The First Prepayment and Second Prepayment are not refundable or conditioned on any event other than the execution of this Term Sheet. All amounts specified herein are in US dollars.

*** = Portions of this exhibit have been omitted pursuant to a request for confidential treatment. An unredacted version of this exhibit has been filed separately with the Commission.

7

  NANG KUANG PHARMACEUTICAL CO., LTD

• $3,000,000 upon execution of this Term Sheet between NK/CANDA and Athenex (“First Prepayment”); to be paid no later than twenty (20) business days after the execution of this Term Sheet; and

• $9,000,000 on or before May 1, 2017 (“Second Prepayment”). The Athenex agreement to make the Second Prepayment is a binding and irrevocable obligation and not conditioned on the occurrence of any other event(s). For purposes of clarity and without the intent of being exhaustive, Athenex’s Second Prepayment obligation is not dependent in any manner on (1) the ability of Athenex to complete an initial public offering; (2) tentative or final approval by the FDA of the Regulatory Submission; (3) the outcome in case 15-2067 at the United States Court of Appeals for the Federal Circuit; or (4) the outcome at the Patent Trial and Appeal Board or any appeal in any of IPR2016-00237, IPR2016-00240 and IPR2016-00318.  Athenex is a sophisticated party in the business of developing pharmaceutical products and has the benefit of counsel experienced in pharmaceutical industry transactions, patent law and Hatch-Waxman litigation when negotiating this Term Sheet. Further,  Athenex fully understands that there is risk associated with this transaction and events may transpire that make this a less commercially attractive opportunity. Despite this, Athenex is willing to enter into this binding agreement via this Term Sheet and irrevocably agrees to make the Second Prepayment on or before May 1, 2017. In the absence of Athenex’s commitment to make the Second Prepayment on or before May 1, 2017, NK/CANDA would not have entered into this Term Sheet with Athenex.

b. Second Payment

Athenex shall make a Second Payment of the Transfer Price to NK for the Product within thirty (30) days after NK’s confirmation of acceptance of each of Athenex’s Purchase Orders. The parties acknowledge that the amount of the Second Payment is based on ***% of the Transfer Price Formula A (defined below). The “Transfer Price Formula A” means the actual cost that will be incurred by NK to produce and ship the Product, including but not limited to the cost of materials, labor, overhead, relevant insurance and shipping incurred by NK, without any markup. The amount of the Transfer Price Formula A is estimated to be $ *** per 100 mg vial of the Product and $ *** per 500 mg vial of the Product, subject to the adjustment based on the Transfer Price Formula A that is to be determined by the average of the first three batches for the first year and thereafter by the first batch annually for the following years. Upon request by Athenex, NK would provide Athenex the breakdown and supporting documentation how the Transfer Price Formula A is calculated, and Athenex would have the right to audit NK’s books and records relating to the Transfer Price Formula A, limited once per year at Athenex’s sole cost.

*** = Portions of this exhibit have been omitted pursuant to a request for confidential treatment. An unredacted version of this exhibit has been filed separately with the Commission.

8

  NANG KUANG PHARMACEUTICAL CO., LTD

c. Third Payment

Subject to the terms below, Athenex shall make a Third Payment to NK/CANDA as a part of the Transfer Price equal to ***% of the “Transfer Price Formula B” (as defined below), which shall result in a ***% of Transfer Price Formula B to Athenex upon commercial launch of the Product. In addition, the total amount of the Second Payment and Third Payment to NK/CANDA is ***% of the Transfer Price Formula A plus ***% of Transfer Price Formula B. If the Transfer Price Formula B calculation results in an amount equal to or less than zero, the Parties would meet to negotiate how to reduce the actual cost of the Product. The Third Payment would be made on a quarterly basis by Athenex to NK/CANDA, within thirty (30) days following the end of each calendar quarter following the Launch Date. Each payment would be accompanied by a statement showing the aggregate Net Sales of the Product for the applicable quarter, the aggregate cost incurred by Athenex for the units sold, and the calculation of the Third Payment. The following definitions would apply to the calculation of the Third Payment:

(1) “Athenex Profit” shall mean fifty percent (***%) of Transfer Price Formula B derived from Athenex’s sales of the Product in the Territory.

(2) “Transfer Price Formula B” shall mean Net Sales less (i) the Second Payment to NK, freight in, duty, customs, shipping, inventory and write offs incurred by Athenex; and (ii) for the three (3) year period following the execution of the Definitive Agreement, ***% of Net Sales (defined below) for Athenex’s costs related to marketing and selling the Product, and for the period beginning immediately after the expiration of the three (3) year period following the execution of the Definitive Agreement, ***% of Net Sales (defined below) for Athenex’s costs related to marketing and selling the Product.

(3) “Net Sales” shall mean the gross invoiced sales of the finished Product to all customers less (i) chargebacks; (ii) freight and insurance charges; (iii) trade discounts, credits or allowances; (iv) costs of replacements, returns, recalls or rebates (including but not limited to group purchasing organization fees and rebates); (v) discounts or rebates or other payments required by law to be made under Medicaid, Medicare or other governmental special medical assistance programs; (vi) wholesaler service charges; (vii) sales, excise or value added taxes paid on or in relation to sales of the finished Product and (viii) penalties from hospitals due to insufficient Product supply caused by NK’s limited capacity; (ix) storage costs/fees; and (x) any other fees paid or costs incurred by Athenex in connection with the handling, storage, shipment, distribution and sale of the Product (excluding marketing costs). All of the foregoing would be as calculated in accordance with United States Generally Accepted Accounting Principles.

***

***

*** = Portions of this exhibit have been omitted pursuant to a request for confidential treatment. An unredacted version of this exhibit has been filed separately with the Commission.

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  NANG KUANG PHARMACEUTICAL CO., LTD

Athenex shall reasonably cooperate with NK to make all Transfer Price payments to NK in the manner specified by NK and set forth in the Definitive Agreement between the Parties.

Accounting

Rights: Each Party shall have the right, no more than once per calendar year, to inspect the books and records of the other Parties to evaluate reported costs, including Transfer Price, Net Sales and Athenex Profit The Party requesting the audit shall bear its costs.

Expenses: Each Party will bear its own legal, accounting and other fees and expenses related to the proposed business transaction incurred through the execution of the Definitive Agreement.

Assignment: The Definitive Agreement is not assignable by either Party without the prior written consent of the other Party hereto, which consent shall not be unreasonably withheld, delayed or conditioned. Notwithstanding the foregoing, either Party may assign all or any portion of this Agreement without the consent of the other Party to an affiliate or upon a merger, reorganization or sale of substantially all its assets to which the Definitive Agreement relates. Without limiting the forgoing, NK may assign all or any portion of the Definitive Agreement to CANDA.

Sincerely,

NANG KUANG PHARMACEUTICAL CO., LTD

By:

Title:

Date:

Athenex API limited

By:

Title:

Date:

*** = Portions of this exhibit have been omitted pursuant to a request for confidential treatment. An unredacted version of this exhibit has been filed separately with the Commission.

10

  NANG KUANG PHARMACEUTICAL CO., LTD

CANDA NK-2, LLC

By:

Title:

Date:

*** = Portions of this exhibit have been omitted pursuant to a request for confidential treatment. An unredacted version of this exhibit has been filed separately with the Commission.

11

  NANG KUANG PHARMACEUTICAL CO., LTD

Sincerely,

NANG KUANG PHARMACEUTICAL CO., LTD

By:

Title:

Date:

Athenex API limited

By:

Title:

Date:

CANDA NK-2, LLC

By:

Title:

Date:

*** = Portions of this exhibit have been omitted pursuant to a request for confidential treatment. An unredacted version of this exhibit has been filed separately with the Commission.

12

EX-10

Exhibit 10.22

Amphastar 2-1-17

ASSET PURCHASE AGREEMENT

between

ATHENEX, INC.

and

AMPHASTAR PHARMACEUTICALS, INC.

Dated as of February 1, 2017

TABLE OF CONTENTS

				Page
ARTICLE I		PURCHASE AND SALE			4
	Section 1.01.		Purchase and Sale		4
	Section 1.02.		Transferred Assets and Excluded Assets.		5
	Section 1.03.		Assumption of Liabilities; Retained Liabilities		6
ARTICLE II		CLOSING			7
	Section 2.01.		Closing		7
	Section 2.02.		Transactions To Be Effected at the Closing		7
ARTICLE III		REPRESENTATIONS AND WARRANTIES OF SELLER			8
	Section 3.01.		Organization and Standing		8
	Section 3.02.		Authority; Execution and Delivery; Enforceability		8
	Section 3.03.		Non-Contravention and Approvals		8
	Section 3.04.		Title to Assets		9
	Section 3.05.		Litigation		9
	Section 3.06.		Regulatory Approvals; Compliance Arrangements		9
	Section 3.07.		Hikma Asset Purchase Agreement		9
	Section 3.08.		API		10
	Section 3.09.		Representations Complete		10
ARTICLE IV		REPRESENTATIONS AND WARRANTIES OF PURCHASER			10
	Section 4.01.		Organization		10
	Section 4.02.		Authority; Execution and Delivery; Enforceability		10
	Section 4.03.		Non-Contravention and Approvals		11
	Section 4.04.		Litigation		11
	Section 4.05.		No Brokers’ Fees		11
	Section 4.06.		Seller’s Representations; Independent Investigation		11
ARTICLE V		COVENANTS			13
	Section 5.01.		Access to Information		13
	Section 5.02.		Confidentiality		14
	Section 5.03.		Publicity		15
	Section 5.04.		Covenant Not to Sue		15
	Section 5.07.		Insurance		15
	Section 5.06.		Change in Ownership Letters		16
	Section 5.07.		Tax Covenants		16

ARTICLE VI		CLOSING DELIVERABLES		17
	Section 6.01.		Seller Deliverables	17
	Section 6.02.		Purchaser Deliverables	17
ARTICLE VIII		INDEMNIFICATION; SURVIVAL		17
	Section 7.01.		Indemnification by Seller	17
	Section 7.02.		Indemnification by Purchaser	17
	Section 7.03.		Indemnification Procedures	18
	Section 7.04.		Limitations on Indemnification	19
	Section 7.05.		Calculation of Indemnity Payments	19
	Section 7.06.		Exclusive Remedy	20
	Section 7.07.		Tax Treatment of Indemnification	21
	Section 7.08.		Survival	21
	Section 7.09.		No Setoff Rights	21
ARTICLE IX		MISCELLANEOUS		22
	Section 8.01.		Assignment	22
	Section 8.02.		No Third-Party Beneficiaries	22
	Section 8.03.		Expenses	22
	Section 8.04.		Notices	22
	Section 8.05.		Interpretation; Certain Definitions	23
	Section 8.06.		Limitation on Damages	27
	Section 8.07.		Counterparts	27
	Section 8.08.		Entire Agreement	27
	Section 8.09.		Severability	28
	Section 8.10.		Governing Law	28
	Section 8.11.		Jurisdiction	28
	Section 8.12.		Service of Process	28
	Section 8.13.		Waiver of Jury Trial	29
	Section 8.14.		Amendments and Waivers	29
	Section 8.15.		Specific Performance	29
	Section 8.16.		Joint Drafting	29
	Section 8.17.		Fulfillment of Obligations	29

Exhibit A	Forms of Transfer Documents
Exhibit B	Form of Purchaser Change in Ownership Letters
Exhibit C	Form of Seller Change in Ownership Letters

ASSET PURCHASE AGREEMENT dated as of                     , 2017 (this “Agreement”), between Athenex, Inc., a Delaware corporation (“Purchaser”) and Amphastar Pharmaceuticals, Inc., a Delaware corporation (“Seller”).

WHEREAS, pursuant to an asset purchase agreement dated as of March 4, 2016 (the “Hikma Asset Purchase Agreement”), Seller purchased certain assets, including the Transferred Assets (as defined herein), from Hikma Pharmaceuticals PLC, a public limited company incorporated in England and Wales (“Hikma”) (the “Hikma Acquisition”);

WHEREAS, Seller owns the Transferred Assets;

WHEREAS, Seller desires to sell, transfer and deliver the Transferred Assets to Purchaser and Purchaser desires to acquire such Transferred Assets, upon the terms and subject to the conditions of this Agreement.

NOW, THEREFORE, in consideration of the premises and the mutual agreements and covenants hereinafter set forth, and intending to be legally bound, the parties hereby agree as follows:

ARTICLE I

PURCHASE AND SALE

SECTION 1.01. Purchase and Sale.

(a) Purchase Price. Upon the terms and subject to the conditions of this Agreement, at the Closing, Seller will sell, transfer, assign, convey and deliver to Purchaser, and Purchaser will purchase, acquire and accept from Seller, all of Seller’s right, title and interest in, to and under the Transferred Assets as of the Closing, free and clear of all Liens (other than Permitted Liens) for (a) an aggregate purchase price of $6.4 million in cash to be paid in accordance with the terms and conditions of Section 2.02(b) (the “Purchase Price”); and (b) the assumption by Purchaser of the Assumed Liabilities. The purchase and sale of the Transferred Assets and the assumption of the Assumed Liabilities are collectively referred to in this Agreement as the “Acquisition”.

(b) Royalty. In addition to the Purchase Price, Purchaser agrees to pay Seller a royalty fee equal to 2% of Net Sales (if any) which are derived from Purchaser’s sales of the Products from the Transferred Assets (the “Royalty Fee”) for a period beginning as of the date of Closing and continuing until the tenth (10^th) anniversary of the Closing Date (the “Royalty Term”). Such Royalty Fee shall be cumulated, will be in U.S. Dollars and paid to Seller within forty-five (45) days of the end of each calendar quarter during the Royalty Term; it being understood that the Royalty Fee payments shall be reconciled, to the extent necessary, in any subsequent quarter during the Royalty Term or at the end of the Royalty Term, as the case may be, based on the actual Net Sales realized by Purchaser. Purchaser shall provide Seller with a written statement setting forth the number of Product units sold and the Royalty Fee due during

each calendar quarter during the Royalty Term within thirty (30) days of the end of each calendar quarter. The Purchaser shall maintain and keep for a period of not less than two (2) years complete and accurate records in sufficient detail to enable any accrued royalties to be calculated. During normal business hours and with reasonable advance written notice but in no event less than twenty (20) Business Days and not exceeding once a year during the Royalty Term, Purchaser shall permit a Representative of Seller to have access to such records of Purchaser as may be necessary to verify the accuracy of the records related to the Royalty Fees paid to Seller (in each case, a “Seller Audit”); provided however that any such Seller Audit must take place no more than one (1) year following the end of the calendar year during the Royalty Term at issue and will be at Seller’s expense unless the mutually agreed upon accounting firm audit finds that the royalties have been under reported by more than 5%, in which case Buyer will pay for the audit. Promptly following Seller’s completion of any such Seller Audit (but in no event later than thirty (30) days following such completion), Seller shall deliver to Purchaser written notice of the results of such Seller Audit, including a description in reasonable detail of any proposed adjustments to the Royalty Fees actually paid to Seller for the applicable period covered by such Seller Audit. Seller and Purchaser will negotiate in good faith to resolve any dispute over Seller’s proposed adjustments to the Royalty Fees, provided that if any such dispute is not resolved within thirty (30) days following receipt by Purchaser of the proposed adjustments, either Purchaser or Seller may engage a mutually agreed upon accounting firm with a national presence (the “Accounting Firm”) on behalf of Purchaser and Seller to resolve any remaining dispute of Seller’s proposed adjustments, which resolution will be final. The Accounting Firm will be instructed to deliver its written determination within thirty (30) days. The Accounting Firm will address only those items in dispute and may not assign a value greater than the greatest value for such item claimed by either party or a value smaller than the smallest value for such item claimed by either party. The fees and expenses of the Accounting Firm will be shared by the parties in inverse proportion to the percentage of the disputed amount determined by the Accounting Firm to be in favor of Seller, on the hand, and Purchaser, on the other hand. The calculation and amount of the Royalty Fees for the period covered by any Seller Audit will become final and binding on all parties upon the earliest of (i) Seller’s delivery of notice to Purchaser of the results of the Seller Audit whereby such results reflect Seller’s agreement with the amount of Royalty Fees actually paid to Seller, (ii) the mutual agreement of Seller and Purchaser with respect to any of Seller’s proposed adjustments to the Royalty Fees actually paid to Seller, and (iii) the Accounting Firm’s final resolution of any disputes submitted to the Accounting Firm. Promptly after such final determination of the amount of the Royalty Fees for the period covered by any Seller Audit: (x) if such finally determined Royalty Fee amount exceeds the amount actually paid to Seller, then Purchaser will pay to Seller an amount equal to such excess within thirty (30) days after such final determination; or (ii) if the amount of Royalty Fees actually paid to Seller exceed such finally determined Royalty Fee amount, then Seller will refund to Purchaser an amount equal to such excess within thirty (30) days after such final determination.

SECTION 1.02. Transferred Assets and Excluded Assets.

(a) The term “Transferred Assets” means all of Seller’s right, title and interest in, to and under the following assets as they exist at the time of the Closing:

(i) all books, records, files, data and other documentation in the categories, to the extent applicable and obtained from Hikma, set forth in Section 1.02(a)(i) of the Seller Disclosure Schedule that are exclusively related to the Products or the Transferred Assets (except to the extent in the possession or control of a Governmental Entity or a contract manufacturer of the Products) and as provided in Section 5.01 (collectively, the “Transferred Books and Records”);

(ii) all ANDAs listed in Section 1.02(a)(ii) of the Seller Disclosure Schedule (the “Regulatory Approvals”); and

(iii) all of the inventory for the Active Pharmaceuticals Ingredients (“API”) as of the Closing listed in Section 1.02(a)(iii) of the Seller Disclosure Schedule.

(b) Notwithstanding anything to the contrary contained in this Agreement, (A) no Excluded Asset (as defined below) shall be included within the Transferred Assets and (B) Seller shall not sell, transfer, assign or deliver to Purchaser, and Purchaser shall not purchase, acquire or accept, any right, title and interest of Seller in, to or under the Commingled Documents or any assets of Seller or its affiliates not expressly included in the Transferred Assets (all such other assets, the “Excluded Assets”); provided, that Seller shall use commercially reasonable efforts to provide Purchaser with access to the Commingled Documents in accordance with Section 5.01.

(c) Subject to Section 5.02(b) and in accordance with Section 5.01, Seller shall have the right to retain copies of and have access to the documents, materials and data relating to the ownership, use, sale, license or lease of the Transferred Assets prior to the Closing Date.

SECTION 1.03. Assumption of Liabilities; Retained Liabilities.

(a) Upon the terms and subject to the conditions of this Agreement Purchaser shall assume, effective as of the Closing, and shall pay, perform and discharge when due, any and all obligations, liabilities and commitments of any nature, whether known or unknown, express or implied, primary or secondary, direct or indirect, liquidated, absolute, accrued, contingent or otherwise and whether due or to become due (collectively, “Liabilities”):

(i) related to or arising out of the ownership, use, sale, license or lease of the Transferred Assets by Purchaser from and after the Closing Date, including all Liabilities (A) related to or arising out of products liability Claims with respect to the Exploitation of any Product on or after the Closing Date or (B) related to or arising out of government seizures, filed corrections, withdrawals or recalls of Product sold on or after the Closing Date;

(ii) concerning the use of any third party Intellectual Property (“IP Liabilities”), arising out of or related to any Exploitation of Product on or after the Closing Date;

(iii) for Transfer Taxes and Apportioned Obligations allocated to Purchaser under Section 5.07; and

(iv) related to or arising out of the matters set forth in Section 1.03(a)(iv) of the Seller Disclosure Schedules.

The Liabilities referenced in clauses (i) through (iv) above are referred to, collectively, as the “Assumed Liabilities”.

(b) The term “Retained Liabilities” means all Liabilities of Seller and its affiliates, including without limitation to the extent related to the Transferred Assets, other than the Assumed Liabilities.

ARTICLE II

CLOSING

SECTION 2.01. Closing. The closing of the Acquisition (the “Closing”) shall take place by the electronic exchange of documents and signature pages on the date hereof (the “Closing Date).”

SECTION 2.02. Transactions To Be Effected at the Closing.

(a) At the Closing, Seller shall deliver or cause to be delivered to Purchaser duly executed binding term sheet, bills of sale, assignments, licenses and other instruments of transfer relating to the Transferred Assets, in each case in the form attached hereto as Exhibit A.

(b) At the Closing, Purchaser shall deliver or cause to be delivered to Seller within fifteen (15) business days of the Closing Date (i) payment, by wire transfer of immediately available funds to one or more accounts designated in writing by Seller (such designation to be made at least fifteen (15) days prior to the Closing Date), of $1.0 million and (ii) duly executed counterparts to the bills of sale, assignments, licenses and other instruments of transfer referred to in Section 2.02(a), and duly executed assumption agreements and other instruments of assumption providing for the assumption of the Assumed Liabilities, in each case reasonably acceptable to Purchaser and Seller. A second payment in the amount of $1.0 million will be made by Purchaser to Seller within 30 days of May 1, 2017. A third payment in the amount of $3.0 million will be paid within 30 days of receiving FDA approval of site transfer to sell Prochlorperazine Edisylate Injection USP and a fourth payment in the amount of $1.4 million will be paid by Purchaser to Seller within 30 days of FDA approval of site transfer of the second product to be FDA approved. If the third and fourth payment milestones are not reached by December 31, 2017, Purchaser will pay the balance of the $4.4 million within 30 days of December 31, 2017. All of the risk of loss with respect to the Transferred Assets (whether or not covered by insurance) shall be on Seller up to the time of the Closing, whereupon such risk of loss with respect to the Transferred Assets shall pass to Purchaser. Notwithstanding anything to the contrary contained in this Agreement except as a result of a breach by Seller or its affiliates

of this Agreement, and/or during the pendency of any disputes arising under or related hereto (whether for breach of contract, tortious conduct or otherwise), in the event that Purchaser fails to make any of the required payments set forth in this Section 2.02(b) (“Payment Breach”), and fails to cure such Payment Breach within 45 days written of notice in accordance with Section 8.04 thereof, Purchaser agrees to transfer the ownership of the Transferred Assets to Seller and Purchaser shall have no right of recourse to any of the previous payments.

(c)

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF SELLER

Except as set forth in the disclosure schedules of Seller (the “Seller Disclosure Schedule”), Seller hereby represents and warrants to Purchaser as follows:

SECTION 3.01. Organization and Standing. Seller is a legal entity duly organized, validly existing and in good standing under the Laws of the jurisdiction of its organization. Seller has the requisite power and authority to enable it to own, lease, license or otherwise hold the Transferred Assets owned, leased, licensed or otherwise held by it.

SECTION 3.02. Authority; Execution and Delivery; Enforceability. Seller has the requisite power and authority to execute and deliver this Agreement and the other agreements and instruments to be executed and delivered by it in connection with this Agreement (the “Ancillary Agreements”) to which it will be a party and to consummate the Acquisition and the other transactions contemplated to be consummated by it by this Agreement and such Ancillary Agreements. Seller has taken all action required by its organizational documents to authorize the execution and delivery of this Agreement and the Ancillary Agreements and to authorize the consummation of the Acquisition and the other transactions contemplated to be consummated by it by this Agreement and such Ancillary Agreements. Seller has duly executed and delivered this Agreement and each Ancillary Agreement, and (assuming the due authorization, execution and delivery by the other parties hereto) this Agreement and each Ancillary Agreement constitutes its legal, valid and binding obligation, enforceable against it in accordance with its terms subject, as to enforcement, to applicable bankruptcy, insolvency, moratorium, reorganization, fraudulent conveyance or similar Laws affecting the enforcement of creditors’ rights generally and to general equitable principles (whether considered in a Proceeding in equity or at law) (the “Enforceability Exceptions”).

SECTION 3.03. Non-Contravention and Approvals.

(a) The execution and delivery by Seller of this Agreement and each Ancillary Agreement does not, and the consummation by Seller of the Acquisition and the other transactions contemplated to be consummated by it by this Agreement and such Ancillary Agreements will not, (i) conflict with or violate the organizational documents of Seller, (ii) assuming compliance with Section 3.03(b), conflict with or violate any judgment, injunction,

order or decree (“Judgment”) or federal, national, supranational, state, provincial, local, foreign or administrative statute, law, ordinance, rule, code or regulation (“Law”) to which Seller or any of the Transferred Assets is subject or (iii) result in the creation of any Lien (other than Permitted Liens or Liens arising from any act of Purchaser or its affiliates) upon any of the Transferred Assets, except, in the case of clauses (ii) and (iii), for any such items that would not, individually or in the aggregate, reasonably be expected to have a material adverse effect on the Transferred Assets or materially impede or materially delay the consummation by Seller of the Acquisition and the other transactions contemplated by this Agreement (“a Material Adverse Effect”).

(b) Except as contemplated by this Agreement, no consent, approval, waiver, notice or authorization (“Consent”) of, or registration, declaration or filing with, any Governmental Entity is required to be obtained, given or made by Seller in connection with the execution, delivery and performance of this Agreement or the Ancillary Agreements, or the consummation of the Acquisition other than (i) those that may be required solely by reason of Purchaser’s (as opposed to any other third party’s) participation in the Acquisition and the other transactions contemplated by this Agreement and by the Ancillary Agreements and (ii) those the failure of which to obtain, give or make would not, individually or in the aggregate, constitute a Material Adverse Effect.

SECTION 3.04. Title to Assets. Seller has good and marketable title to, and is transferring to Purchaser all of Seller’s right, title and interests in and to, the Transferred Assets, in each case free and clear of any mortgages, liens, pledges, security interests, charges or other encumbrances of any kind (collectively, “Liens”), except for Permitted Liens.

SECTION 3.05. Litigation. There are no Proceedings pending or, to the knowledge of Seller, threatened in writing against Seller or any of its affiliates which relate to the Transferred Assets and which, in all cases would, individually or in the aggregate, constitute a Material Adverse Effect. None of Seller or any of its affiliates is party or subject to or in default under any unsatisfied Judgment applicable to the Transferred Assets, other than such Judgments that would not, individually or in the aggregate, constitute a Material Adverse Effect.

SECTION 3.06. Regulatory Approvals; Compliance Arrangements. To the knowledge of Seller, each Regulatory Approval is valid, effective and in full force and effect in all material respects, and all applicable fees and costs that are due and payable with respect to such Regulatory Approvals have been paid in full.

SECTION 3.07. Hikma Asset Purchase Agreement. With respect to the agreements and covenants of Seller concerning the sale, transfer, assignment, conveyance, and delivery of, and access to, the Transferred Assets and the Commingled Documents (including Seller Commingled Information and Purchaser Commingled Information) that are set forth in Sections 1.01, 1.02, and 5.01(I) of this Agreement (and as such terms are defined in this Agreement), the Hikma Asset Purchase Agreement contains the same or substantially the same agreements and covenants with respect to the Transferred Assets and Commingled Documents (as between Hikma and Seller), other than with respect to (i) purchase price, (ii) efforts standards

with respect to the delivery of and access to the Transferred Assets and Commingled Documents and (iii) the last sentence of Section 5.01(I) of this Agreement. The seller will provide a copy of the Hikma Asset Purchase Agreement to the Purchaser.

SECTION 3.08. API. All inventory of API set forth on Section 1.02(a)(iii) of the Seller Disclosure Schedule that is unexpired (as indicated in the column titled “Expiry”) as of the Closing Date is usable and of a quality in accordance with applicable FDA guidelines through the date of expiry.

SECTION 3.09. Representations Complete. Other than the representations and warranties of Seller specifically contained in this Article III, there are no representations or warranties of Seller or any other person either expressed or implied with respect to the Transferred Assets, the Assumed Liabilities, or the transactions contemplated hereby, individually or collectively. None of Seller, its affiliates or its Representatives makes any representations or warranties relating to (i) the maintenance, repair, condition, design, performance or marketability of any Transferred Asset, including merchantability of fitness for a particular purpose, (ii) the Exploitation of the Products by Seller on or prior to the Closing, (iii) the ownership, use, sale, license or lease of the Transferred Assets by Purchaser after the Closing or (iv) the Exploitation of the Transferred Assets by Purchaser after the Closing, including the probable success or profitability of the Exploitation of the Products after the Closing. Nothing in this Section 3.09 or otherwise in this Agreement shall limit any claim for fraud or intentional misrepresentation.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF PURCHASER

Purchaser hereby represents and warrants to Seller as follows:

SECTION 4.01. Organization. Purchaser is a legal entity duly organized, validly existing and in good standing under the Laws of the jurisdiction of its organization or incorporation.

SECTION 4.02. Purchaser agrees to make timely payments to seller in accordance with section 2.02(b)

SECTION 4.03. Authority; Execution and Delivery; Enforceability. Purchaser has the requisite power and authority to execute and deliver this Agreement and the Ancillary Agreements to which it will be a party and to consummate the Acquisition and the other transactions contemplated to be consummated by it by this Agreement and such Ancillary Agreements. Purchaser has taken all action required by its organizational documents to authorize the execution and delivery of this Agreement and the Ancillary Agreements and to authorize the consummation of the Acquisition and the other transactions contemplated to be consummated by it by this Agreement and such Ancillary Agreements. Purchaser has duly executed and delivered this Agreement and each Ancillary Agreement, and (assuming the due

authorization, execution and delivery by the other parties hereto) this Agreement and each Ancillary Agreement constitutes its legal, valid and binding obligation, enforceable against it in accordance with its terms subject, as to enforcement, to the Enforceability Exceptions.

SECTION 4.04. Non-Contravention and Approvals.

(a) The execution and delivery by Purchaser of this Agreement and each Ancillary Agreement, the consummation by Purchaser of the Acquisition and the other transactions contemplated to be consummated by it hereunder and the consummation by Purchaser of the transactions contemplated to be consummated by them under the Ancillary Agreements will not, (i) conflict with or violate the organizational documents of Purchaser, (ii) result in any violation of, breach of or constitute a default under, or give rise to a right of termination, cancellation, payment or acceleration of any obligation or loss of a benefit under, any Contract to which Purchaser is a party or by which any of its properties or assets is bound, (iii) assuming compliance with Section 4.04(b), conflict with or violate any Judgment or Law to which Purchaser or its properties or assets are subject or (iv) result in the creation of any Lien upon any of the properties or assets of Purchaser, except, in the case of clauses (ii) through (iv), for any such items that would not, individually or in the aggregate, reasonably be expected to result in any event, change, occurrence or effect that prevents or materially impedes or materially delays the consummation by Purchaser of the Acquisition and the other transactions contemplated by this Agreement (a “Purchaser Material Adverse Effect”).

(b) No Consent of, or registration, declaration or filing with, any Governmental Entity is required to be obtained, given or made by Purchaser in connection with the execution, delivery and performance of this Agreement or the Ancillary Agreements or the consummation of the Acquisition, other than (i) those that may be required solely by reason of Seller’s (as opposed to any other third party’s) participation in the Acquisition and the other transactions contemplated by this Agreement and by the Ancillary Agreements, and (ii) those the failure of which to obtain, give or make would not, individually or in the aggregate, constitute a Purchaser Material Adverse Effect.

SECTION 4.05. Litigation. There are no Proceedings or Claims pending or, to the knowledge of Purchaser, threatened in writing against Purchaser or any of its affiliates that, in any such case, would, individually or in the aggregate, constitute a Purchaser Material Adverse Effect. Neither Purchaser nor any of its affiliates is party or subject to or in default under any unsatisfied Judgment, other than such Judgments that would not, individually or in the aggregate, constitute a Purchaser Material Adverse Effect.

SECTION 4.06. No Brokers’ Fees. Purchaser has not taken any action that would entitle any person to any commission or broker’s fee in connection with the transactions contemplated by this Agreement.

SECTION 4.07. Seller’s Representations; Independent Investigation.

(a) Purchaser acknowledges and agrees that, other than the representations and warranties of Seller specifically contained in Article III, there are no representations or warranties of Seller or any other person either expressed or implied with respect to the Transferred Assets, the Assumed Liabilities, or the transactions contemplated hereby, individually or collectively. Purchaser, together with and on behalf of its affiliates and Representatives, specifically disclaims that it or they are relying upon or have relied upon any such other representations or warranties that may have been made by any person, and Purchaser, together with and on behalf of its affiliates and Representatives, acknowledges and agrees that Seller and its affiliates have specifically disclaimed and do hereby specifically disclaim any such other representation or warranty made by any person. Without limiting the generality of the foregoing, Purchaser acknowledges and agrees that none of Seller, its affiliates or its Representatives makes any representations or warranties relating to (i) the maintenance, repair, condition, design, performance or marketability of any Transferred Asset, including merchantability of fitness for a particular purpose, (ii) the Exploitation of the Products by Seller on or prior to the Closing, (iii) the ownership, use, sale, license or lease of the Transferred Assets by Purchaser after the Closing or (iv) the Exploitation of the Transferred Assets by Purchaser after the Closing, including the probable success or profitability of the Exploitation of the Products after the Closing. Except as set forth in the representations and warranties in Article III, Purchaser acknowledges and agrees that it shall obtain rights in the Transferred Assets in their present condition and state of repair, “as is” and “where is.” Nothing in this Section 4.06 or otherwise in this Agreement shall limit any claim for fraud or intentional misrepresentation.

(b) Purchaser acknowledges that Purchaser, its affiliates and their respective Representatives have been permitted full access to the books and records, facilities, equipment, personnel and other properties and assets relating to the Transferred Assets that Purchaser, its affiliates and their respective Representatives have desired or requested to see and review, and that Purchaser, its affiliates and their respective Representatives have had a full opportunity to conduct and complete a due diligence investigation of the Transferred Assets and the Assumed Liabilities. Except as expressly set forth in any representation or warranty in Article III, Purchaser acknowledges and agrees that no person, including the Purchaser Indemnitees, shall have any claim (whether in warranty, contract, tort (including negligence or strict liability) or otherwise) or right to indemnification pursuant to Article VII (or otherwise) with respect to any information, documents or materials made available or otherwise furnished to or for Purchaser, its affiliates or their respective Representatives by Seller, Hikma, any of their respective affiliates, or any of their respective Representatives, including any financial projections or other statements regarding future performance and any other information, documents or material, whether oral or written, made available to Purchaser, its affiliates or their respective Representatives in any “data room,” management presentation, “break-out” discussions or meetings, responses to questions submitted on behalf of Purchaser, its affiliates or their respective Representatives or otherwise furnished to Purchaser, its affiliates or their respective Representatives in any form in expectation of the transactions contemplated hereby, except, for avoidance of doubt, insofar as such claim or indemnification relates to a Retained Liability or an Excluded Asset.

(c) Purchaser, its affiliates and their respective Representatives may have received and may continue to receive from Seller, Hikma, their respective affiliates and their respective Representatives certain estimates, projections and other forecasts and certain plan and budget information. Purchaser acknowledges that these estimates, projections, forecasts, plans and budgets, and the assumptions on which they are based, were prepared for specific purposes and may vary significantly from each other. Further, Purchaser acknowledges that there are uncertainties inherent in attempting to make such estimates, projections, forecasts, plans and budgets, that Purchaser is taking full responsibility for making its own evaluation of the adequacy and accuracy of all estimates, projections, forecasts, plans and budgets so furnished to it, its affiliates or their respective Representatives (including the reasonableness of the assumptions underlying such estimates, projections, forecasts, plans and budgets) and that Purchaser is not relying on, and Seller and its affiliates have not made and are not making any representations or warranties with respect to, any estimates, projections, forecasts, plans or budgets made available or otherwise furnished by Seller, Hikma, their respective affiliates or their respective Representatives, and Purchaser shall not, and shall cause its affiliates and their respective Representatives not to, hold any such person liable with respect thereto (whether in warranty, contract, tort (including negligence or strict liability) or otherwise).

(d) Purchaser, its affiliates and their respective Representatives acknowledge that any dispute regarding Section 3.08 (API), Seller reserves the right to perform its own API testing. Should there be any disputes regarding the API test results, both parties agree to contract with an independent third party laboratory to perform the API testing. Both parties agree to accept test result as provided by the third party laboratory.

ARTICLE V

COVENANTS

SECTION 5.01. Access to Information. (I) Notwithstanding anything herein (including Section 1.01 and Section 1.02(a)) to the contrary, as soon as practicable following the Closing Date, Seller shall use commercially reasonable efforts to provide to Purchaser copies of (i) the Regulatory Approvals, and (ii) the Commingled Documents, if any, in the categories set forth in Section 5.01(i) of the Seller Disclosure Schedule, in the case of each of clauses (i) and (ii), redacted to exclude information or data related to products owned or licensed by third parties (including Hikma, Seller or their respective affiliates and excluding Purchaser or affiliates of Purchaser) and not included within the Transferred Assets (such information or data, “Third Party Information”). Following the Closing, upon the reasonable request of Purchaser therefor, Seller shall (x) use commercially reasonable efforts to provide to Purchaser copies of the Commingled Documents, if any, in the categories set forth in Section 5.01(ii) or the categories set forth in Section 5.01(iii) of the Seller Disclosure Schedule, redacted with respect to all Third Party Information or (y) to the extent reasonably required by Purchaser in connection with (A) any pending Proceeding (including any Proceeding before the United States Patent and

Trademark Office and any successor agency thereto, or the equivalent entity in other countries or regulatory jurisdictions) or (B) complying with requirements of any Governmental Entity, use commercially reasonable efforts to arrange for Hikma to grant Purchaser reasonable access to, the portions of the Commingled Documents, if any, in the categories set forth in Section 5.01(iii) of the Seller Disclosure Schedule that contain information regarding any Product acquired by Purchaser pursuant to this Agreement (such information, the “Purchaser Commingled Information”). Any such access shall be subject to confidentiality restrictions equivalent to those set forth in Section 5.02. In the event that Purchaser exercises its right to access Commingled Documents hereunder, Purchaser shall assume all liability for any disclosure or use of the information other than Purchaser Commingled Information (such other information, the “Seller Commingled Information”) contained therein and any and all loss, damage, destruction or alteration of such Commingled Documents arising from the use or possession of such Commingled Documents by Purchaser or its Representatives. For clarity, this Section 5.01 shall not provide either party hereto or any of their respective affiliates with any rights to use or disclose any information contained within any Commingled Documents not otherwise retained or obtained pursuant to this Agreement. All requests by Purchaser for Commingled Documents shall be directed in writing to the persons set forth in Section 5.01(iv) of the Seller Disclosure Schedule (or such other persons as are designated by Seller in writing to Purchaser). For purposes of this Section 5.01, Purchaser acknowledges and agrees that, with respect to any Commingled Documents in the possession of Hikma, Seller’s obligation to use commercially reasonable efforts to provide Purchaser with, or access to, such Commingled Documents shall only require Seller to deliver written notice to Hikma requesting access to such Commingled Documents. (II) Any language in this Section 5.01 to the contrary notwithstanding, in all events, Seller shall be obligated to provide to Purchaser, as soon as practicable following the Closing Date, copies of (i) Regulatory Approvals, and (ii) Commingled Documents (including Purchaser Commingled Information), that actually are in possession of Seller as of the Closing Date, in each case redacted to exclude all Third Party Information.

SECTION 5.02. Confidentiality.

(a) Purchaser acknowledges that the information provided to it in connection with the Acquisition and the consummation of the other transactions contemplated by this Agreement is subject to the terms of confidentiality letter agreement between Purchaser and Seller in connection with the Acquisition, dated September 1, 2016 (the “Confidentiality Agreement”). Effective upon, and only upon, the Closing, the Confidentiality Agreement shall terminate with respect to information relating solely to the Transferred Assets or the Assumed Liabilities; provided, however, that Purchaser acknowledges that any and all other information provided to it by any of Seller, any of its affiliates or their respective Representatives concerning Seller or any of its affiliates (other than information to the extent relating to the Transferred Assets or the Assumed Liabilities) shall remain subject to the terms and conditions of the Confidentiality Agreement after the Closing.

(b) Subject to Section 5.03, from and after the Closing until the third anniversary of the Closing Date, Seller shall, and shall cause its affiliates to, treat as confidential and shall

safeguard any and all confidential or proprietary information, knowledge and data related solely to the Transferred Assets or the Assumed Liabilities by using the same degree of care to prevent the unauthorized use, dissemination or disclosure of such information, knowledge and data as Seller and its affiliates used with respect thereto prior to the execution of this Agreement; provided, however, that Seller and its affiliates shall be entitled to use any such information, knowledge and data only to the extent necessary to perform their respective obligations or exercise or enforce their respective rights and remedies under this Agreement, any Ancillary Agreement or any agreements entered into in connection with any of the foregoing. The obligations of Seller and its affiliates pursuant to this Section 5.02(b) shall not extend to any information, knowledge or data that is (i) required to be disclosed by applicable Law, (ii) requested by a government official or (iii) except as a result of a disclosure by Seller or its affiliates after the Closing in breach of this Agreement, generally available to the public or already known by a third party receiving such information from Seller or its affiliates.

SECTION 5.03. Publicity. Other than any press release, if any, to be agreed to in writing by Purchaser and Seller to be issued following the execution of this Agreement, neither of Purchaser, on the one hand, nor Seller, on the other hand, will issue or permit any of its respective affiliates to issue any press release, website posting or other public announcement with respect to this Agreement or the transactions contemplated hereby without the prior consent of the other party (which consent shall, if applicable, be provided as promptly as practicable), except as may be required by Law or stock exchange rules or regulations (in which case, whichever of Purchaser or its affiliates or Seller or its affiliates, as applicable, is required to make the release or statement shall, to the extent compliance with such Law, rules or regulations permits, allow the other reasonable time to comment on such release or statement in advance of such issuance and such other party shall provide any comments thereto as promptly as practicable); provided, however, that (a) Purchaser, on the one hand, and Seller, on the other hand, may, following the date hereof, make internal announcements to their respective employees and affiliates that are consistent with the parties’ prior permitted public disclosures regarding the transactions contemplated by this Agreement and (b) Seller and Purchaser may communicate with government officials, customers and suppliers regarding this Agreement and the transactions contemplated hereby (so long as, in the case of customers and suppliers, such communications are consistent with Seller’s or Purchaser’s, as applicable, prior permitted public disclosures regarding the transactions contemplated by this Agreement, or a communications plan agreed upon by Seller and Purchaser).

SECTION 5.04. Covenant Not to Sue. Seller agrees not to object, oppose or otherwise challenge the use, in connection with the Exploitation of the Products anywhere in the world, by Purchaser and its successors, assigns, sublicensees, contractors, manufacturers, agents and representatives of all Know-How that is controlled by Seller and its affiliates as of the Closing.

SECTION 5.05. Insurance. From and after the Closing, Purchaser shall not, and shall cause its affiliates not to, assert any claim against any insurance policies or practices of Seller and its affiliates or Hikma and its affiliates (including any captive insurance policies,

self-insurance, surety bonds or corporate insurance policies or practices). Purchaser agrees, from and after the Closing Date, to arrange for its own insurance policies with respect to the Transferred Assets and the Assumed Liabilities covering all periods and agrees not to seek, through any means, to benefit from any of Seller’s or its affiliates’ insurance policies which may provide coverage for claims relating in any way to the Transferred Assets or the Assumed Liabilities.

SECTION 5.06. Change in Ownership Letters. Purchaser and Seller shall, with respect to each Regulatory Approval, if applicable, file each Purchaser Change in Ownership Letter and each Seller Change in Ownership Letter, respectively, with the U.S. Food and Drug Administration (the “FDA”) as soon as possible and in any event within 10 days after the date on which Seller provides to Purchaser a copy of the applicable Regulatory Approval underlying each such letter pursuant to and in accordance with Section 5.01. The letters filed by Seller and Purchaser pursuant to this Section 5.06 shall comply with all aspects of 21 C.F.R. 314.72 (Change in Ownership of an Application), and such letters shall provide for transfer of title to the Regulatory Approvals for the Products to be effective as of the Closing.

SECTION 5.07. Tax Covenants.

(a) As soon as practicable after the Closing, the parties shall agree upon an allocation of the Purchase Price (plus the Assumed Liabilities, to the extent properly taken into account under Section 1060 of the Internal Revenue Code of 1986, as amended) among the Transferred Assets in accordance with Section 1060 of the Internal Revenue Code of 1986, as amended. Seller and Purchaser shall, and shall cause their respective affiliates to, act in accordance with such allocation in the preparation, filing and audit of any Tax Return.

(b) Purchaser and Seller shall cooperate in timely making all filings, returns, reports and forms as may be required in connection with Purchaser’s payment of Transfer Taxes. Seller shall, or Purchaser, as applicable, shall execute and deliver all instruments and certificates necessary to enable the other to comply with any filing requirements relating to any such Transfer Taxes. Purchaser and Seller shall each pay fifty percent (50%) of all Transfer Taxes.

(c) All real property Taxes, personal property Taxes and similar ad valorem obligations levied with respect to the Transferred Assets for a taxable period which includes (but does not end on) the Closing Date (collectively, the “Apportioned Obligations”) shall be apportioned between Seller, on the one hand, and Purchaser, on the other hand, based on the number of days of such taxable period included in the Pre-Closing Tax Period and the number of days included in the Post-Closing Tax Period. Seller shall be liable for the proportionate amount of such Taxes that is attributable to the Pre-Closing Tax Period and Purchaser shall be liable for the proportionate amount of such Taxes that is attributable to the Post-Closing Tax Period.

(d) Purchaser agrees to retain all records relating to Taxes with respect to the Transferred Assets for all taxable periods ending on or prior to the Closing Date until the expiration of the statutes of limitation (including any extensions thereof) for the taxable period or periods to which such records relate. Purchaser and Seller agree to provide each other with such information and assistance as is reasonably necessary, including access to records and personnel, for the preparation of any Tax Returns or for the defense of any Tax claim or assessment, whether in connection with an audit or otherwise.

ARTICLE VI

CLOSING DELIVERABLES

SECTION 6.01. Seller Deliverables. The obligation of Purchaser to consummate the Closing is subject to the delivery by the Seller of executed counterparts of this Agreement and each Ancillary Agreement to which Seller is a party.

SECTION 6.02. Purchaser Deliverables. The obligation of Seller to consummate the Closing is subject to the delivery of the following by the Purchaser:

(a) executed counterparts of this Agreement and each Ancillary Agreement to which Purchaser is a party; and

(b) the Purchase Price in accordance with the terms and conditions of Section 2.02(b).

ARTICLE VII

INDEMNIFICATION; SURVIVAL

SECTION 7.01. Indemnification by Seller. Subject to this Article VII, from and after the Closing, Seller shall indemnify Purchaser and its affiliates and each of their respective officers, directors, employees, stockholders, agents and representatives (the “Purchaser Indemnitees”) from and against any and all losses, damages or expenses, including reasonable third-party legal fees and expenses in connection with any Proceeding (collectively, “Losses”), to the extent arising or resulting from any of the following:

(a) any breach of any Specified Representations and any representations and warranties set forth in Section 3.06 (Regulatory Approvals; Compliance Arrangements), Section 3.07 (Hikma Purchase Agreement) and Section 3.08 (API);

(b) any breach of any covenant of Seller contained in this Agreement;

(c) any Excluded Asset; and

(d) any Retained Liability.

SECTION 7.02. Indemnification by Purchaser. Subject to this Article VII, from and after the Closing, Purchaser shall indemnify Seller and its affiliates and each of their respective officers, directors, employees, stockholders, agents and representatives (the “Seller Indemnitees”) from and against any and all Losses, to the extent arising or resulting from any of the following:

(a) any breach of any representation or warranty of Purchaser contained in this Agreement;

(b) any breach of any covenant of Purchaser contained in this Agreement;

(c) any Assumed Liability; and

(d) the Exploitation of the Products following the Closing.

SECTION 7.03. Indemnification Procedures.

(a) Third Party Claims. If any party (the “Indemnified Party”) receives written notice of the commencement of any Proceeding or the assertion of any claim by a third party or the imposition of any penalty or assessment (in each case other than with respect to Taxes) for which indemnity may be sought under Section 7.01 or Section 7.02 (a “Third Party Claim”), and such Indemnified Party intends to seek indemnity pursuant to this Article VII, the Indemnified Party shall promptly (but no later than 30 days of receiving such notice) provide the other party (the “Indemnifying Party”) with written notice of such Third Party Claim, stating the nature, basis, the amount (to the extent known or estimated, which amount shall not be conclusive of the final amount of such Third Party Claim) and a reasonable description of any other material details thereof. Failure of the Indemnified Party to give such notice will not relieve the Indemnifying Party from its indemnification obligations hereunder, except to the extent that the Indemnifying Party is actually prejudiced thereby. The Indemnifying Party will have 20 days from receipt of any such notice of a Third Party Claim to give notice to the Indemnified Party whether it is assuming and controlling the defense, appeal or settlement proceedings thereof with counsel of the Indemnifying Party’s choice; provided, however, that the Indemnifying Party shall not have the right to assume the defense of any Third Party Claim to the extent (but only to the extent) such Third Party Claim (i) relates to any actual or alleged criminal proceeding, action, indictment, allegation or investigation or (ii) seeks an injunction or equitable relief against the Indemnified Party that is not merely ancillary to the principal damages sought in the relevant claim. So long as the Indemnifying Party or the Indemnified Party, as applicable, has assumed the defense, appeal or settlement proceedings of the Third Party Claim in accordance herewith, (1) the other such party may retain separate co-counsel at the controlling party’s cost and expense and participate in (but not control) the defense, appeal or settlement proceedings of the Third Party Claim, (2) the controlling party will not admit any liability, file any papers or consent to the entry of any judgment or enter into any settlement agreement, compromise or discharge with respect to the Third Party Claim without the prior written consent of the other such party and (3) the controlling party will not admit to any wrongdoing by the other such party. The controlling party shall have the right to settle any Third Party Claim for which it obtains a full release of the other such party with respect to such Third Party Claim or to which settlement the Indemnified Party consents in writing (such consent not to be unreasonably withheld, conditioned or delayed). The parties will act in good faith in responding to, defending against, settling or otherwise dealing with Third Party Claims. The parties will also cooperate in any such defense, appeal or settlement proceedings, and give each other reasonable access to all

information relevant thereto. Whether or not the Indemnifying Party has assumed the defense, appeal or settlement proceedings with respect to a Third Party Claim, such Indemnifying Party will not be obligated to indemnify the Indemnified Party hereunder for any settlement entered into or any judgment that was consented to without the Indemnifying Party’s prior written consent (such consent not to be unreasonably withheld, conditioned or delayed). The party assuming such defense, appeal or settlement proceedings shall keep the other party reasonably advised of the status of such Third Party Claim and the defense thereof and shall reasonably consider recommendations made by the other party with respect thereto.

(b) Other Claims. An Indemnified Party shall give the Indemnifying Party written notice of any matter that an Indemnified Party has determined has given or could give rise to a right of indemnification under this Agreement, within 30 days of such determination, stating the amount of the Loss, if known, and the method of computation thereof, and containing a reference to the provisions of this Agreement in respect of which such right of indemnification is claimed or arises. It is the express intention of the parties that the indemnification provided for in this Article VII shall apply to direct claims between the parties for a breach of this Agreement (whether or not involving a third party).

SECTION 7.04. Limitations on Indemnification. Notwithstanding anything to the contrary contained in this Agreement, (i) Seller’s aggregate maximum liability under Section 7.01(a) shall not exceed an amount equal to the Purchase Price with exception of Section 3.08 (API), Seller’s aggregate maximum liability under 3.08 (API) shall not exceed $612,000; (ii) no party shall have any liability for an otherwise indemnifiable Loss that is contingent unless and until such contingent Loss becomes an actual Loss of the Indemnified Party and is due and payable, so long as the claim for such Loss was timely submitted pursuant to the provisions of this Article VII; (iii) no party shall be liable for any Losses to the extent the Purchaser Indemnitees or the Seller Indemnitees, as applicable, failed to mitigate such Losses in accordance with applicable Laws; (iv) no party shall be liable for any Loss to the extent arising from any Law not in force on the date hereof or any change in Law which takes effect retroactively and (v) no party shall be liable for any otherwise indemnifiable Loss arising out of any breach of any representation, warranty, covenant or agreement of such party unless a claim therefor is asserted with specificity and in writing by the Indemnified Party timely in accordance with Section 7.08, failing which such claim shall be waived and extinguished. The waiver of any condition to the Closing based on the accuracy of any representation or warranty or on the performance of or compliance with any covenant or agreement shall be deemed a waiver of the right to indemnification under this Article VII with respect to such representation or warranty, covenant, agreement or obligation. Notwithstanding any implication to the contrary contained in this Agreement, the limits on indemnification set forth in this Agreement shall not apply to any claims or Losses based on fraud or intentional misrepresentation.

SECTION 7.05. Calculation of Indemnity Payments.

(a) The amount of any Loss for which indemnification is provided under this Article VII shall be net of any amounts actually recovered by the Indemnified Party with respect to such

Loss (including payments under insurance policies net of all increases in premiums and other costs of such insurance policies for pursuing a claim thereunder). For Section 3.08 (API), calculation of loss is based on the quantity of APIs that is unusable, which is unexpired as of the Testing Date, with payment of $0.48 per grams for Acyclovir and $25.50 per gram for Prochlorperazine Edisylate.

(b) If an Indemnified Party recovers an amount from a third party (including payments under insurance policies) in respect of Losses that are the subject of indemnification hereunder after all or a portion of such Losses have been paid by an Indemnifying Party pursuant to this Article VII, then the Indemnified Party shall promptly remit to the Indemnifying Party the amount received by the Indemnified Party in respect thereof (up to the amount paid by the Indemnifying Party in respect of such Losses but net of any increase in premiums paid or other costs incurred in connection with the recovery of such proceeds).

(c) Each party shall, and shall cause its respective affiliates to, take all commercially reasonable steps to mitigate any Loss indemnifiable hereunder upon and after becoming aware of any event that could reasonably be expected to give rise to any Loss. No party shall be entitled to any payment, adjustment or indemnification more than once with respect to the same matter.

SECTION 7.06. Exclusive Remedy. From and after the Closing, subject to Section 1.01(b) and Section 8.15, Purchaser’s sole and exclusive remedy with respect to any and all claims relating to this Agreement, the Transferred Assets, the Assumed Liabilities or the transactions contemplated by this Agreement shall be pursuant to the indemnification provisions set forth in this Article VII. In furtherance of the foregoing, Purchaser hereby waives, from and after the Closing, any and all rights, claims and causes of action whether based on warranty, in contract, in tort (including negligence or strict liability) or otherwise that Purchaser or any other Purchaser Indemnitee may have against Seller, any of its affiliates or any other person, arising under or based upon any Law, except pursuant to the indemnification provisions set forth in this Article VII. Notwithstanding anything to the contrary contained in this Agreement, no breach of any representation, warranty, covenant or agreement contained herein shall, after the consummation of the transactions contemplated by this Agreement, give rise to any right on the part of Purchaser, on the one hand, or Seller, on the other hand, to rescind this Agreement or any of the transactions contemplated hereby. No past, present or future Representative, incorporator, member, partner or stockholder of Seller or any of its affiliates shall have any liability, whether based on warranty, in contract, in tort (including negligence or strict liability) or otherwise, for any obligations or liabilities of Seller or any of its affiliates arising under, in connection with or related to this Agreement or for any claim based on, in respect of or by reason of the Acquisition, including any alleged non-disclosure or misrepresentations made by any such persons. Notwithstanding anything to the contrary contained in this Agreement, nothing in this Agreement shall limit the rights, remedies or claims of any party based on fraud or intentional misrepresentation by any other party.

SECTION 7.07. Tax Treatment of Indemnification. For all Tax purposes, Purchaser and Seller agree to treat any adjustments to amounts paid under this Agreement and any indemnity payment under this Agreement as an adjustment to the Purchase Price unless a final determination of a Taxing Authority (which shall include the execution of an IRS Form 870-AD or successor form or an HMRC Enquiry Closure Notice form) provides otherwise.

SECTION 7.08. Survival. All representations and warranties contained in this Agreement, and all claims with respect thereto shall terminate at Closing; provided, however, that (i) Seller’s representations and warranties set forth in Section 3.06 (Regulatory Approvals; Compliance Arrangements), Section 3.07 (Hikma Asset Purchase Agreement), Section 3.08 (API) shall terminate at the close of business on the date that is one year following the Closing Date, and (ii) the Specified Representations and the representations and warranties set forth in Section 4.01 (Organization), Section 4.03 (Authority; Execution and Delivery; Enforceability) and Section 4.05 (Brokers and Finders), shall survive indefinitely; provided, further that the covenants or agreements contained in this Agreement which by their terms contemplate performance after the Closing Date shall survive the Closing only until the expiration of the term of the undertaking set forth in such agreements and covenants. After the Closing, no party shall have any liability or obligation of any nature with respect to any representation, warranty, agreement or covenant after the termination thereof, with the exception of payment of the Purchase Price, unless a notice of a breach thereof giving rise to a right of indemnity shall have been given to the party against whom such indemnity may be sought prior to such time, in which case the representation, warranty, covenant or agreement which is the subject of such claim shall survive, to the extent of the claims described in the notice only, until such claim is resolved, whether or not the amount of the Losses resulting from such breach has been finally determined at the time the notice is given.

SECTION 7.09. No Setoff Rights. Neither party shall have any right of setoff of any amounts due and payable, or any Liabilities arising, under this Agreement, any Ancillary Agreement or any other agreement entered into by the parties or their respective affiliates against any other amounts due and payable, or any other Liabilities arising, under this Agreement, any Ancillary Agreement or any other agreement entered into by the parties or their respective affiliates. The payment obligations under each of this Agreement and the Ancillary Agreements remain independent obligations of each party, irrespective of any amounts owed to any other party under this Agreement, the respective Ancillary Agreements or any other agreement entered into by the parties or their respective affiliates.

ARTICLE VIII

MISCELLANEOUS

SECTION 8.01. Assignment. Seller may assign any of its rights and obligations hereunder (i) to any of its affiliates; provided that Seller, as applicable, shall remain primarily liable for all of its obligations hereunder and (ii) to a third party in connection with a sale or transfer (by means of a merger, stock sale or otherwise) of all or substantially all of Seller’s business and Purchaser may assign its rights and obligations hereunder (i) to any of its affiliates; and (ii) to a third party in connection with a sale or transfer (by means of a merger, stock sale or otherwise) of all or substantially all of Purchaser’s business, subject to applicable Law, provided that in each instance Purchaser shall remain primarily liable for all of its obligations hereunder. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns. Any attempted assignment or transfer in violation of this Section 8.01 shall be null and void.

SECTION 8.02. No Third-Party Beneficiaries. Except as provided in Section 5.01 and Article VII, this Agreement is for the sole benefit of the parties hereto and their respective successors and permitted assigns and nothing herein expressed or implied shall give or be construed to give to any person, other than the parties hereto and such successors and assigns, any legal or equitable rights hereunder.

SECTION 8.03. Expenses. Whether or not the Closing occurs, each of the parties shall pay its own legal, accounting and other fees and expenses incurred in connection with the preparation, execution and delivery of this Agreement and all documents and instruments executed pursuant hereto and the consummation of the transactions contemplated hereby and any other costs and expenses incurred by such party, except as otherwise expressly set forth herein.

SECTION 8.04. Notices. All notices, requests, permissions, waivers and other communications hereunder shall be in writing and shall be deemed to have been duly given (a) five Business Days following sending by registered or certified mail, postage prepaid, (b) when delivered, if delivered personally to the intended recipient and (c) one Business Day following sending by overnight delivery via a national courier service and, in each case, addressed to a party at the following address for such party:

(i)	if to Seller,
	Amphastar Pharmaceuticals, Inc.
	11570 6th Street
	Rancho Cucamonga, CA 91730
	Attention: General Counsel
	Attention: Sr. Vice President of Corporate Administration Center

(ii)	if to Purchaser,
	Athenex, Inc.
	Conventus Building
	1001 Main Street
	Suite 600
	Buffalo, NY 14203
	Attention: Teri Bair, Senior VP of Corp. Development & Legal Affairs,

or to such other address(es) as shall be furnished in writing by any such party to the other party hereto in accordance with the provisions of this Section 8.04.

SECTION 8.05. Interpretation; Certain Definitions.

(a) Any matter set forth in any provision, subprovision, Section or subsection of the Seller Disclosure Schedule shall be deemed to be disclosed for each other provision, subprovision, Section or subsection of the Seller Disclosure Schedule to the extent it is reasonably apparent from the face of such disclosure that such disclosure is applicable to such other provision, subprovision, Section or subsection of the Seller Disclosure Schedule. Inclusion of a reference to or disclosure of any matter or item in this Agreement or in the Seller Disclosure Schedule (i) shall not be construed as an admission or indication that such matter or item is material or that such matter or item is required to be referred to or disclosed, nor shall it be deemed to establish a standard of materiality now or in the future (it being the intent that neither Seller, Purchaser nor any of their respective affiliates, as applicable, shall be penalized for having disclosed more than may be required by the request); (ii) does not represent a determination by Seller, Purchaser or any of their respective affiliates, as applicable, that such matter or item did not arise in the ordinary course; (iii) shall not imply that such matter or item constitutes or would constitute a Material Adverse Effect by the criteria set forth in this Agreement and (iv) shall not imply that disclosure of such matter or item is required by Law or by any Governmental Entity. Without limiting the foregoing, no such reference to or disclosure of a possible breach or violation of any Contract, Law or Judgment shall be construed as an admission or indication that a breach or violation exists or has actually occurred. All Exhibits annexed hereto or referred to herein, and the Seller Disclosure Schedule, are hereby incorporated in and made a part of this Agreement as if set forth in full herein. Any term used in the Seller Disclosure Schedule, or in any Exhibit but not otherwise defined therein, shall have the meaning assigned to such term in this Agreement, if any. References to defined terms in the singular shall include the plural and references to defined terms in the plural shall include the singular. “Extent” in the phrase “to the extent” means the degree to which a subject or other thing extends, and such phrase does not mean simply “if.” The descriptive headings of the several Articles and Sections of this Agreement, the Table of Contents to this Agreement and the Seller Disclosure Schedule are inserted for convenience only, do not constitute a part of this Agreement and shall not affect in any way the meaning or interpretation of this Agreement. All references herein to “Articles,” “Sections,” “Exhibits” or “Schedules” shall be deemed to be references to Articles or Sections hereof or Exhibits or Schedules hereto unless otherwise indicated. The terms “hereof,” “herein,” “hereby” and derivative or similar words refer to this entire Agreement. References (x)

to any statute shall be deemed to refer to such statute as amended from time to time and to any rules or regulations promulgated thereunder and (y) to any Contract are to that Contract as amended, modified or supplemented from time to time in accordance with the terms hereof and thereof. Except where the context otherwise requires, wherever used, the word “or” is used in the inclusive sense (and/or). Any references in this Agreement to dollars, or to $ are expressed in the currency of the United States.

(b) For all purposes hereof:

“affiliate” means, with respect to any party, any person or entity controlling, controlled by or under common control with such party; provided that, for the avoidance of doubt, the term “affiliate” shall not include the shareholders of (i) Purchaser or (ii) Seller. For purposes of this definition, “control” means, with respect to any entity, the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such entity, whether through the ownership of voting securities (or other ownership interest), by contract or otherwise.

“ANDA” means an abbreviated new drug application submitted in accordance with Section 505(j) of the Federal Food, Drug and Cosmetic Act.

“Business Day” means any day, other than a Saturday or a Sunday, on which commercial banks are not required or authorized to remain closed in New York City.

“Claim” means any claims, demands, actions, suits and causes of action, whether class, individual or otherwise in nature, in law or in equity.

“Commingled Documents” means Transferred Books and Records (other than Regulatory Approvals) within the categories listed in Section 5.01 of the Seller Disclosure Schedule that include both (i) information or data related to Transferred Assets and (ii) Third Party Information.

“Contract” means any contract, agreement, lease, sublease, license, commitment, franchise, understanding, arrangement, bond, debenture, note, mortgage, indenture, guarantee, purchase order, term sheet, or other legally binding instrument, whether written or oral.

“Exploit” means to make, have made, import, export, use, have used, sell, offer for sale, have sold, research, develop (including seeking, obtaining and maintaining Regulatory Approval), commercialize, hold or keep (whether for disposal or otherwise), transport, distribute, promote, market, or otherwise dispose of and Manufacture or have Manufactured. “Exploitation” has a corresponding meaning.

“Governmental Entity” means any federal, national, supranational, state, provincial, local, foreign or administrative court of competent jurisdiction, governmental agency, authority, instrumentality or regulatory body.

“including” (and, with correlative meaning, “include”) means including, without limiting the generality of any description preceding or succeeding such term, and the rule of ejusdem generis will not be applicable to limit a general statement preceded, followed by or referable to an enumeration of specific matters, to matters similar to those specifically mentioned.

“Intellectual Property” means all (i) patents and patent applications, including divisionals, continuations, continuations-in-part, renewals, extensions, reissues and reexaminations; (ii) trademarks, trade names, logos, service marks, and other indicia of origin, all registrations and applications for any of the foregoing, and all goodwill associated therewith and symbolized thereby, including all renewals of same; (iii) Know-How, including Trade Secrets that are the subject of efforts that are reasonable under the circumstances to maintain their secrecy; (iv) published and unpublished original works of authorship (including software and data compilations to the extent it constitutes an original work of authorship) fixed in any tangible media, and registrations and applications therefor, and any copyrights with respect thereto and all renewals, extensions, restorations and reversions thereof, database rights and moral rights; (v) rights of publicity and privacy; (vi) Internet domain names; and (vii) any other domestic, state and foreign intellectual property rights (including industrial property rights) to the extent entitled to legal protection as such.

“Know-How” means all inventions, Trade Secrets, discoveries, know-how, data, information (including scientific, technical or regulatory information), processes, means, methods, practices, formulae, instructions, procedures, techniques, materials, technology, results, analyses, designs, drawings, computer programs, specifications, technical assistance, in written, electronic or any other form, whether or not patentable, including any such Know-How that relates to Manufacturing of the Products.

“made available” means, with respect to any document, that such document was delivered to Purchaser or its Representatives by any of Seller or its affiliates or Representatives prior to the date hereof.

“Manufacture” means all activities related to the production, manufacture, processing, filling, finishing, packaging, labeling, shipping and holding (prior to distribution) and distribution of any of the Products or any intermediate thereof, including process development, process qualification and validation, scale-up, commercial manufacture and analytic development, product characterization, stability testing, quality assurance and quality control.

“Net Sales” means the gross invoiced sales of the Products from Transferred Assets to all customers less (i) chargebacks; (ii) trade discounts, credits or allowances; (iii) costs of replacements, returns, recalls or rebates (including but not limited to group purchasing organization fees and rebates); (iv) discounts or rebates or other payments required by law to be made under Medicaid, Medicare or other governmental special medical assistance programs (v) wholesaler service charges; (vi) sales, excise or value added taxes paid on or in relation to sales of the Products, all as calculated in accordance with US GAAP; and (vii) two percent (2%) of the Net Sales price representing the overhead attributable to marketing and selling the Products.

“NDA” means a New Drug Application, and any amendments or supplements thereto, filed with the FDA pursuant to its rules and regulations.

“Permitted Liens” means (i) such Liens as are set forth in Section 8.05(b)(ii) of the Seller Disclosure Schedule, (ii) mechanics’, materialmen’s, carriers’, workmen’s, repairmen’s or other like Liens arising or incurred in the ordinary course of Seller’s business relating to obligations as to which there is no default on the part of Seller or the validity or amount of which is being

contested in good faith through appropriate proceedings, (iii) Liens arising under original purchase price conditional sales Contracts and equipment leases with third parties entered into in the ordinary course of Seller’s business, (iv) Liens for Taxes and other governmental charges that are not due and payable or being contested in good faith, (v) recorded or unrecorded easements, covenants, restrictions, rights-of-way, zoning, building restrictions and other similar matters, (vi) licenses and options relating to Intellectual Property granted in the ordinary course of Seller’s business and (vii) such imperfections of title, licenses or Liens, if any, which do not materially impair the continued use and operation or value of the Transferred Assets.

“person” means any individual, firm, corporation, partnership, limited liability company, trust, joint venture, Governmental Entity or other entity.

“Post-Closing Tax Period” means all taxable periods beginning on or after the Closing Date and the portion beginning on the Closing Date of any tax period that includes but does not end on the day prior to the Closing Date.

“Pre-Closing Tax Period” means all taxable periods ending prior to the Closing Date and the portion ending on the day prior to the Closing Date of any taxable period that includes but does not end on the day prior to the Closing Date.

“Product” means any of the products set forth in Section 8.05(b)(iii) of the Seller Disclosure Schedule.

“Purchaser Change in Ownership Letters” means the letters to the FDA substantially in the form of Exhibit B, accepting the transfer of rights to the Regulatory Approvals, if applicable, from Seller.

“Representatives” means, with respect to a person, such person’s directors, officers, employees, investment bankers, financial advisors, attorneys, accountants or other advisors, agents or representatives.

“Seller Change in Ownership Letters” means the letters to the FDA substantially in the form of Exhibit C, transferring the rights to the Regulatory Approvals, if applicable, to Purchaser.

“Specified Representations” means the representations and warranties of Seller set forth in Section 3.01 (Organization and Standing), Section 3.02 (Authority; Execution and Delivery; Enforceability) and Section 3.04 (Title to Assets).

“Subsidiary” of any person means another person, an amount of the voting securities, other voting ownership or voting partnership interests of which is sufficient to elect at least a majority of its Board of Directors or other governing body (or, if there are no such voting interests, 50% or more of the equity interests of which) is owned directly or indirectly by such first person or by another subsidiary of such first person.

“Tax” means all forms of taxation, including any interest or penalties that may become payable in respect thereof, imposed by any federal, national, supranational, state, provincial, local, foreign or other Taxing Authority, including income, franchise, gross receipts, occupation, real and personal property, stamp, sales, use, excise, profits, capital, net worth, employment,

unemployment, payroll, social security, estimated, value added, ad valorem, custom duties, transfer, recapture, withholding, workers’ compensation, occupancy, health and other taxes or obligations of the same or of a similar nature, and shall include any liability for such amounts whether as a primary obligor or as a result of being a transferee or successor of another person or as a result of either being a member of a combined, consolidated, unitary or affiliated group or of a contractual obligation to indemnify any person or other entity.

“Tax Return” means any report, return, document, declaration or other information or filing required to be supplied to any Taxing Authority with respect to Taxes, including any amendment made with respect thereto.

“Taxing Authority” means any federal, national, supranational, state, provincial, local or foreign government, any subdivision, agency, commission or authority thereof or any quasi-governmental body exercising tax regulatory authority.

“Trade Secrets” means information that derives independent economic value from not being generally well known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use, including confidential or proprietary information including customer, supplier, vendor and distributor lists and related data, invention disclosures, discoveries, lab notebooks or journals.

“Transfer Taxes” means all sales, use, transfer, recording, value added, ad valorem, privilege, documentary, gross receipts, registration, conveyance, excise, license, stamp or similar fees and Taxes arising out of, in connection with or attributable to the transactions effectuated pursuant to this Agreement.

SECTION 8.06. Limitation on Damages. Notwithstanding anything to the contrary contained in this Agreement, in no event shall either party be liable for special, indirect, incidental, exemplary, punitive or consequential damages of the other party (including for lost or anticipated profits, revenues or opportunities, diminution in value or business interruption), or for any damages calculated by reference to a multiplier of revenue, profits, EBITDA or similar methodology (provided, that, in any case, damages payable to a third party shall constitute direct damages notwithstanding the characterization of such damages vis-à -vis the third party) whether or not caused by or resulting from the actions of such party or the breach of its covenants, agreements, representations or warranties hereunder and whether or not based on or in warranty, contract, tort (including negligence or strict liability) or otherwise.

SECTION 8.07. Counterparts. This Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement, and shall become effective when each party hereto shall have received counterparts hereof signed by each of the other parties hereto. If any signature is delivered by facsimile transmission or by PDF, such signature shall create a valid and binding obligation of the party executing (or on whose behalf the signature is executed) with the same force and effect as if such facsimile or PDF signature were an original thereof.

SECTION 8.08. Entire Agreement. This Agreement, and the Exhibits and Seller Disclosure Schedule annexed hereto, the Confidentiality Agreement and the Ancillary

Agreements constitute the entire understanding between the parties with respect to the subject matter hereof and thereof, and supersede all other understandings, negotiations, discussions, conversations and writings with respect thereto. The parties agree to define their rights, liabilities and obligations with respect to such understanding and the transactions contemplated hereby exclusively in contract pursuant to the express terms and provisions of this Agreement, and the parties expressly disclaim that they are owed any duties or are entitled to any remedies not expressly set forth in this Agreement. In the event of any conflict between the provisions of this Agreement (including the Seller Disclosure Schedule and Exhibits), on the one hand, and the provisions of the Confidentiality Agreement or the Ancillary Agreements (including the schedules and exhibits thereto), on the other hand, the provisions of this Agreement shall control.

SECTION 8.09. Severability. In the event that any provision contained in this Agreement shall for any reason be held to be invalid, illegal or unenforceable in any jurisdiction, such provision shall be ineffective as to such jurisdiction to the extent of such invalidity, illegality or unenforceability without invalidating or affecting the remaining provisions hereof or affecting the validity, legality or enforceability of such provision in any other jurisdiction. Upon such a determination, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties hereto as closely as possible in a reasonably acceptable manner in order that the transactions contemplated hereby may be consummated as originally contemplated to the fullest extent possible.

SECTION 8.10. Governing Law. This Agreement, the negotiation, execution or performance of this Agreement and any disputes arising under or related hereto (whether for breach of contract, tortious conduct or otherwise) shall be governed and construed in accordance with the Laws of the State of Delaware, without reference to its conflicts of law principles that would refer the construction of or resolution of any dispute under this Agreement to the substantive Laws of another jurisdiction.

SECTION 8.11. Jurisdiction. Each party irrevocably agrees that, subject to Section 1.01(b) and Section 8.15, any Proceeding against them arising out of or in connection with this Agreement or the transactions contemplated hereby or disputes relating hereto (whether for breach of contract, tortious conduct or otherwise) shall be brought in the United States District Court of Delaware, and hereby irrevocably accepts and submits to the jurisdiction and venue of the aforesaid courts in personam with respect to any such Proceeding and waives to the fullest extent permitted by Law any objection that it may now or hereafter have that any such Proceeding has been brought in an inconvenient forum.

SECTION 8.12. Service of Process. Each of the parties consents to service of any process, summons, notice or document which may be served in any Proceeding in the United States District Court of Delaware, which service may be made by certified or registered mail, postage prepaid, or as otherwise provided in Section 8.04, to such party’s respective address set forth in Section 8.04.

SECTION 8.13. Waiver of Jury Trial. Each party hereby waives, to the fullest extent permitted by Law, any right it may have to a trial by jury in respect to any litigation directly or indirectly arising out of, under or in connection with this Agreement or any Ancillary Agreement or the transactions contemplated hereby or thereby or disputes relating hereto or thereto. Each party (a) certifies that no representative, agent or attorney of any other party has represented, expressly or otherwise, that such other party would not, in the event of litigation, seek to enforce the foregoing waiver and (b) acknowledges that it and the other party hereto have been induced to enter into this Agreement by, among other things, the mutual waivers and certifications in this Section 8.13.

SECTION 8.14. Amendments and Waivers. This Agreement may be amended, modified, superseded or canceled and any of the terms, covenants, representations, warranties or conditions hereof may be waived only by an instrument in writing signed by each of the parties or, in the case of a waiver, by or on behalf of the party waiving compliance. No course of dealing between the parties shall be effective to amend or waive any provision of this Agreement.

SECTION 8.15. Specific Performance. The parties agree that irreparable damage would occur in the event that the parties do not perform their obligations under the provisions of this Agreement in accordance with its specified terms or otherwise breach such provisions. The parties acknowledge and agree that (a) the parties shall be entitled to an injunction or injunctions, specific performance or other equitable relief to prevent breaches of this Agreement and to enforce specifically the terms and provisions hereof in any court of competent jurisdiction without proof of damages or otherwise, this being in addition to any other remedy to which they are entitled under this Agreement and (b) the right of specific enforcement is an integral part of the transactions contemplated by this Agreement and without that right, neither Seller nor Purchaser would have entered into this Agreement. The parties agree not to assert that a remedy of specific enforcement is unenforceable, invalid, contrary to Law or inequitable for any reason, and not to assert that a remedy of monetary damages would provide an adequate remedy or that the parties otherwise have an adequate remedy at law. The parties hereto acknowledge and agree that any party seeking an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement in accordance with this Section 8.15 shall not be required to provide any bond or other security in connection with any such order or injunction.

SECTION 8.16. Joint Drafting. The parties hereto have been represented by counsel in the negotiations and preparation of this Agreement; therefore, this Agreement will be deemed to be drafted by each of the parties hereto, and no rule of construction will be invoked respecting the authorship of this Agreement.

SECTION 8.17. Fulfillment of Obligations. Any obligation of any party to any other party under this Agreement or any of the Ancillary Agreements, which obligation is performed, satisfied or fulfilled completely by an affiliate of such party, shall be deemed to have been performed, satisfied or fulfilled by such party.

IN WITNESS WHEREOF, Seller and Purchaser have duly executed this Agreement as of the date first written above.

ATHENEX, INC.
By:
	Name:
	Title:

AMPHASTAR PHARMACEUTICALS, INC.
By:
	Name:
	Title:

SIGNATURE PAGE

ASSET PURCHASE AGREEMENT

SELLER DISCLOSURE SCHEDULE TO

ASSET PURCHASE AGREEMENT

            , 2017

The attached disclosure schedule (this “Seller Disclosure Schedule”) constitutes the Seller Disclosure Schedule referred to in the Asset Purchase Agreement (the “Agreement”) dated as of             , 2017, between Athenex Inc., a Delaware corporation (“Purchaser”) and Amphastar Pharmaceuticals, Inc., a Delaware corporation (“Seller”). Any term used in this Seller Disclosure Schedule and not otherwise defined herein shall have the meaning assigned to such term in the Agreement, if any. All references to section numbers contained in this Seller Disclosure Schedule refer to sections of the Agreement, unless the context otherwise requires.

This Seller Disclosure Schedule is qualified in its entirety by reference to specific provisions of the Agreement, and is not intended to constitute, and shall not be construed as constituting, representations, warranties, covenants or agreements of Seller or any of its affiliates except as and to the extent provided in the Agreement. Any matter set forth in any provision, subprovision, section or subsection of this Seller Disclosure Schedule shall be deemed to be disclosed for each other provision, subprovision, section or subsection of this Seller Disclosure Schedule to the extent it is reasonably apparent from the face of such disclosure that such disclosure is applicable to such other provision, subprovision, section or subsection of this Seller Disclosure Schedule. This Seller Disclosure Schedule and the information and disclosures contained herein are intended only to qualify the representations, warranties and covenants of Seller contained in the Agreement, and in no event shall the listing of such matters in this Seller Disclosure Schedule be deemed or interpreted to broaden or otherwise amplify such representations, warranties or covenants. Inclusion of a reference to or disclosure of any matter or item in this Seller Disclosure Schedule (i) shall not be construed as an admission or indication that such matter or item is material or that such matter or item is required to be referred to or disclosed, nor shall it be deemed to establish a standard of materiality now or in the future (it being the intent that neither Seller nor any of its affiliates shall be penalized for having disclosed more than may be required by the request); (ii) does not represent a determination by Seller or any of its affiliates that such matter or item did not arise in the ordinary course; (iii) shall not imply that such matter or item constitutes or would result in a Material Adverse Effect by the criteria set forth in the Agreement and (iv) shall not imply that disclosure of any such matter or item is required by Law or by any Governmental Entity. Without limiting the foregoing, no such reference to or disclosure of a possible breach or violation of any Contract, Law or Judgment shall be construed as an admission or indication that a breach or violation exists or has actually occurred. The information contained in this Seller Disclosure Schedule is disclosed solely for the purposes of the Agreement, and no information contained in this Seller Disclosure Schedule shall be deemed to be an admission by Seller to any third party of any matter whatsoever. In disclosing this information, Seller expressly does not waive any attorney client privilege associated with such information or any protection afforded by the work product doctrine with respect to any of the matters disclosed or discussed herein.

Matters reflected in this Seller Disclosure Schedule are not necessarily limited to matters required by the Agreement to be reflected herein. To the extent any such additional matters are included, they are included for information purposes and do not necessarily include other matters of a similar nature.

The descriptive headings of the several sections of this Seller Disclosure Schedule are inserted for convenience only, do not constitute a part of this Seller Disclosure Schedule and shall not affect in any way the meaning or interpretation of this Seller Disclosure Schedule. The contents of all schedules, annexes and attachments to this Seller Disclosure Schedule are incorporated by reference in this Seller Disclosure Schedule as though fully set forth in this Seller Disclosure Schedule.

The information contained in this Seller Disclosure Schedule is confidential information of Seller, and Purchaser and its respective affiliates are obligated to maintain and protect such information pursuant to the Agreement and the Confidentiality Agreement.

Section 1.02(a)(i)

Transferred Books and Records

Quality/Production Data

1. Annual stability report and any associated OOS/OOT

2. API specific analytical methods

3. General test methods

4. Process validation reports

5. Container Closure Integrity Test reports

6. Annual Product Review

7. Product Quality Assessment, if applicable

8. Final Product Certificate of Analysis

9. Executed batch records

10. Master batch records template

11. API specifications

12. Non compendia excipients specifications, analytical methods and analytical methods validations, if available

Regulatory Data

1. All official ANDA documentation (Vol. A correspondence, original application, amendments, supplements, etc.) and electronic submission sequences

2. Active pharmaceutical ingredient DMF dossiers

3. Product specific Field Alert Reports and Recalls, if applicable

4. Product specific labeling files

5. Advertising/promotion record, if applicable

6. Clinical records, if applicable

7. Global Field Alert Reports and Recalls

8. Labeling files and structured product labeling files

9. Adverse events and product complaints, if applicable

Section 1.02(a)(ii)

Regulatory Approvals

Current (A)NDA #	Original (A)NDA #	Product	Strength	Marketing Status
074596	74-596	Acyclovir for Injection USP	500mg	Discontinued
		Acyclovir for Injection USP	1g	Discontinued
074441	74-441	Bumetanide Injection USP	0.25mg/mL, 2mL	Discontinued
		Bumetanide Injection USP	0.25mg/mL, 4mL	Discontinued
		Bumetanide Injection USP	0.25mg/mL, 10mL	Discontinued
074617	74-617	Diltiazem HCl Injection	5mg/mL, 5mL	Discontinued
		Diltiazem HCl Injection	5mg/mL, 10mL	Discontinued
		Diltiazem HCl Injection	5mg/mL, 25mL	Discontinued
074939	74-939	Dipyridamole Injection USP	5mg/mL, 10mL	Discontinued
076266	76-266	Doxapram HCl Injection USP	20mg/mL, 20mL	Discontinued

Current (A)NDA #	Original (A)NDA #	Product	Strength	Marketing Status
075634	75-634	Enalaprilat Injection	1.25mg/mL, 2mL	Discontinued
075825	75-825	Famotidine Injection (Pharmacy Bulk; Preservative-Free)	10mg/mL, 50mL	Discontinued
075684	75-684	Famotidine Injection (Pharmacy Bulk; Preserved)	10mg/mL, 50mL	Discontinued
075622	75-622	Famotidine Injection (Preservative-Free)	10mg/mL, 2mL	Discontinued
075651	75-651	Famotidine Injection (Preserved)	10mg/mL, 4mL	Discontinued
		Famotidine Injection (Preserved)	10mg/mL, 20mL	Discontinued
040540	40-540	Prochlorperazine Edisylate Injection USP	5mg/mL, 2mL	Discontinued
		Prochlorperazine Edisylate Injection USP	5mg/mL, 10mL	Discontinued
075792	75-792	Propranolol HCl Injection USP	1mg/mL, 1mL	Discontinued
076770	76-770	Terbutaline Sulfate Injection USP	1mg/mL, 1mL	Discontinued
076295	76-295	Valproate Sodium Injection USP	100mg/mL, 5mL	Discontinued

Section 1.02(a)(iii)

Inventory of the APIs

Item Number	Description		Expiry	Vendor Lot	Lot/Serial	Qty	UM
BNCH3497S	ACYCLOVIR USP/EP	Excella GmbH	Feb-16	1100236	11-0314	47,991.73	gm
BNCH3497S	ACYCLOVIR USP/EP	Excella GmbH	Feb-16	1100236	11-0314	49,995.38	gm
BNCH3497S	ACYCLOVIR USP/EP	Excella GmbH	Feb-16	1100236	11-0314	49,995.38	gm
BNCH3497S	ACYCLOVIR USP/EP	Excella GmbH	Feb-16	1100236	11-0314	49,995.38	gm
BNCH3497S	ACYCLOVIR USP/EP	Excella GmbH	Feb-16	1100236	11-0314	49,995.38	gm
BNCH3497S	ACYCLOVIR USP/EP	Excella GmbH	24-Jan-17	1200590	12-0103	4,179.87	gm
BNCH3497S	ACYCLOVIR USP/EP	Excella GmbH	24-Jan-17	1200590	12-0103	49,947.41	gm
BNCH3497S	ACYCLOVIR USP/EP	Excella GmbH	24-Jan-17	1200590	12-0103	49,947.41	gm
BNCH3497S	ACYCLOVIR USP/EP	Excella GmbH	12-Dec-17	9030400	13-0032	19,982.23	gm
BNCH3497S	ACYCLOVIR USP/EP	Excella GmbH	12-Dec-17	9030400	13-0032	49,982.23	gm
BNCH3497S	ACYCLOVIR USP/EP	Excella GmbH	12-Dec-17	9030400	13-0032	49,982.23*	gm
BNCH3529	DILTIAZEM HCL, USP	FERMION (4029)INTERCHEM	14-Jun-15	1343727	10-0579	36,543.55	gm
BNCH3529	DILTIAZEM HCL, USP	FERMION (4029)INTERCHEM	28-Feb-16	1386196	11-0238	20,690.63	gm
BNCH3529	DILTIAZEM HCL, USP	FERMION (4029)INTERCHEM	28-Feb-16	1386196	11-0238	39,968.63	gm

BNCH3529	DILTIAZEM HCL, USP	FERMION (4029)INTERCHEM	28-Feb-16	1386196	11-0238	39,992.27	gm
BNCH3529	DILTIAZEM HCL, USP	FERMION (4029)INTERCHEM	28-Feb-16	1386196	11-0238	39,998.49	gm
BNCH3529	DILTIAZEM HCL, USP	FERMION (4029)INTERCHEM	28-Feb-16	1386196	11-0238	39,992.27	gm
BNCH3887	DIPYRIDAMOLE, USP	GYMA/SIMS	Dec-14	155.106	10-0291	24,688.58	GM
BNCH3711	ENALAPRILAT, USP	Excella GmbH	Nov-14	0911473	10-0236	1,425.86	GM
BNCH3711	ENALAPRILAT, USP	Excella GmbH	Nov-14	0911473	11-0002	733.29	GM
BNCH3711	ENALAPRILAT, USP	Excella GmbH	Nov-14	0911473	11-0152	1,483.12	GM
BNCH3721	FAMOTIDINE	GYMA/ECROS	21-Oct-12	F 307	10-0101	5,647.73	GM
BNCH3721	FAMOTIDINE	GYMA/ECROS	25-May-13	F 311	10-0715	24,846.40	GM
BNCH3721	FAMOTIDINE	GYMA/ECROS	9-Dec-13	F 316	11-0181	24,857.84	GM
BNCH3721	FAMOTIDINE	GYMA/ECROS	9-Dec-13	F 316	11-0181	24,995.60	GM
BNCH3721	FAMOTIDINE	GYMA/ECROS	9-Dec-13	F 316	11-0181	24,995.60	GM
BNCH3721	FAMOTIDINE	GYMA/ECROS	9-Dec-13	F 316	11-0181	24,995.60	GM
BNCH3721	FAMOTIDINE	GYMA/ECROS	9-Dec-13	F 316	11-0181	24,995.60	GM
BNCH3951	PROCHLORPERAZINE	EDISYLATE TRIFARMA S.p.A	July 2016	PROPER-ES/072/L	11-0531	4,519.75	GM
BNCH3951	PROCHLORPERAZINE	EDISYLATE TRIFARMA S.p.A	Nov 2016	PROPER-ES/074/L	11-0701	7,372.95	GM
BNCH3951	PROCHLORPERAZINE	EDISYLATE TRIFARMA S.p.A	Nov 2016	PROPER-ES/076/L	11-0703	5,460.75	GM

BNCH3951	PROCHLORPERAZINE	EDISYLATE TRIFARMA S.p.A	Nov 2016	PROPER- ES/077/L	12-0005A	7,358.51	GM
BNCH3951	PROCHLORPERAZINE	EDISYLATE TRIFARMA S.p.A	June 2018	PROPER- ES/083/L	13-0167A	7,300.00*	GM
BNCH3951	PROCHLORPERAZINE	EDISYLATE TRIFARMA S.p.A	June 2018	PROPER- ES/084/L	13-0168	7,400.00*	GM
BNCH3951	PROCHLORPERAZINE	EDISYLATE TRIFARMA S.p.A	June 2018	PROPER- ES/085/L	13-0169	7,062.60*	GM
BNCH3987	TERBUTALINE SULFATE	CAMBREX PROFRMACO MILANO	Jan 2015	220103	11-0392	1,945.58	GM

* Seller will keep certain amount of APIs that are not expired as of the Closing Date as “Retain Samples”, the quantity for Retain Samples will be according to the applicable United States Pharmacopeia.

Section 1.03(a)(iv)

Assumed Liabilities

It is possible that the FDA may require that additional studies be performed or data and information be provided or that additional requirements be imposed in connection with Purchaser’s transfer of the Products to a new facility in order to exploit the Regulatory Approvals.

Section 5.01(c)

Commingled Documents

(i)

Commingled Document Type	Document Description	Document Format	Method of Delivery to Purchaser
Current Supplier Dossiers and Vendor Qualification for current suppliers of vials, stoppers, seals, active pharmaceutical ingredients, and excipients	A Supplier Dossier is a package of documents which supports the adequacy of the supplier (vendor or manufacturer) to provide a raw material or component. The dossier may include the quality agreement, quality standards, standard operating procedures, supplier questionnaires and any audit results. Vendor Qualification includes documentation supporting the auditing process which ensures a product and/or a service provided by the vendor consistently meets the quality requirements set forth by the firm.	Paper and Electronic (some in each format)	All commingled supplier dossiers will be transferred to Purchaser. Information in these dossiers identifying products not included in the Transferred Assets, and the respective customer information, will be redacted.
Field Alert Reports (FAR)	FDA form filed when there is any known failure to meet specifications (testing requirements) of one or more distributed batches of the drug product as established in the drug product application (NDA or ANDA).	Paper and Electronic (some in each format)	All commingled Field Alert Reports will be transferred to Purchaser. Information in these reports identifying products not included in the Transferred Assets, and the respective customer information, will be redacted.

Commingled Document Type	Document Description	Document Format	Method of Delivery to Purchaser
Recall Documentation	The documentation filled out to designate the need to remove or correct a marketed product that the FDA considers to be in violation of the Laws it administers and against which the agency would initiate legal action, e.g., seizure.	Paper and Electronic (some in each format)	All Transferred Asset-specific Recalls will be transferred to Purchaser.
Container Closure Integrity Testing Reports	A container closure system refers to the sum of packaging components that together contain and protect the drug product. The report shows that each of the components conforms to sterility requirements that when the product is placed in the component, sterility is maintained.	Paper	All container closure integrity testing reports will be transferred to Purchaser. Information in these reports identifying products not included in the Transferred Assets, and the respective customer information, will be redacted.
FDA Minutes	Minutes from meetings with the FDA to discuss the state of BVL and the Transferred Assets, supply from 2011 forward.	Paper and Electronic (some in each format)	Minutes from meetings with the FDA from 2011 to the present will be transferred to Purchaser. Information in these minutes identifying products not included in the Transferred Assets, and the respective customer information, will be redacted.
Validation Reports and Raw Data	Validation reports and raw data from the quality function	Electronic (for validation reports) and Paper (for raw data)	All validation reports and raw data will be transferred to Purchaser. Information in these materials identifying products not included in the Transferred Assets, and the respective customer information, will be redacted.

(ii)

Commingled Document Type	Document Description	Document Format	Method of Delivery to Purchaser
Investigations (including Investigations related to Field Alert Reports and Recalls)	An investigation is the process and the documentation of the process of using inquiries and examinations to gather facts and information to solve a problem or resolve an issue with root cause of the problem. The problem is an event determined to have an impact on a regulatory submission, validated (tested and confirmed) parameter, policies or specifications (acceptance criteria).	Paper and Electronic (some in each format)	Summaries of Product specific investigations for commercial Products are included in Annual Product Reviews (2009 to present) that will be provided to Purchaser. Investigations tied to ANDA submissions will be provided to Purchaser as part of the ANDA with redaction to remove non-Transferred Asset specific information. Upon request, Seller will use commercially reasonable efforts to obtain from Hikma, or provide Purchaser with access to, such information (which will have all non-Transferred Asset information redacted).
Out of Specification (OOS) and Out of Trend (OOT) Reports for Laboratory Results	The specification is the explicit set of requirements to be satisfied by the product, raw material or component, which makes it suitable for use. When these requirements are not met that failure is called being “out of specification.” The documentation represents the investigation performed to understand the out of specification event.	Paper and Electronic (some in each format)	Summaries of product specific OOS and OOT reports for Transferred Assets are included in Annual Product Reviews (2009 to present) that will be provided to Purchaser. Upon request, Seller will use commercially reasonable efforts to obtain from Hikma, or provide Purchaser with access

Commingled Document Type	Document Description	Document Format	Method of Delivery to Purchaser
	An out of trend result is one that does not follow the expected values with respect to previously collected data. That data may be within specification but not within the norm for that product. The documentation represents the investigation performed to understand the out of trend event.		to, such information (which will have all non-Transferred Asset information redacted).
Change Controls	The commercial system process to document all changes that have the potential to impact product registration, cGMPs, product attributes (safety, identity, strength, purity and quality) and/or the state of validation of processes, equipment, instruments, facilities and systems.	Paper and Electronic (some in each format)	Summaries of Product specific change controls are included in Annual Reports to the FDA that will be provided to Purchaser. Upon request, Seller will use commercially reasonable efforts to obtain from Hikma, or provide Purchaser with access to, such information (which will have all non-Transferred Asset information redacted).
Corrective Actions and Preventive Actions (CA/PA)	A corrective action is the immediate action and the documentation of the action taken to eliminate or mitigate the effects of an existing nonconformance (failure to meet criteria or perform to procedure), defect or any other event which is outside the regulatory filing. A preventive action is an action and the documentation of the action taken to reduce the potential of reoccurrence of the defined root cause in an investigation or nonconformance.	Paper and Electronic (some in each format)	Summaries of product specific change controls resulting from CA/PA actions are included in Annual Reports to the FDA that will be provided to Purchaser. Upon request, Seller will use commercially reasonable efforts to obtain from Hikma, or provide Purchaser with access to, such information (which will have all non-Transferred Asset information redacted).

(iii)

Commingled Document Type	Document Description	Document Format	Method of Delivery to Purchaser
Laboratory Notebooks – Development (Pre Product Approval and Support Post Approval) Includes all work tied to development work for all Bedford Business Products and all Transferred Assets/Products, pre-product approval and post-approval.	Documentation from the laboratory and the primary record of laboratory testing for product development and lifecycle management. May include interpretation of the analysis or an assessment against a defined set of limits.	Paper for those not commingled, Electronic (and redacted) for those commingled.	Notebooks containing Transferred Asset information will be scanned, redacted and Purchaser will receive electronic copies of all Transferred Asset information.

Section 8.05(b)(ii)

Permitted Liens

None.

Section 8.05(b)(iii)

Products

acyclovir sodium

bumetanide

diltiazem hydrochloride

dipyridamole

doxapram hydrochloride

enalaprilat

famotidine

prochlorperazine edisylate

propranolol hydrochloride

terbutaline sulfate

valproate sodium

Exhibit A

Forms of Transfer Documents

(See attached)

BILL OF SALE AND

ASSIGNMENT AND ASSUMPTION AGREEMENT

This Bill of Sale and Assignment and Assumption Agreement (this “Agreement”) is made and entered into effective as of             , 2017 by and between Athenex, Inc., a Delaware corporation (“Purchaser”) and Amphastar Pharmaceuticals, Inc., a Delaware corporation (“Seller”). Seller and Purchaser may each be referred to herein as a “Party” and collectively as the “Parties.”

RECITALS

WHEREAS, Seller and Purchaser have entered into that certain Asset Purchase Agreement, dated as of             , 2017 (as the same may be amended, restated, supplemented or modified from time to time, the “Asset Purchase Agreement”); and

WHEREAS, pursuant to the Asset Purchase Agreement. Seller has agreed to sell the Transferred Assets and transfer the Assumed Liabilities to Purchaser, and Purchaser has agreed to purchase the Transferred Assets and assume the Assumed Liabilities from Seller.

AGREEMENT

NOW, THEREFORE, for consideration of the mutual agreements and covenants contained herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties, intending to be legally bound, agree as follows:

1. Definitions. Unless otherwise specifically provided herein, capitalized terms used in this Agreement and not otherwise defined herein shall have the respective meanings ascribed thereto in the Asset Purchase Agreement.

2. Conveyance and Acceptance. In accordance with the provisions of the Asset Purchase Agreement, Seller hereby sells, transfers, conveys, assigns and delivers to Purchaser all of Seller’s right, title and interest in and to the Transferred Assets, and Purchaser hereby purchases and accepts the Transferred Assets, in each case, free and clear of all Liens other than Permitted Liens.

3. Assumption of Assumed Liabilities. In accordance with the provisions of the Asset Purchase Agreement, Seller hereby assigns to Purchaser the Assumed Liabilities and Purchaser hereby assumes and agrees to pay and discharge when due the Assumed Liabilities.

4. Asset Purchase Agreement Controls. Notwithstanding any other provision of this Agreement to the contrary, nothing contained herein shall in any way supersede, modify, replace, amend, change, rescind, waive, exceed, expand, enlarge or in any way affect the provisions, including warranties, covenants, agreements, conditions, representations or, in general any of the rights and remedies, or any of the obligations of Purchaser or Seller set forth in the Asset Purchase Agreement. This Agreement is subject to and governed entirely in accordance with the terms and conditions of the Asset Purchase Agreement. Nothing contained herein is intended to modify or supersede any of the provisions of the Asset Purchase Agreement.

5. Miscellaneous.

(a) This Agreement, the negotiation, execution or performance of this Agreement and any disputes arising under or related hereto (whether for breach of contract, tortious conduct or otherwise) shall be governed and construed in accordance with the Laws of the State of Delaware, without reference to its conflicts of laws principles that would refer the interpretation or construction of, or resolution of any dispute under, this Agreement to the substantive Laws of another jurisdiction.

(b) This Agreement may be amended, modified, superseded or canceled, and any of the terms, covenants, representations, warranties or conditions hereof may be waived only by an instrument in writing signed by each of the parties or, in the case of a waiver, by or on behalf of the party waiving compliance. No course of dealing between the parties shall be effective to amend of waive any provision of this Agreement.

(c) All legal and other costs and expenses incurred in connection herewith and the transactions contemplated hereby shall (except as otherwise provided herein) be paid by the Party incurring such expenses.

(d) This Agreement shall be binding upon, inure to the benefit of, and be enforceable by, the Parties and their respective successors and permitted assigns.

(e) In the event that any provision contained in this Agreement shall for any reason be held to be illegal, invalid or unenforceable in any jurisdiction, such provision shall be ineffective as to such jurisdiction to the extent of such invalidity, illegality or unenforceability without invalidating or affecting the remaining provisions hereof or affecting the validity, legality or enforceability of such provision in any other jurisdiction. Upon such a determination, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties hereto as closely as possible in a reasonably acceptable manner in order that the transactions contemplated hereby may be consummated as originally contemplated to the fullest extent possible.

(f) This Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement, and shall become effective when each party hereto shall have received counterparts hereof signed by each of the other parties hereto. If any signature is delivered by facsimile transmission or by PDF, such signature shall create a valid and binding obligations of the party executing (or on whose behalf the signature is executed) with the same force and effect as if such facsimile or PDF signature were an original thereof.

[Signature page follows]

2

IN WITNESS WHEREOF, the Parties hereto have each caused this Agreement to be duly executed as of the Closing Date.

SELLER:

AMPHASTAR PHARMACEUTICALS, INC.

By:

Name:

Title:

PURCHASER:

ATHENEX, INC.

By:

Name:

Title:

SIGNATURE PAGE

BILL OF SALE AND ASSIGNMENT AND ASSUMPTION AGREEMENT

Exhibit B

Form of Purchaser Change in Ownership Letters

[Purchaser’s Letterhead]

[Date], 2017

Office of Generic Drugs

Re:	ANDA [*]
	[Product Name]
	Change of Ownership Acceptance

Dear Sir/Madame:

With this letter, we wish to notify the Food and Drug Administration (“FDA”) consistent with 21 C.F.R. § 314.72(a)(1) that, effective             , 2017 the ownership of the above-referenced Abbreviated New Drug Application (“ANDA”) was transferred from [Seller] to [Purchaser] (“[Purchaser]”).

Additionally, [Purchaser] is hereby appointing the following U.S. Agent for this application:

[U.S. Agent]

[Contact]

[Address]

[Phone]

[Purchaser Language Option #1: In accordance with 21 C.F.R. 314.72(a)(2)(iii), [Seller] has provided to [Purchaser] a complete copy of the approved ANDA, including supplements and records that are required to be kept under 21 C.F.R. 314.81. OR Purchaser Language Option #2: In accordance with 21 C.F.R. 314.72(a)(2)(iii), [Purchaser] hereby requests [or has requested] from FDA a complete copy of the approved ANDA.] In accordance with 21 C.F.R. §314.72(a)(2)(i), [Purchaser] commits to all agreements, promises and conditions made by the former owner, [Seller], and contained in the application. Consistent with 21 C.F.R. § 314.72(b), [Purchaser] commits to advising FDA about any change in the conditions in the approved application under 21 C.F.R. § 314.70.

Enclosed in this submission is a Letter of Authorization from [Purchaser] authorizing [U.S. Agent] to act on their behalf as it relates to Agency matters regarding this ANDA.

Written acknowledgement of the change in ANDA ownership would be appreciated. Please contact the undersigned if you have any comments or questions regarding this letter.

This submission is being provided in electronic format. It has been scanned with [McAfee Virus Scan Enterprise [insert version]] and found to be virus-free. [For technical issues unrelated to the content of this submission, please contact [name] at [phone number]]. [Optional]

Sincerely,

[*]

[Purchaser]

Exhibit C

Form of Seller Change in Ownership Letters

[Seller’s Letterhead]

[Date], 2017

[Address of FDA Contact]

Re: ANDA [*]

[Product Name]

Transfer of ANDA Ownership

Dear Sir/Madame:

With this letter, we wish to notify the Food and Drug Administration (“FDA”) consistent with 21 C.F.R. § 314.72(a)(1) that, effective             , 2017, [Seller] has transferred all rights to the above-referenced Abbreviated New Drug Application (“ANDA”) to [Purchaser] (“[Purchaser]”).

Written acknowledgement of the change in ANDA ownership would be appreciated. Please contact [Seller contact’s name, phone number and email address] or [Buyer contact’s name, phone number and email address] if you have any comments or questions regarding this letter.

This submission is being provided in electronic format. It has been scanned with [McAfee Virus Scan Enterprise [insert version]] and found to be virus-free. For technical issues unrelated to the content of this submission, please contact [name] at [phone number].

Sincerely,

[*]

[Seller]

PPAB 3547796v2

EX-10

Exhibit 10.25

EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT (this “Agreement”) is made and entered into as of February 21, 2017 (the “Effective Date”) by and between ATHENEX, INC., a company existing under the laws of Delaware having its principal office at Conventus Building, 1001 Main Street, Suite 600, Buffalo, New York 14203 (the “Company”), and Dr. Rudolf Min-Fun Kwan, an individual residing at # ##### #### ######, ######, ## #####, USA (“Executive”).

1. Employment; Term. Subject to the terms and conditions set forth in this Agreement, the Company hereby agrees to employ Executive, and Executive hereby accepts employment, as Chief Medical Officer of the Company, for the period beginning on the Effective Date of this Agreement and continuing for an initial term of three (3) years (the “Term”) unless earlier terminated as hereinafter set forth. Upon the end of the Term, this Employment Agreement shall continue to renew for additional one (1) year Terms until terminated pursuant to this Agreement.

2. Position and Duties. During the employment relationship, Executive shall serve as Chief Medical Officer of the Company, and will report to the Chief Executive Officer, and will have such responsibilities, duties and authorities, and render such services to the Company as are reasonably consistent with such positions and as the Chief Executive Officer may from time to time direct. Executive acknowledges that his duties and responsibilities will require 80% of his full-time business efforts and agrees that during the employment relationship, he will not engage in any other business activity or have any business pursuits or interests except activities or interests which the Chief Executive Officer has determined, in his reasonable judgment, after notice by Executive, do not conflict with the business of the Company or interfere with the performance of Executive’s duties hereunder. Executive agrees to perform his duties and discharge his responsibilities in a diligent, efficient and faithful manner, and to promote the best interests of the Company. Notwithstanding the foregoing, Executive may devote a reasonable amount of time to civic, educational, community, or charitable activities that do not interfere with the performance of Executive’s duties and responsibilities hereunder and, with the prior consent of the Chief Executive Officer, serve as a director of entities other than the Company. Executive’s duties (the “Executive Duties”) shall include such duties as are assigned to Executive by the Chief Executive Officer from time to time and:

a. preserving the business relationships of the Company;

b. participating in the creation, communication, and implementation of the Company’s vision, mission, and overall direction;

c. participating in the creation of the long- and short-term strategies surrounding the marketing of products and services, as well as the research and development of current and new products;

d. participating in the execution of delivering the Company’s products and services;

e. advising and consulting with the Chief Executive Officer regarding employee performance, evaluating employees, hiring and firing employees;

f. actively advancing, developing, and improving the products and services of the Company; and

g. becoming an active member of Athenex’s executive management team.

3. Salary and Benefits. As consideration and compensation for the Executive Duties, the Company shall compensate Executive in the following manner:

a. Base Salary. The Company shall pay Executive a salary of USD Three Hundred Thousand Dollars ($300,000) per year, as may be adjusted upward from time to time (the “Base Salary”), payable in accordance with the customary payroll practices of the Company.

b. Bonus. The Executive will also be considered for year end bonus with other senior executives and will be awarded at the same range with the exact amount to be determined by the Compensation Committee of the Board of Directors.

c. Stock Options. The Compensation Committee of the Board will also recommend to the full Board an additional 140,000 shares of Athenex stock options under the current Stock Option Plan during the Initial Public Offering with a term often (10) years, vested in equal installments over three (3) years, and the exercise price the same as the Initial Public Offering Price.

d. Other Benefits. Executive shall be entitled to fifteen (15) business days of paid time off and all paid holidays provided by Athenex to its senior executives. At the end of the annual measurement period, any accrued and unused paid time off shall be forfeited, except that Executive may defer, for a period not to exceed one (1) year, up to five (5) business days of his accrued and unused paid time off. In addition, Executive shall, during the Term, be entitled to participate in any and all employee welfare (including health) plans, fringe benefits, employee benefit plans and similar plans of the Company, which shall be comparable to those offered by Athenex to its senior executives (collectively, “Company Benefits”), now or hereafter in effect and open to participation by qualifying employees of the Company generally. Said participation shall be in accordance with eligibility and other requirements, and on terms and conditions, no less generous than as provided to senior executives of Athenex.

e. Expenses. The Company shall pay or reimburse Executive for all reasonable and necessary out-of-pocket expenses incurred by Executive in the performance of his Executive Duties, subject to the presentation of appropriate receipts and expense reports in accordance with the Company’s policies for expense verification.

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4. Termination.

a. Executive’s employment hereunder shall continue from the date hereof until terminated upon the first to occur of the following events:

i. death or Disability (defined below);

ii. termination by Executive, either for or for no Good Reason; or

iii. termination by the Company, either with or without Cause;

b. Upon termination pursuant to clause 4.a.i. above, Executive (or Executive’s estate, in the event of termination as a result of the death of Executive) shall be entitled to receive (i) all compensation or benefits required under applicable law or offered generally by the Company to its employees in the event of death or disability, (ii) an Annual Bonus, if earned, for the calendar year in which the termination occurred (prorated for any partial year), and (iii) in the event of “Disability”, an amount sufficient to provide Executive with one (1) year of healthcare coverage comparable to that which Executive and his family, if applicable, received while employed by the Company. For purposes of this Section 4, the Executive shall be deemed “Totally Disabled” (and termination of his employment shall be deemed to be due to such “Disability”) if the Executive is unable to perform the essential functions of the job set forth in this Agreement, with or without a reasonable accommodation, and the accommodation would not be an undue hardship for the Company, for a period of (120) consecutive or one hundred eighty (180) non-consecutive days out of any consecutive twelve (12) month period as a result of physical or mental illness or loss of legal capacity. If the Executive is prevented from performing his duties because of Disability, upon request by the Company, the Executive shall submit to an examination by a physician selected by the Company, at the Company’s expense, and the Executive shall also authorize his personal physician to disclose to the selected physician all of the Executive’s relevant medical records.

c. Upon termination pursuant to clause 4.a.ii. without Good Reason, all compensation, rights and benefits provided to Executive pursuant to this Agreement shall cease immediately, except that Executive shall be entitled to receive (i) all compensation or benefits required under applicable law, and (ii) if applicable, the amounts paid during the Non-Compete Period, at the Company’s option, pursuant to Section 5.c.ii.

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f. Upon termination pursuant to clause 4.a.iii. for Cause, all compensation, rights and benefits provided to Executive pursuant to this Agreement shall cease immediately, except that Executive shall be entitled to receive all compensation or benefits in a timely manner required under applicable law.

g. In the event of a termination of the employment relationship pursuant to clause 4.a.ii. for Good Reason or clause 4.a.iii. for any reason other than for Cause, Executive shall continue to receive (i) the Base Salary provided pursuant to Section 3.a. for the period from the date of such termination until the second (2nd) anniversary of the Effective Date (the “Severance Period”), and (ii) in the event that the Non-Compete Period extends beyond the Severance Period, if applicable, the amounts paid during the Non-Compete Period, at the Company’s option, pursuant to Section 5.c.ii.

h. Notwithstanding anything to the contrary herein, the payment by the Company of the amounts described in Section 4.b.ii, 4.b.iii, 4.c.ii and 4.f. shall be contingent upon Executive, or in the case of Executive’s death, the executor of Executive’s estate, executing a release in form and substance satisfactory to the Company.

5. Non-Solicitation; Non-Competition. Executive acknowledges and agrees that the expertise and experience of Executive in the business of the Company is essential for the growth, success and stability of the Company. Executive further acknowledges and understands that the covenants set forth in this Section 5 are reasonable and necessary and part of the consideration provided to Executive by Athenex pursuant to the Acquisition. Therefore, in consideration of the various covenants and obligations of the Company pursuant to this Agreement and the other agreements described herein, as long as Executive receives the Base Salary, or if applicable, amounts paid during the Non-Compete Period, Executive shall not, directly or indirectly;

a. during the employment relationship and two (2) years following the termination of the employment relationship, knowingly solicit any Person in the employment of the Company (other than via a general advertisement or other solicitation not addressed specifically to such Person) to: (i) terminate such employment, and/or (ii) accept employment or enter into any consulting arrangements with any Person other than the Company; provided, however, this provision is not intended to and does not preclude Executive, on behalf of himself or another, from offering employment to or hiring any Person in the employment of the Company who initiates contact with Executive, inquires about employment or consulting opportunities, and/or otherwise responds to a general employment or similar notice issued on behalf of the Executive or another Person, in each case, without any inducement from or on behalf of the Executive. The prohibitions in this Section 5.a. include, but are not limited to using social media, such as LinkedIn, Facebook, and/or Twitter, to directly communicate with any employee, customer, supplier, licensee, licensor,

4

Prospective Customer or other business relation of the Company or any of its Affiliates, it being understood that any general update to Executive’s title or employer on Executive’s profile on such social media shall not be considered such direct communication;

b. during the employment relationship and two (2) years following the termination of the employment relationship, call on, solicit, accept business from, or provide service to, or sell to any supplier, licensee, licensor, customer, Prospective Customer, or other business relation of the Company, or induce, encourage or cause any such supplier, licensee, licensor, customer, Prospective Customer, or other business relation to reduce or terminate its business relationship with the Company;

c. (i) Except as provided in Section 5.c.iii. and subject to Section 5.c.ii. below, during the employment relationship and one (1) year following the termination of the employment relationship (the “Non-Compete Period”), either for himself or for any other Person, own, manage, control, participate in, consult with, render services for, permit his name to be used or in any other manner or capacity engage in any business or enterprise which constitutes a Competitive Business within ninety (90) miles of the principal office of the Company as set forth in the introduction to this Agreement (or as may be changed on the records of the Company pursuant to Section 8 hereof) (the “Territory”). For purposes of this Agreement, the term “participate” includes any direct or indirect interest in any enterprise, whether as an officer, director, employee, partner, sole proprietor, agent, representative, independent contractor, consultant, executive, franchisor, franchisee, creditor, owner, member, shareholder or otherwise; provided, that the Competitive Business activities prohibited hereunder shall not include passive ownership of less than 5% of the stock of a privately-held or publicly-held corporation.

(ii) Notwithstanding the provisions of Section 5.c.i. or any other provision in this Agreement to the contrary, in the event of (A) a termination of the employment relationship upon or after the expiration of the initial Term, (B) a termination of this Agreement pursuant to clause 4.a.ii. without Good Reason, or (C) a termination of this Agreement pursuant to clause 4.a.ii. for Good Reason or clause 4.a.iii. for any reason other than Cause at any point when the Non-Compete Period extends beyond the Severance Period, and only for such time period after the Severance Period, then the Company shall be deemed to have waived Executive’s compliance with the provisions of Section 5.c.i., and shall have no further obligations to the Executive other than those described in Sections 4.b.i., 4.b.ii., 4.d.i., and 4.f.i. unless the Company shall, at its sole option, provide Executive with written notice within ten (10) business days of the effective date of such termination that the Company has elected to enforce the provisions of Section 5.c.i following such termination, in which case the Company shall continue pay to Executive (I) the full amount of the Base Salary, and (II) an amount equal to the Company’s contribution toward the

5

healthcare insurance coverage which Executive and his family, if applicable, was or were receiving as of the date of termination, in each case in cash, payable at the same times and in a materially similar manner as Company payroll for the entire Non-Compete Period. For the avoidance of doubt, the provisions of this Section 5.c.ii., and any waiver by the Company of the provisions of Section 5.c.i. pursuant hereto, shall in no way affect Executive’s obligations and covenants contained in Sections 5.a., 5.b. and 6.

(iii) The provisions of Section 5.c.i and 5.c.ii shall be of no force and effect following a termination of employment relationship after a Change in Control.

6. Confidential Information, Work Product; Confidentiality of Terms.

a. Executive shall keep secret and retain the confidential nature of all Confidential Information (as hereinafter defined) of or belonging to the Company or any of its Affiliates and take such other precautions with respect thereto as the Company, in its sole discretion, may reasonably request. Executive shall not at any time, whether before or after the termination of his employment hereunder, use, copy, disclose, divulge or make available any Confidential Information or Work Product to any natural person, partnership, limited liability company, corporation, trust, governmental body or any other legal entity; except that Executive may use, copy or disclose to any Person any Confidential Information (i) to the extent required in the performance of his duties pursuant to this Agreement, (ii) to the extent it becomes publicly available through no fault of Executive, (iii) to the extent he is required to do so pursuant to applicable law, court order and/or court-issued subpoena, or (iv) with the prior written consent of the Chief Executive Officer.

b. Executive agrees, subject to applicable law, to treat the terms of this Agreement as “Confidential Information” and to not disclose or discuss or release any such terms to any Person (except to Executive’s attorneys, accountants and other consultants who have agreed to keep such information confidential) without the consent of the CEO.

c. If, during the employment relationship, Executive is engaged in or associated with the research, investigation, planning or implementation of any project, program or venture on behalf of or involving the Company, all rights in the project, program or venture shall belong exclusively to the Company and shall constitute an opportunity belonging exclusively to the Company. Except as approved in advance and in writing by the Board of Directors of Athenex, Executive shall not be entitled to any interest in such project, program or venture or to any commission, finder’s fee or other compensation in connection therewith, other than the compensation to be paid to Executive by the Company as provided herein. Moreover, Executive hereby acknowledges that all Work Product is owned by the Company, and Executive covenants not to take any position or action contrary to such acknowledgement.

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d. All Confidential Information disclosed or made available by the Company or its Affiliates to Executive shall at all times remain the personal property of the Company or such Affiliates as the case may be, and all documents, lists, plans, proposals, records, computer disks and other tangible items supplied to Executive that constitute or contain Confidential Information shall, together with all copies thereof, and all other property of the Company, be returned to the Company immediately upon termination of employment for whatever reason or if sooner, immediately upon demand by the Company.

7. Enforcement.

a. Executive further acknowledges that the scope of the business of the Company and its Affiliates is independent of location in the Territory and that as a senior executive of the Company, Executive has and will have direct and indirect responsibility, oversight and duties with respect to all of the businesses and enterprises of the Company and its controlled Affiliates and its and their current and prospective employees, vendors, customers, clients and other business relations, and that, accordingly, the restrictions contained in Sections 5 and 6 are reasonable in all respects and necessary to protect the goodwill, Confidential Information, customer relationships and Work Product of the Company and its Affiliates and that, without such protection, the Company’s and its Affiliates’ customer and client relations and competitive advantage would be materially adversely affected. It is specifically recognized by Executive that (i) Executive is significantly responsible for the growth and development of the Company and its Affiliates and the creation and preservation of their goodwill, (ii) money damages are insufficient to protect such interests, (iii) such prohibitions would be necessary and appropriate without regard to compensation being provided to Executive hereunder, and (iv) the Company would not enter into this Agreement with Executive without the restrictions contained in Sections 5 and 6. Executive further acknowledges that the restrictions contained in Sections 5 and 6 do not impose an undue hardship on him and that, since he has general business skills which may be used for a business other than a Competitive Business, do not deprive Executive of his livelihood. Executive agrees that the covenants made in Sections 5 and 6 shall be construed as agreements independent of any other provision(s) of this Agreement and shall survive any order of a court of competent jurisdiction terminating any other provision(s) of this Agreement.

b. If, at the time of enforcement of Section 5 or 6, a court holds that the restrictions stated herein are unreasonable under circumstances then

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existing, the Parties agree that the maximum period, scope or geographical area reasonable under such circumstances shall be substituted for the stated period, scope or area. Because Executive’s services are unique and because Executive has access to Confidential Information, customers and Prospective Customers of the Company and Work Product, and for the other reasons set forth herein, the Parties agree that money damages would not be an adequate remedy for any breach of this Agreement. Therefore, in the event of a breach or threatened breach of any of Sections 5 or 6 of this Agreement, the Company and its successors and assigns shall, in addition to other rights and remedies existing in their favor, be entitled to obtain specific performance and injunctive or other relief in order to enforce, or prevent any violations of, the provisions hereof (without posting a bond or other security). To the fullest extent permitted by applicable law, in the event of a breach by Executive of Section 5 hereof, the Restricted Period shall be tolled until such breach or violation has been duly cured. Executive agrees that the provisions of this Section 7 are reasonable and necessary to protect the Company.

8. Notices. Any notice provided for in this Agreement shall be in writing and shall be either personally delivered, mailed by first class mail (return receipt requested), or sent by overnight courier service: if to the Company or to Athenex, to Athenex’s then-current headquarters, attention: Teresa Bair, Esq., and if to Executive, to Executive’s primary residence then on record with the Company (the Company shall be entitled to rely upon information provided by Executive from time to time concerning the address of Executive’s primary residence). Any notice under this Agreement shall be deemed to have been given on the earlier of when so delivered or three (3) business days after being deposited in the mail (as the case may be).

9. Cooperation; Return of Company Property. For a period of one (1) year following termination of Executive’s employment for any reason, Executive agrees to cooperate in good faith with the Company and to be reasonably available to the Company with respect to continuing or future matters arising out of Executive’s services to the Company and its Affiliates in exchange for compensation at an hourly rate of one hundred fifty dollars ($150.00), provided, however, that the Executive shall provide such cooperation at no additional charge to the Company during any periods in which Executive is receiving compensation from the Company pursuant to Sections 4.c.ii., or 4.f. Upon termination, Executive shall promptly return to the Company all property of the Company and its Affiliates, whether tangible or intangible, which he possessed or had control over at any time during the employment relationship, including, without limitation, credit cards, building and office access cards, keys, computer equipment, cell phones, electronic devices, manuals, files, documents, records, software, customer database and other data, research, financial data and information, correspondence, statistics and payroll and other data, and any copies, compilations, extracts, excerpts, summaries and other notes thereof or relating thereto.

10. Executive’s Representations. Executive hereby represents and warrants to the Company that: (a) the execution, delivery and performance of this Agreement by Executive do

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not and shall not conflict with, breach, violate or cause a default under any contract, agreement, instrument, order, judgment or decree to which Executive is a party or by which he is bound; and (b) this Agreement is the valid and binding obligation of Executive, enforceable in accordance with its terms.

11. Definitions.

“Affiliate” shall mean any of the following: (a) any “affiliate” as defined under Rule 12b-2 of the Securities Exchange Act of 1934, as amended, (b) any individual or entity who directly or indirectly controls, is controlled by or is under common control with the specified individual or entity, and (c) any pair of entities or an individual and an entity in which one of the two parties (in such pair) owns, directly or indirectly, at least twenty percent (20%) of the outstanding equity interests of the other party.

“Cause” shall mean (i) documented nonperformance or nonperformance of the Executive Duties, or refusal to abide by or comply with the reasonable directives of the CEO, or the Company’s policies and procedures that continues without cure or remedy for thirty (30) days after the CEO has given written notice to Executive specifying in reasonable detail the manner in which Executive has failed to perform such duties or comply with such directions, (ii) conviction for, or plea of nolo contendere to, any felony causing material harm to the Company or the reputation of the Company, or any other conviction for, or plea of nolo contendere to, any act or omission involving fraud, theft or embezzlement, (iii) the commission of any other act or omission involving fraud with respect to the Company or any of its Affiliates that could reasonably constitute a crime under applicable law based on the facts and circumstances as alleged, (iv) a breach by the Executive of Sections 5 or 6 of this Agreement (v) the commission of any act that is in breach of Executive’s fiduciary duties of care or loyalty to Company, (vi) gross negligence or willful misconduct with respect to the Company or any of its Affiliates that continues without cure or remedy for thirty (30) days after the CEO has given written notice to Executive specifying in reasonable detail the manner in which Executive has engaged in gross negligence or willful misconduct with respect to the Company or any of its Affiliates, or (vii) a breach by Executive of any other material provision of this Agreement that is not susceptible to remedy or cure, or if susceptible to remedy or cure, that is not cured or remedied and continues beyond thirty (30) days after the CEO has given written notice to Executive specifying in reasonable detail the manner in which Executive has breached this Agreement.

“Change in Control” shall mean (i) any merger, reorganization, or consolidation transaction or series of transactions, whether or not Athenex is the surviving or continuing corporation in such transaction; provided that such transaction or series of related transactions shall not be a Change in Control if the holders of the equity interests in Athenex immediately prior to such transaction or transactions will, immediately after such transaction or transactions (by virtue of securities issued as consideration for the transaction or otherwise) hold at least fifty percent (50%) of the voting power of the surviving, continuing or purchasing entity; or (B) any sale, lease or other disposition of all or substantially all of the assets (tangible or intangible) of Athenex; or (C) any transfer, or series of related transfers, of at least 50% of the outstanding equity interests of Athenex, other than to Affiliates of Athenex and/or the existing stockholders; and (D) Dr. Johnson Lau is not the Chief Executive Officer Position within three years of the execution of this agreement.

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“Competitive Business” shall mean any business or enterprise engaged in or contemplated to be engaged in the manufacturing of active pharmaceutical ingredients.

“Confidential Information” includes, but is not limited to, proprietary information, Intellectual Property, technical data, and trade secrets concerning or consisting of research, development, manufacturing and production of pharmaceutical products and/or medical devices, product plans, products, services, customer proposals and contracts, customer lists and customers (including, but not limited to, customers of the Company or any of the Company’s Affiliates on whom Executive called or with whom Executive became acquainted during the course of employment), requirements and contact information of customers and suppliers, customer leads, data, markets, software, programs, source codes and object codes, developments, inventions, processes, designs, product designs, drawing, engineering, hardware configuration information, formulas, formulations, prototypes, products, compositions, manuals, research, studies, equipment, machines, blueprints, specifications, discoveries, concepts, patent applications, technology, licenses, trade secrets, know-how, techniques, original works of authorship and any other information of a similar nature, whether or not patentable or copyrightable, documents or data stamped “Confidential”, marketing plans, this Agreement, any document related to the Acquisition, finances or other business information or strategies disclosed to Executive, either directly or indirectly, in writing, by drawings or by observation; provided, that “Confidential Information” shall not include information that: (a) is generally known to the public prior to disclosure, or after disclosure becomes generally known to the public through no act or failure to act on the part of the Executive; or (b) is rightfully furnished to the Executive by a Person without breaching any agreement, understanding or confidential relationship between such Person and the Company.

“Good Reason” shall mean, without Executive’s consent, the occurrence of one of the following: (i) a material diminution of the Executive Duties or change in Executive’s position or compensation or change or removal of both titles specified in Section 2; (ii) the Company’s material breach of any provision of this Agreement; or (iv) resignation by the Executive after an act by the CEO or the Board of Directors of Athenex that would constitute a breach of the Company’s or Athenex’s code of ethics, if any, or fiduciary duties, a crime or material fraud; provided, however, Executive’s termination pursuant to Section 4.a.ii. shall not be for Good Reason unless Executive shall have given written notice to the Company within ninety (90) days after any event which has resulted in any such material diminution and the Company has failed to cure any such material diminution within thirty (30) days of receipt of such written notice from Executive.

“Intellectual Property” shall mean (a) all Work Product (whether or not patentable and whether or not reduced to practice), all improvements thereto, and all patents, patent applications, and patent disclosures, together with all reissuances, continuations, continuations- in-part, revisions, extensions, and reexaminations thereof, (b) all trademarks, service marks, trade dress, logos, trade names, and corporate names, together with all translations, adaptations, derivations, and combinations thereof and including all goodwill associated therewith, and all

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applications, registrations, and renewals in connection therewith, (c) all copyrightable works, all copyrights, and all applications, registrations, and renewals in connection therewith, (d) all mask works and all applications, registrations, and renewals in connection therewith, (e) all trade secrets (as defined in the Uniform Trade Secrets Act and under corresponding foreign statutory and common law) and confidential business information (including ideas, research and development, formulas, compositions, manufacturing and production processes and techniques, technical data, designs, drawings, specifications, customer and supplier lists, pricing and cost information, and business and marketing plans and proposals) related to the Work Product, (f) all software (including firmware and other software embedded in hardware devices), software code (including source code and executable or object code), subroutines, interfaces, including APIs, and algorithms, (g) all other proprietary rights, and (h) all copies and tangible embodiments thereof (in whatever form or medium).

“Person” shall mean an individual, a partnership, a limited liability company, a corporation, an association, a joint stock company, a trust, a joint venture, an unincorporated organization and a governmental entity or any department, agency or political subdivision thereof.

“Prospective Customer” shall mean a Person (i) to whom the Company or any Affiliate of the Company previously provided services within the two (2) years immediately preceding Executive’s termination, (ii) from whom the Company or any Affiliate of the Company has actively solicited business within the two (2) years immediately preceding the Executive’s termination, or (iii) to whom the Company or any Affiliate of the Company has planned to solicit business within the six (6) months immediately preceding the Executive’s termination as evidenced by inclusion on a prospective customer list, business plans, pipeline reports, or sales meetings.

“Work Product” shall mean any and all inventions, innovations, improvements, original works of authorship, developments, concepts, methods, trade secrets, designs, analyses, drawings, reports and all similar or related information (whether or not patentable or registrable under copyright or similar laws) which are solely or jointly conceived, developed, made or reduced to practice, or caused to be conceived, developed, made or reduced to practice, by Executive while employed by the Company or any of its Affiliates with respect to pharmaceutical products and/or medical devices; provided, however, that “Work Product” shall not include any invention that Executive developed entirely on his own time without using the Company’s equipment, supplies, facilities or Confidential Information except for those inventions that either (a) relate at the time of conception or reduction to practice of the invention to the Company’s business, or actual or demonstrably anticipated research or development of the Company, or (b) result from any work performed by Executive for the Company or any of its Affiliates.

12. Severability. Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other provision or any other jurisdiction, but this Agreement shall be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision had never been contained herein.

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13. Complete Agreement. This Agreement, including all Exhibits attached hereto, and the Proprietary Rights Agreement between the Company and Executive, a copy of which is attached as Exhibit A hereto, embodies the complete agreement and understanding among the Parties with respect to the subject matter hereof and thereof and supersedes and preempts any prior understandings, agreements or representations by or among the Parties, written or oral, that may have related to the subject matter hereof or thereof in any way.

14. Counterparts. This Agreement may be executed by electronic or facsimile signature and in separate counterparts, each of which is deemed to be an original and all of which taken together constitute one and the same agreement.

15. Successors and Assigns. This Agreement is intended to bind and inure to the benefit of and be enforceable by Executive and the Company, and their respective heirs, successors and assigns. Executive may not assign his rights or delegate his obligations hereunder without the prior written consent of the Company. Any attempted assignment of this Agreement in contravention of this Section 15 shall be null and void.

16. Jurisdiction and Venue. Any controversy, claim or dispute arising out of or relating to any provision of this Agreement (collectively, a “Dispute”) shall be venued exclusively in the state or federal courts located in the Western District of New York. Such courts are together referred to as the “Exclusive Venues” for litigation. The Parties agree not to institute any litigation except in the Exclusive Venues and further agree that specific enforcement of this covenant with respect to Exclusive Venues may be awarded to the Parties by means of all available legal or equitable remedies, including, without limitation, a temporary restraining order. The Parties hereby submit to the personal jurisdiction of the Exclusive Venues, and waive any defense of inconvenient forum to the maintenance of any action or proceeding to be brought.

17. Amendment. The provisions of this Agreement may be amended or waived only with the prior written consent of the Company and Executive, and no course of conduct or failure or delay in enforcing the provisions of this Agreement shall affect the validity, binding effect or enforceability of this Agreement.

18. Survival. The obligations of the Parties in Sections 5, 6, 7, 8, 9, 12, 16, 19 and 20 shall survive indefinitely (unless otherwise limited in duration in this Agreement) regardless of any termination or cancellation (for any reason) of this Agreement.

19. Costs and Expenses. In the event of any legal proceedings in connection with this Agreement, the non-prevailing party shall pay the reasonable fees and costs (including without limitation, attorney’s fees, costs and expenses) of the prevailing party.

20. Governing Law. The Parties agree that this Agreement shall be governed by and construed in accordance with the domestic laws of the State of New York without giving effect

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to any choice or conflict of law provision or rule (whether of the State of New York or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of New York.

21. No Strict Construction. The Parties have participated jointly in the negotiation and drafting of this Agreement. Executive was represented by and consulted with counsel during the negotiation and preparation of this Agreement. In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the Parties and no presumption or burden of proof shall arise favoring or disfavoring any Party by virtue of the authorship of any provisions of this Agreement.

22. Paragraph Headings. Headings and subheadings herein are for convenience of reference only and are not of substantive effect.

23. Incorporation of Recitals. The recitals in the preamble of this Agreement are hereby incorporated by reference into this Agreement in their entirety.

24. Taxes. The Company may withhold from any payments made under this Agreement all applicable taxes, including but not limited to income, employment and social insurance taxes, as shall be required by law.

[Signature Page Follows.]

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IN WITNESS WHEREOF, the Parties have executed this Employment Agreement as of the Effective Date.

ATHENEX, INC.
By:
	Johnson Lau CEO

Dr. Rudolf Min-Fun Kwan

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EX-10

Exhibit 10.26

EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT (this “Agreement”) is made and entered into as of February 20, 2017 (the “Effective Date”) by and between ATHENEX, INC., a company existing under the laws of Delaware having its principal office at Conventus Building, 1001 Main Street, Suite 600, Buffalo, New York 14203 (the “Company”), and Dr. Simon Pedder, an individual residing at #### ########## ####, ###### ####, ##, #####, USA (“Executive”).

1. Employment; Term. Subject to the terms and conditions set forth in this Agreement, the Company hereby agrees to employ Executive, and Executive hereby accepts employment, as Executive Vice President and Chief Business and Strategy Officer, Proprietary Products, of the Company, for the period beginning on the Effective Date of this Agreement and continuing for an initial term of three (3) years (the “Term”) unless earlier terminated as hereinafter set forth. Upon the end of the Term, this Employment Agreement shall continue to renew for additional one (1) year Terms until terminated pursuant to this Agreement.

2. Position and Duties. During the employment relationship, Executive shall serve as Executive Vice President and Chief Business and Strategy Officer, Proprietary Products, of the Company, and will report to the Chief Executive Officer, and will have such responsibilities, duties and authorities, and render such services to the Company as are reasonably consistent with such positions and as the Chief Executive Officer may from time to time direct. Executive acknowledges that his duties and responsibilities will require 80% of his full-time business efforts and agrees that during the employment relationship, he will not engage in any other business activity or have any business pursuits or interests except activities or interests which the Chief Executive Officer has determined, in his reasonable judgment, after notice by Executive, do not conflict with the business of the Company or interfere with the performance of Executive’s duties hereunder. Executive agrees to perform his duties and discharge his responsibilities in a diligent, efficient and faithful manner, and to promote the best interests of the Company. Notwithstanding the foregoing, Executive may devote a reasonable amount of time to civic, educational, community, or charitable activities that do not interfere with the performance of Executive’s duties and responsibilities hereunder and, with the prior consent of the Chief Executive Officer, serve as a director of entities other than the Company. Executive’s duties (the “Executive Duties”) shall include such duties as are assigned to Executive by the Chief Executive Officer from time to time and:

a. preserving the business relationships of the Company;

b. participating in the creation, communication, and implementation of the Company’s vision, mission, and overall direction;

c. participating in the creation of the long- and short-term strategies surrounding the marketing of products and services, as well as the research and development of current and new products;

d. participating in the execution of delivering the Company’s products and services;

e. advising and consulting with the Chief Executive Officer regarding employee performance, evaluating employees, hiring and firing employees;

f. actively advancing, developing, and improving the products and services of the Company; and

g. becoming an active member of Athenex’s executive management team.

3. Salary and Benefits. As consideration and compensation for the Executive Duties, the Company shall compensate Executive in the following manner:

a. Base Salary. The Company shall pay Executive a salary of USD Three Hundred Thousand Dollars ($300,000) per year, as may be adjusted upward from time to time (the “Base Salary”), payable in accordance with the customary payroll practices of the Company.

b. Bonus. The Executive will also be considered for year end bonus with other senior executives and will be awarded at the same range with the exact amount to be determined by the Compensation Committee of the Board of Directors.

c. Stock Options. The Compensation Committee of the Board will also recommend to the full Board an additional 130,000 shares of Athenex stock options under the current Stock Option Plan during the Initial Public Offering with a term of ten (10) years, vested in equal installments over four (4) years, and the exercise price the same as the Initial Public Offering Price.

d. Other Benefits. Executive shall be entitled to fifteen (15) business days of paid time off and all paid holidays provided by Athenex to its senior executives. At the end of the annual measurement period, any accrued and unused paid time off shall be forfeited, except that Executive may defer, for a period not to exceed one (1) year, up to five (5) business days of his accrued and unused paid time off. In addition, Executive shall, during the Term, be entitled to participate in any and all employee welfare (including health) plans, fringe benefits, employee benefit plans and similar plans of the Company, which shall be comparable to those offered by Athenex to its senior executives (collectively, “Company Benefits”), now or hereafter in effect and open to participation by qualifying employees of the Company generally. Said participation shall be in accordance with eligibility and other requirements, and on terms and conditions, no less generous than as provided to senior executives of Athenex.

e. Expenses. The Company shall pay or reimburse Executive for all reasonable and necessary out-of-pocket expenses incurred by Executive in the performance of his Executive Duties, subject to the presentation of appropriate receipts and expense reports in accordance with the Company’s policies for expense verification.

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4. Termination.

a. Executive’s employment hereunder shall continue from the date hereof until terminated upon the first to occur of the following events:

i. death or Disability (defined below);

ii. termination by Executive, either for or for no Good Reason; or

iii. termination by the Company, either with or without Cause;

b. Upon termination pursuant to clause 4.a.i. above, Executive (or Executive’s estate, in the event of termination as a result of the death of Executive) shall be entitled to receive (i) all compensation or benefits required under applicable law or offered generally by the Company to its employees in the event of death or disability, (ii) an Annual Bonus, if earned, for the calendar year in which the termination occurred (prorated for any partial year), and (iii) in the event of “Disability”, an amount sufficient to provide Executive with one (1) year of healthcare coverage comparable to that which Executive and his family, if applicable, received while employed by the Company. For purposes of this Section 4, the Executive shall be deemed “Totally Disabled” (and termination of his employment shall be deemed to be due to such “Disability”) if the Executive is unable to perform the essential functions of the job set forth in this Agreement, with or without a reasonable accommodation, and the accommodation would not be an undue hardship for the Company, for a period of (120) consecutive or one hundred eighty (180) non-consecutive days out of any consecutive twelve (12) month period as a result of physical or mental illness or loss of legal capacity. If the Executive is prevented from performing his duties because of Disability, upon request by the Company, the Executive shall submit to an examination by a physician selected by the Company, at the Company’s expense, and the Executive shall also authorize his personal physician to disclose to the selected physician all of the Executive’s relevant medical records.

c. Upon termination pursuant to clause 4.a.ii. without Good Reason, all compensation, rights and benefits provided to Executive pursuant to this Agreement shall cease immediately, except that Executive shall be entitled to receive (i) all compensation or benefits required under applicable law, and (ii) if applicable, the amounts paid during the Non-Compete Period, at the Company’s option, pursuant to Section 5.c.ii.

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f. Upon termination pursuant to clause 4.a.iii. for Cause, all compensation, rights and benefits provided to Executive pursuant to this Agreement shall cease immediately, except that Executive shall be entitled to receive all compensation or benefits in a timely manner required under applicable law.

g. In the event of a termination of the employment relationship pursuant to clause 4.a.ii. for Good Reason or clause 4.a.iii. for any reason other than for Cause, Executive shall continue to receive (i) the Base Salary provided pursuant to Section 3.a. for the period from the date of such termination until the second (2nd) anniversary of the Effective Date (the “Severance Period”), and (ii) in the event that the Non-Compete Period extends beyond the Severance Period, if applicable, the amounts paid during the Non-Compete Period, at the Company’s option, pursuant to Section 5.c.ii.

h. Notwithstanding anything to the contrary herein, the payment by the Company of the amounts described in Section 4.b.ii, 4.b.iii, 4.c.ii and 4.f. shall be contingent upon Executive, or in the case of Executive’s death, the executor of Executive’s estate, executing a release in form and substance satisfactory to the Company.

5. Non-Solicitation; Non-Competition. Executive acknowledges and agrees that the expertise and experience of Executive in the business of the Company is essential for the growth, success and stability of the Company. Executive further acknowledges and understands that the covenants set forth in this Section 5 are reasonable and necessary and part of the consideration provided to Executive by Athenex pursuant to the Acquisition. Therefore, in consideration of the various covenants and obligations of the Company pursuant to this Agreement and the other agreements described herein, as long as Executive receives the Base Salary, or if applicable, amounts paid during the Non-Compete Period, Executive shall not, directly or indirectly:

a. during the employment relationship and two (2) years following the termination of the employment relationship, knowingly solicit any Person in the employment of the Company (other than via a general advertisement or other solicitation not addressed specifically to such Person) to: (i) terminate such employment, and/or (ii) accept employment or enter into any consulting arrangements with any Person other than the Company; provided, however, this provision is not intended to and does not preclude Executive, on behalf of himself or another, from offering employment to or hiring any Person in the employment of the Company who initiates contact with Executive, inquires about employment or consulting opportunities, and/or otherwise responds to a general employment or similar notice issued on behalf of the Executive or another Person, in each case, without any inducement from or on behalf of the Executive. The prohibitions in this Section 5.a. include, but are not limited to using social media, such as LinkedIn, Facebook, and/or Twitter, to directly communicate with any employee, customer, supplier, licensee, licensor,

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Prospective Customer or other business relation of the Company or any of its Affiliates, it being understood that any general update to Executive’s title or employer on Executive’s profile on such social media shall not be considered such direct communication;

b. during the employment relationship and two (2) years following the termination of the employment relationship, call on, solicit, accept business from, or provide service to, or sell to any supplier, licensee, licensor, customer, Prospective Customer, or other business relation of the Company, or induce, encourage or cause any such supplier, licensee, licensor, customer, Prospective Customer, or other business relation to reduce or terminate its business relationship with the Company;

c. (i) Except as provided in Section 5.c.iii. and subject to Section 5.c.ii. below, during the employment relationship and one (1) year following the termination of the employment relationship (the “Non-Compete Period”), either for himself or for any other Person, own, manage, control, participate in, consult with, render services for, permit his name to be used or in any other manner or capacity engage in any business or enterprise which constitutes a Competitive Business within ninety (90) miles of the principal office of the Company as set forth in the introduction to this Agreement (or as may be changed on the records of the Company pursuant to Section 8 hereof) (the “Territory”). For purposes of this Agreement, the term “participate” includes any direct or indirect interest in any enterprise, whether as an officer, director, employee, partner, sole proprietor, agent, representative, independent contractor, consultant, executive, franchisor, franchisee, creditor, owner, member, shareholder or otherwise; provided, that the Competitive Business activities prohibited hereunder shall not include passive ownership of less than 5% of the stock of a privately-held or publicly-held corporation.

(ii) Notwithstanding the provisions of Section 5.c.i. or any other provision in this Agreement to the contrary, in the event of (A) a termination of the employment relationship upon or after the expiration of the initial Term, (B) a termination of this Agreement pursuant to clause 4.a.ii. without Good Reason, or (C) a termination of this Agreement pursuant to clause 4.a.ii. for Good Reason or clause 4.a.iii. for any reason other than Cause at any point when the Non-Compete Period extends beyond the Severance Period, and only for such time period after the Severance Period, then the Company shall be deemed to have waived Executive’s compliance with the provisions of Section 5.c.i., and shall have no further obligations to the Executive other than those described in Sections 4.b.i., 4.b.ii., 4.d.i., and 4.f.i. unless the Company shall, at its sole option, provide Executive with written notice within ten (10) business days of the effective date of such termination that the Company has elected to enforce the provisions of Section 5.c.i following such termination, in which case the Company shall continue pay to Executive (I) the full amount of the Base Salary, and (II) an amount equal to the Company’s contribution toward the

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healthcare insurance coverage which Executive and his family, if applicable, was or were receiving as of the date of termination, in each case in cash, payable at the same times and in a materially similar manner as Company payroll for the entire Non-Compete Period. For the avoidance of doubt, the provisions of this Section 5.c.ii., and any waiver by the Company of the provisions of Section 5.c.i. pursuant hereto, shall in no way affect Executive’s obligations and covenants contained in Sections 5.a., 5.b. and 6.

(iii) The provisions of Section 5.c.i and 5.c.ii shall be of no force and effect following a termination of employment relationship after a Change in Control.

6. Confidential Information, Work Product; Confidentiality of Terms.

a. Executive shall keep secret and retain the confidential nature of all Confidential Information (as hereinafter defined) of or belonging to the Company or any of its Affiliates and take such other precautions with respect thereto as the Company, in its sole discretion, may reasonably request. Executive shall not at any time, whether before or after the termination of his employment hereunder, use, copy, disclose, divulge or make available any Confidential Information or Work Product to any natural person, partnership, limited liability company, corporation, trust, governmental body or any other legal entity; except that Executive may use, copy or disclose to any Person any Confidential Information (i) to the extent required in the performance of his duties pursuant to this Agreement, (ii) to the extent it becomes publicly available through no fault of Executive, (iii) to the extent he is required to do so pursuant to applicable law, court order and/or court-issued subpoena, or (iv) with the prior written consent of the Chief Executive Officer.

b. Executive agrees, subject to applicable law, to treat the terms of this Agreement as “Confidential Information” and to not disclose or discuss or release any such terms to any Person (except to Executive’s attorneys, accountants and other consultants who have agreed to keep such information confidential) without the consent of the CEO.

c. If, during the employment relationship, Executive is engaged in or associated with the research, investigation, planning or implementation of any project, program or venture on behalf of or involving the Company, all rights in the project, program or venture shall belong exclusively to the Company and shall constitute an opportunity belonging exclusively to the Company. Except as approved in advance and in writing by the Board of Directors of Athenex, Executive shall not be entitled to any interest in such project, program or venture or to any commission, finder’s fee or other compensation in connection therewith, other than the compensation to be paid to Executive by the Company as provided herein. Moreover, Executive hereby acknowledges that all Work Product is owned by the Company, and Executive covenants not to take any position or action contrary to such acknowledgement.

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d. All Confidential Information disclosed or made available by the Company or its Affiliates to Executive shall at all times remain the personal property of the Company or such Affiliates as the case may be, and all documents, lists, plans, proposals, records, computer disks and other tangible items supplied to Executive that constitute or contain Confidential Information shall, together with all copies thereof, and all other property of the Company, be returned to the Company immediately upon termination of employment for whatever reason or if sooner, immediately upon demand by the Company.

7. Enforcement.

a. Executive further acknowledges that the scope of the business of the Company and its Affiliates is independent of location in the Territory and that as a senior executive of the Company, Executive has and will have direct and indirect responsibility, oversight and duties with respect to all of the businesses and enterprises of the Company and its controlled Affiliates and its and their current and prospective employees, vendors, customers, clients and other business relations, and that, accordingly, the restrictions contained in Sections 5 and 6 are reasonable in all respects and necessary to protect the goodwill, Confidential Information, customer relationships and Work Product of the Company and its Affiliates and that, without such protection, the Company’s and its Affiliates’ customer and client relations and competitive advantage would be materially adversely affected. It is specifically recognized by Executive that (i) Executive is significantly responsible for the growth and development of the Company and its Affiliates and the creation and preservation of their goodwill, (ii) money damages are insufficient to protect such interests, (iii) such prohibitions would be necessary and appropriate without regard to compensation being provided to Executive hereunder, and (iv) the Company would not enter into this Agreement with Executive without the restrictions contained in Sections 5 and 6. Executive further acknowledges that the restrictions contained in Sections 5 and 6 do not impose an undue hardship on him and that, since he has general business skills which may be used for a business other than a Competitive Business, do not deprive Executive of his livelihood. Executive agrees that the covenants made in Sections 5 and 6 shall be construed as agreements independent of any other provision(s) of this Agreement and shall survive any order of a court of competent jurisdiction terminating any other provision(s) of this Agreement.

b. If, at the time of enforcement of Section 5 or 6, a court holds that the restrictions stated herein are unreasonable under circumstances then

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existing, the Parties agree that the maximum period, scope or geographical area reasonable under such circumstances shall be substituted for the stated period, scope or area. Because Executive’s services are unique and because Executive has access to Confidential Information, customers and Prospective Customers of the Company and Work Product, and for the other reasons set forth herein, the Parties agree that money damages would not be an adequate remedy for any breach of this Agreement. Therefore, in the event of a breach or threatened breach of any of Sections 5 or 6 of this Agreement, the Company and its successors and assigns shall, in addition to other rights and remedies existing in their favor, be entitled to obtain specific performance and injunctive or other relief in order to enforce, or prevent any violations of, the provisions hereof (without posting a bond or other security). To the fullest extent permitted by applicable law, in the event of a breach by Executive of Section 5 hereof, the Restricted Period shall be tolled until such breach or violation has been duly cured. Executive agrees that the provisions of this Section 7 are reasonable and necessary to protect the Company.

8. Notices. Any notice provided for in this Agreement shall be in writing and shall be either personally delivered, mailed by first class mail (return receipt requested), or sent by overnight courier service: if to the Company or to Athenex, to Athenex’s then-current headquarters, attention: Teresa Bair, Esq., and if to Executive, to Executive’s primary residence then on record with the Company (the Company shall be entitled to rely upon information provided by Executive from time to time concerning the address of Executive’s primary residence). Any notice under this Agreement shall be deemed to have been given on the earlier of when so delivered or three (3) business days after being deposited in the mail (as the case may be).

9. Cooperation; Return of Company Property. For a period of one (1) year following termination of Executive’s employment for any reason, Executive agrees to cooperate in good faith with the Company and to be reasonably available to the Company with respect to continuing or future matters arising out of Executive’s services to the Company and its Affiliates in exchange for compensation at an hourly rate of two hundred fifty dollars ($250.00), provided, however, that the Executive shall provide such cooperation at no additional charge to the Company during any periods in which Executive is receiving compensation from the Company pursuant to Sections 4.c.ii., or 4.f. Upon termination, Executive shall promptly return to the Company all property of the Company and its Affiliates, whether tangible or intangible, which he possessed or had control over at any time during the employment relationship, including, without limitation, credit cards, building and office access cards, keys, computer equipment, cell phones, electronic devices, manuals, files, documents, records, software, customer database and other data, research, financial data and information, correspondence, statistics and payroll and other data, and any copies, compilations, extracts, excerpts, summaries and other notes thereof or relating thereto.

10. Executive’s Representations. Executive hereby represents and warrants to the Company that: (a) the execution, delivery and performance of this Agreement by Executive do

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not and shall not conflict with, breach, violate or cause a default under any contract, agreement, instrument, order, judgment or decree to which Executive is a party or by which he is bound; and (b) this Agreement is the valid and binding obligation of Executive, enforceable in accordance with its terms.

11. Definitions.

“Affiliate” shall mean any of the following: (a) any “affiliate” as defined under Rule 12b-2 of the Securities Exchange Act of 1934, as amended, (b) any individual or entity who directly or indirectly controls, is controlled by or is under common control with the specified individual or entity, and (c) any pair of entities or an individual and an entity in which one of the two parties (in such pair) owns, directly or indirectly, at least twenty percent (20%) of the outstanding equity interests of the other party.

“Cause” shall mean (i) documented nonperformance or nonperformance of the Executive Duties, or refusal to abide by or comply with the reasonable directives of the CEO, or the Company’s policies and procedures that continues without cure or remedy for thirty (30) days after the CEO has given written notice to Executive specifying in reasonable detail the manner in which Executive has failed to perform such duties or comply with such directions, (ii) conviction for, or plea of nolo contendere to, any felony causing material harm to the Company or the reputation of the Company, or any other conviction for, or plea of nolo contendere to, any act or omission involving fraud, theft or embezzlement, (iii) the commission of any other act or omission involving fraud with respect to the Company or any of its Affiliates that could reasonably constitute a crime under applicable law based on the facts and circumstances as alleged, (iv) a breach by the Executive of Sections 5 or 6 of this Agreement (v) the commission of any act that is in breach of Executive’s fiduciary duties of care or loyalty to Company, (vi) gross negligence or willful misconduct with respect to the Company or any of its Affiliates that continues without cure or remedy for thirty (30) days after the CEO has given written notice to Executive specifying in reasonable detail the manner in which Executive has engaged in gross negligence or willful misconduct with respect to the Company or any of its Affiliates, or (vii) a breach by Executive of any other material provision of this Agreement that is not susceptible to remedy or cure, or if susceptible to remedy or cure, that is not cured or remedied and continues beyond thirty (30) days after the CEO has given written notice to Executive specifying in reasonable detail the manner in which Executive has breached this Agreement.

“Change in Control” shall mean (i) any merger, reorganization, or consolidation transaction or series of transactions, whether or not Athenex is the surviving or continuing corporation in such transaction; provided that such transaction or series of related transactions shall not be a Change in Control if the holders of the equity interests in Athenex immediately prior to such transaction or transactions will, immediately after such transaction or transactions (by virtue of securities issued as consideration for the transaction or otherwise) hold at least fifty percent (50%) of the voting power of the surviving, continuing or purchasing entity; or (B) any sale, lease or other disposition of all or substantially all of the assets (tangible or intangible) of Athenex; or (C) any transfer, or series of related transfers, of at least 50% of the outstanding equity interests of Athenex, other than to Affiliates of Athenex and/or the existing stockholders; and (D) Dr. Johnson Lau is not in the Chief Executive Officer Position within three years of the execution of this agreement.

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“Competitive Business” shall mean any business or enterprise engaged in or contemplated to be engaged in the manufacturing of active pharmaceutical ingredients.

“Confidential Information” includes, but is not limited to, proprietary information, Intellectual Property, technical data, and trade secrets concerning or consisting of research, development, manufacturing and production of pharmaceutical products and/or medical devices, product plans, products, services, customer proposals and contracts, customer lists and customers (including, but not limited to, customers of the Company or any of the Company’s Affiliates on whom Executive called or with whom Executive became acquainted during the course of employment), requirements and contact information of customers and suppliers, customer leads, data, markets, software, programs, source codes and object codes, developments, inventions, processes, designs, product designs, drawing, engineering, hardware configuration information, formulas, formulations, prototypes, products, compositions, manuals, research, studies, equipment, machines, blueprints, specifications, discoveries, concepts, patent applications, technology, licenses, trade secrets, know-how, techniques, original works of authorship and any other information of a similar nature, whether or not patentable or copyrightable, documents or data stamped “Confidential”, marketing plans, this Agreement, any document related to the Acquisition, finances or other business information or strategies disclosed to Executive, either directly or indirectly, in writing, by drawings or by observation; provided, that “Confidential Information” shall not include information that: (a) is generally known to the public prior to disclosure, or after disclosure becomes generally known to the public through no act or failure to act on the part of the Executive; or (b) is rightfully furnished to the Executive by a Person without breaching any agreement, understanding or confidential relationship between such Person and the Company.

“Good Reason” shall mean, without Executive’s consent, the occurrence of one of the following: (i) a material diminution of the Executive Duties or change in Executive’s position or compensation or change or removal of both titles specified in Section 2; (ii) the Company’s material breach of any provision of this Agreement; or (iv) resignation by the Executive after an act by the CEO or the Board of Directors of Athenex that would constitute a breach of the Company’s or Athenex’s code of ethics, if any, or fiduciary duties, a crime or material fraud; provided, however. Executive’s termination pursuant to Section 4.a.ii. shall not be for Good Reason unless Executive shall have given written notice to the Company within ninety (90) days after any event which has resulted in any such material diminution and the Company has failed to cure any such material diminution within thirty (30) days of receipt of such written notice from Executive.

“Intellectual Property” shall mean (a) all Work Product (whether or not patentable and whether or not reduced to practice), all improvements thereto, and all patents, patent applications, and patent disclosures, together with all reissuances, continuations, continuations-in-part, revisions, extensions, and reexaminations thereof, (b) all trademarks, service marks, trade dress, logos, trade names, and corporate names, together with all translations, adaptations, derivations, and combinations thereof and including all goodwill associated therewith, and all

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applications, registrations, and renewals in connection therewith, (c) all copyrightable works, all copyrights, and all applications, registrations, and renewals in connection therewith, (d) all mask works and all applications, registrations, and renewals in connection therewith, (e) all trade secrets (as defined in the Uniform Trade Secrets Act and under corresponding foreign statutory and common law) and confidential business information (including ideas, research and development, formulas, compositions, manufacturing and production processes and techniques, technical data, designs, drawings, specifications, customer and supplier lists, pricing and cost information, and business and marketing plans and proposals) related to the Work Product, (f) all software (including firmware and other software embedded in hardware devices), software code (including source code and executable or object code), subroutines, interfaces, including APIs, and algorithms, (g) all other proprietary rights, and (h) all copies and tangible embodiments thereof (in whatever form or medium).

“Person” shall mean an individual, a partnership, a limited liability company, a corporation, an association, a joint stock company, a trust, a joint venture, an unincorporated organization and a governmental entity or any department, agency or political subdivision thereof.

“Prospective Customer” shall mean a Person (i) to whom the Company or any Affiliate of the Company previously provided services within the two (2) years immediately preceding Executive’s termination, (ii) from whom the Company or any Affiliate of the Company has actively solicited business within the two (2) years immediately preceding the Executive’s termination, or (iii) to whom the Company or any Affiliate of the Company has planned to solicit business within the six (6) months immediately preceding the Executive’s termination as evidenced by inclusion on a prospective customer list, business plans, pipeline reports, or sales meetings.

“Work Product” shall mean any and all inventions, innovations, improvements, original works of authorship, developments, concepts, methods, trade secrets, designs, analyses, drawings, reports and all similar or related information (whether or not patentable or registrable under copyright or similar laws) which are solely or jointly conceived, developed, made or reduced to practice, or caused to be conceived, developed, made or reduced to practice, by Executive while employed by the Company or any of its Affiliates with respect to pharmaceutical products and/or medical devices; provided, however, that “Work Product” shall not include any invention that Executive developed entirely on his own time without using the Company’s equipment, supplies, facilities or Confidential Information except for those inventions that either (a) relate at the time of conception or reduction to practice of the invention to the Company’s business, or actual or demonstrably anticipated research or development of the Company, or (b) result from any work performed by Executive for the Company or any of its Affiliates.

12. Severability. Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other provision or any other jurisdiction, but this Agreement shall be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision had never been contained herein.

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13. Complete Agreement. This Agreement, including all Exhibits attached hereto, and the Proprietary Rights Agreement between the Company and Executive, a copy of which is attached as Exhibit A hereto, embodies the complete agreement and understanding among the Parties with respect to the subject matter hereof and thereof and supersedes and preempts any prior understandings, agreements or representations by or among the Parties, written or oral, that may have related to the subject matter hereof or thereof in any way.

14. Counterparts. This Agreement may be executed by electronic or facsimile signature and in separate counterparts, each of which is deemed to be an original and all of which taken together constitute one and the same agreement.

15. Successors and Assigns. This Agreement is intended to bind and inure to the benefit of and be enforceable by Executive and the Company, and their respective heirs, successors and assigns. Executive may not assign his rights or delegate his obligations hereunder without the prior written consent of the Company. Any attempted assignment of this Agreement in contravention of this Section 15 shall be null and void.

16. Jurisdiction and Venue. Any controversy, claim or dispute arising out of or relating to any provision of this Agreement (collectively, a “Dispute”) shall be venued exclusively in the state or federal courts located in the Western District of New York. Such courts are together referred to as the “Exclusive Venues” for litigation. The Parties agree not to institute any litigation except in the Exclusive Venues and further agree that specific enforcement of this covenant with respect to Exclusive Venues may be awarded to the Parties by means of all available legal or equitable remedies, including, without limitation, a temporary restraining order. The Parties hereby submit to the personal jurisdiction of the Exclusive Venues, and waive any defense of inconvenient forum to the maintenance of any action or proceeding to be brought.

17. Amendment. The provisions of this Agreement may be amended or waived only with the prior written consent of the Company and Executive, and no course of conduct or failure or delay in enforcing the provisions of this Agreement shall affect the validity, binding effect or enforceability of this Agreement.

18. Survival. The obligations of the Parties in Sections 5, 6, 7, 8, 9, 12, 16, 19 and 20 shall survive indefinitely (unless otherwise limited in duration in this Agreement) regardless of any termination or cancellation (for any reason) of this Agreement.

19. Costs and Expenses. In the event of any legal proceedings in connection with this Agreement, the non-prevailing party shall pay the reasonable fees and costs (including without limitation, attorney’s fees, costs and expenses) of the prevailing party.

20. Governing Law. The Parties agree that this Agreement shall be governed by and construed in accordance with the domestic laws of the State of New York without giving effect

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to any choice or conflict of law provision or rule (whether of the State of New York or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of New York.

21. No Strict Construction. The Parties have participated jointly in the negotiation and drafting of this Agreement. Executive was represented by and consulted with counsel during the negotiation and preparation of this Agreement. In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the Parties and no presumption or burden of proof shall arise favoring or disfavoring any Party by virtue of the authorship of any provisions of this Agreement.

22. Paragraph Headings. Headings and subheadings herein are for convenience of reference only and are not of substantive effect.

23. Incorporation of Recitals. The recitals in the preamble of this Agreement are hereby incorporated by reference into this Agreement in their entirety.

24. Taxes. The Company may withhold from any payments made under this Agreement all applicable taxes, including but not limited to income, employment and social insurance taxes, as shall be required by law.

[Signature Page Follows.]

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IN WITNESS WHEREOF, the Parties have executed this Employment Agreement as of the Effective Date.

	ATHENEX, INC.
	By:
		Johnson Lau CEO
Dr. Simon Pedder

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EX-10

Exhibit 10.27

EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT (this “Agreement”) is made and entered into as of February 21, 2017 (the “Effective Date”) by and between ATHENEX, INC., a company existing under the laws of Delaware having its principal office at Conventus Building, 1001 Main Street, Suite 600, Buffalo, New York 14203 (the “Company”), and J. Nick Riehle, an individual residing at ### ####### #### #######, #### #####, ## #####, USA (“Executive”).

1. Employment; Term. Subject to the terms and conditions set forth in this Agreement, the Company hereby agrees to employ Executive, and Executive hereby accepts employment, as Chief Financial Officer, for the period beginning on the Effective Date of this Agreement and continuing for an initial term of three (3) years (the “Term”) unless earlier terminated as hereinafter set forth. Upon the end of the Term, this Employment Agreement shall continue to renew for additional one (1) year Terms until terminated pursuant to this Agreement.

2. Position and Duties. During the employment relationship, Executive shall serve as Chief Financial Officer, and will report to the Chief Executive Officer, and will have such responsibilities, duties and authorities, and render such services to the Company as are reasonably consistent with such positions and as the Chief Executive Officer may from time to time direct. Executive acknowledges that his duties and responsibilities will require 80% of his full-time business efforts and agrees that during the employment relationship, he will not engage in any other business activity or have any business pursuits or interests except activities or interests which the Chief Executive Officer has determined, in his reasonable judgment, after notice by Executive, do not conflict with the business of the Company or interfere with the performance of Executive’s duties hereunder. Executive agrees to perform his duties and discharge his responsibilities in a diligent, efficient and faithful manner, and to promote the best interests of the Company. Notwithstanding the foregoing, Executive may devote a reasonable amount of time to civic, educational, community, or charitable activities that do not interfere with the performance of Executive’s duties and responsibilities hereunder and, with the prior consent of the Chief Executive Officer, serve as a director of entities other than the Company. Executive’s duties (the “Executive Duties”) shall include such duties as are assigned to Executive by the Chief Executive Officer from time to time and:

a. preserving the business relationships of the Company;

b. participating in the creation, communication, and implementation of the Company’s vision, mission, and overall direction;

c. participating in the creation of the long- and short-term strategies surrounding the marketing of products and services, as well as the research and development of current and new products;

d. participating in the execution of delivering the Company’s products and services;

e. advising and consulting with the Chief Executive Officer regarding employee performance, evaluating employees, hiring and firing employees;

f. actively advancing, developing, and improving the products and services of the Company; and

g. becoming an active member of Athenex’s executive management team.

3. Salary and Benefits. As consideration and compensation for the Executive Duties, the Company shall compensate Executive in the following manner:

a. Base Salary. The Company shall pay Executive a salary of USD Two Hundred Ninety Thousand Dollars ($290,000) per year, as may be adjusted upward from time to time (the “Base Salary”), payable in accordance with the customary payroll practices of the Company.

b. Bonus. The Executive will also be considered for year end bonus with other senior executives and will be awarded at the same range with the exact amount to be determined by the Compensation Committee of the Board of Directors.

c. Stock Options. The Compensation Committee of the Board will also recommend to the full Board an additional 120,000 shares of Athenex stock options under the current Stock Option Plan during the Initial Public Offering with a term of ten (10) years, vested in equal installments over three (3) years, and the exercise price the same as the Initial Public Offering Price.

d. Other Benefits. Executive shall be entitled to fifteen (15) business days of paid time off and all paid holidays provided by Athenex to its senior executives. At the end of the annual measurement period, any accrued and unused paid time off shall be forfeited, except that Executive may defer, for a period not to exceed one (1) year, up to five (5) business days of his accrued and unused paid time off. In addition, Executive shall, during the Term, be entitled to participate in any and all employee welfare (including health) plans, fringe benefits, employee benefit plans and similar plans of the Company, which shall be comparable to those offered by Athenex to its senior executives (collectively, “Company Benefits”), now or hereafter in effect and open to participation by qualifying employees of the Company generally. Said participation shall be in accordance with eligibility and other requirements, and on terms and conditions, no less generous than as provided to senior executives of Athenex.

e. Expenses. The Company shall pay or reimburse Executive for all reasonable and necessary out-of-pocket expenses incurred by Executive in the performance of his Executive Duties, subject to the presentation of appropriate receipts and expense reports in accordance with the Company’s policies for expense verification.

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4. Termination.

a. Executive’s employment hereunder shall continue from the date hereof until terminated upon the first to occur of the following events:

i. death or Disability (defined below);

ii. termination by Executive, either for or for no Good Reason; or

iii. termination by the Company, either with or without Cause;

b. Upon termination pursuant to clause 4.a.i. above, Executive (or Executive’s estate, in the event of termination as a result of the death of Executive) shall be entitled to receive (i) all compensation or benefits required under applicable law or offered generally by the Company to its employees in the event of death or disability, (ii) an Annual Bonus, if earned, for the calendar year in which the termination occurred (prorated for any partial year), and (iii) in the event of “Disability”, an amount sufficient to provide Executive with one (1) year of healthcare coverage comparable to that which Executive and his family, if applicable, received while employed by the Company. For purposes of this Section 4, the Executive shall be deemed “Totally Disabled” (and termination of his employment shall be deemed to be due to such “Disability”) if the Executive is unable to perform the essential functions of the job set forth in this Agreement, with or without a reasonable accommodation, and the accommodation would not be an undue hardship for the Company, for a period of (120) consecutive or one hundred eighty (180) non-consecutive days out of any consecutive twelve (12) month period as a result of physical or mental illness or loss of legal capacity. If the Executive is prevented from performing his duties because of Disability, upon request by the Company, the Executive shall submit to an examination by a physician selected by the Company, at the Company’s expense, and the Executive shall also authorize his personal physician to disclose to the selected physician all of the Executive’s relevant medical records.

c. Upon termination pursuant to clause 4.a.ii. without Good Reason, all compensation, rights and benefits provided to Executive pursuant to this Agreement shall cease immediately, except that Executive shall be entitled to receive (i) all compensation or benefits required under applicable law, and (ii) if applicable, the amounts paid during the Non-Compete Period, at the Company’s option, pursuant to Section 5.c.ii.

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f. Upon termination pursuant to clause 4.a.iii. for Cause, all compensation, rights and benefits provided to Executive pursuant to this Agreement shall cease immediately, except that Executive shall be entitled to receive all compensation or benefits in a timely manner required under applicable law.

g. In the event of a termination of the employment relationship pursuant to clause 4.a.ii. for Good Reason or clause 4.a.iii. for any reason other than for Cause, Executive shall continue to receive (i) the Base Salary provided pursuant to Section 3.a. for the period from the date of such termination until the second (2nd) anniversary of the Effective Date (the “Severance Period”), and (ii) in the event that the Non-Compete Period extends beyond the Severance Period, if applicable, the amounts paid during the Non-Compete Period, at the Company’s option, pursuant to Section 5.c.ii.

h. Notwithstanding anything to the contrary herein, the payment by the Company of the amounts described in Section 4.b.ii, 4.b.iii, 4.c.ii and 4.f. shall be contingent upon Executive, or in the case of Executive’s death, the executor of Executive’s estate, executing a release in form and substance satisfactory to the Company.

5. Non-Solicitation; Non-Competition. Executive acknowledges and agrees that the expertise and experience of Executive in the business of the Company is essential for the growth, success and stability of the Company. Executive further acknowledges and understands that the covenants set forth in this Section 5 are reasonable and necessary and part of the consideration provided to Executive by Athenex pursuant to the Acquisition. Therefore, in consideration of the various covenants and obligations of the Company pursuant to this Agreement and the other agreements described herein, as long as Executive receives the Base Salary, or if applicable, amounts paid during the Non-Compete Period, Executive shall not, directly or indirectly:

a. during the employment relationship and two (2) years following the termination of the employment relationship, knowingly solicit any Person in the employment of the Company (other than via a general advertisement or other solicitation not addressed specifically to such Person) to: (i) terminate such employment, and/or (ii) accept employment or enter into any consulting arrangements with any Person other than the Company; provided, however, this provision is not intended to and does not preclude Executive, on behalf of himself or another, from offering employment to or hiring any Person in the employment of the Company who initiates contact with Executive, inquires about employment or consulting opportunities, and/or otherwise responds to a general employment or similar notice issued on behalf of the Executive or another Person, in each case, without any inducement from or on behalf of the Executive. The prohibitions in this Section 5.a. include, but are not limited to using social media, such as Linkedln, Facebook, and/or Twitter, to directly communicate with any employee, customer, supplier, licensee, licensor,

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Prospective Customer or other business relation of the Company or any of its Affiliates, it being understood that any general update to Executive’s title or employer on Executive’s profile on such social media shall not be considered such direct communication;

b. during the employment relationship and two (2) years following the termination of the employment relationship, call on, solicit, accept business from, or provide service to, or sell to any supplier, licensee, licensor, customer, Prospective Customer, or other business relation of the Company, or induce, encourage or cause any such supplier, licensee, licensor, customer, Prospective Customer, or other business relation to reduce or terminate its business relationship with the Company;

c. (i) Except as provided in Section 5.c.iii. and subject to Section 5.c.ii. below, during the employment relationship and one (1) year following the termination of the employment relationship (the “Non-Compete Period”), either for himself or for any other Person, own, manage, control, participate in, consult with, render services for, permit his name to be used or in any other manner or capacity engage in any business or enterprise which constitutes a Competitive Business within ninety (90) miles of the principal office of the Company as set forth in the introduction to this Agreement (or as may be changed on the records of the Company pursuant to Section 8 hereof) (the “Territory”). For purposes of this Agreement, the term “participate” includes any direct or indirect interest in any enterprise, whether as an officer, director, employee, partner, sole proprietor, agent, representative, independent contractor, consultant, executive, franchisor, franchisee, creditor, owner, member, shareholder or otherwise; provided, that the Competitive Business activities prohibited hereunder shall not include passive ownership of less than 5% of the stock of a privately-held or publicly-held corporation.

(ii) Notwithstanding the provisions of Section 5.c.i. or any other provision in this Agreement to the contrary, in the event of (A) a termination of the employment relationship upon or after the expiration of the initial Term, (B) a termination of this Agreement pursuant to clause 4.a.ii. without Good Reason, or (C) a termination of this Agreement pursuant to clause 4.a.ii. for Good Reason or clause 4.a.iii. for any reason other than Cause at any point when the Non-Compete Period extends beyond the Severance Period, and only for such time period after the Severance Period, then the Company shall be deemed to have waived Executive’s compliance with the provisions of Section 5.c.i., and shall have no further obligations to the Executive other than those described in Sections 4.b.i., 4.b.ii., 4.d.i., and 4.f.i. unless the Company shall, at its sole option, provide Executive with written notice within ten (10) business days of the effective date of such termination that the Company has elected to enforce the provisions of Section 5.c.i following such termination, in which case the Company shall continue pay to Executive (I) the full amount of the Base Salary, and (II) an amount equal to the Company’s contribution toward the

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healthcare insurance coverage which Executive and his family, if applicable, was or were receiving as of the date of termination, in each case in cash, payable at the same times and in a materially similar manner as Company payroll for the entire Non-Compete Period. For the avoidance of doubt, the provisions of this Section 5.c.ii., and any waiver by the Company of the provisions of Section 5.c.i. pursuant hereto, shall in no way affect Executive’s obligations and covenants contained in Sections 5.a., 5.b. and 6.

(iii) The provisions of Section 5.c.i and 5.c.ii shall be of no force and effect following a termination of employment relationship after a Change in Control.

6. Confidential Information, Work Product; Confidentiality of Terms.

a. Executive shall keep secret and retain the confidential nature of all Confidential Information (as hereinafter defmed) of or belonging to the Company or any of its Affiliates and take such other precautions with respect thereto as the Company, in its sole discretion, may reasonably request. Executive shall not at any time, whether before or after the termination of his employment hereunder, use, copy, disclose, divulge or make available any Confidential Information or Work Product to any natural person, partnership, limited liability company, corporation, trust, governmental body or any other legal entity; except that Executive may use, copy or disclose to any Person any Confidential Information (i) to the extent required in the performance of his duties pursuant to this Agreement, (ii) to the extent it becomes publicly available through no fault of Executive, (iii) to the extent he is required to do so pursuant to applicable law, court order and/or court-issued subpoena, or (iv) with the prior written consent of the Chief Executive Officer.

b. Executive agrees, subject to applicable law, to treat the terms of this Agreement as “Confidential Information” and to not disclose or discuss or release any such terms to any Person (except to Executive’s attorneys, accountants and other consultants who have agreed to keep such information confidential) without the consent of the CEO.

c. If, during the employment relationship, Executive is engaged in or associated with the research, investigation, planning or implementation of any project, program or venture on behalf of or involving the Company, all rights in the project, program or venture shall belong exclusively to the Company and shall constitute an opportunity belonging exclusively to the Company. Except as approved in advance and in writing by the Board of Directors of Athenex, Executive shall not be entitled to any interest in such project, program or venture or to any commission, finder’s fee or other compensation in connection therewith, other than the compensation to be paid to Executive by the Company as provided herein. Moreover, Executive hereby acknowledges that all Work Product is owned by the Company, and Executive covenants not to take any position or action contrary to such acknowledgement.

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d. All Confidential Information disclosed or made available by the Company or its Affiliates to Executive shall at all times remain the personal property of the Company or such Affiliates as the case may be, and all documents, lists, plans, proposals, records, computer disks and other tangible items supplied to Executive that constitute or contain Confidential Information shall, together with all copies thereof, and all other property of the Company, be returned to the Company immediately upon termination of employment for whatever reason or if sooner, immediately upon demand by the Company.

7. Enforcement.

a. Executive further acknowledges that the scope of the business of the Company and its Affiliates is independent of location in the Territory and that as a senior executive of the Company, Executive has and will have direct and indirect responsibility, oversight and duties with respect to all of the businesses and enterprises of the Company and its controlled Affiliates and its and their current and prospective employees, vendors, customers, clients and other business relations, and that, accordingly, the restrictions contained in Sections 5 and 6 are reasonable in all respects and necessary to protect the goodwill, Confidential Information, customer relationships and Work Product of the Company and its Affiliates and that, without such protection, the Company’s and its Affiliates’ customer and client relations and competitive advantage would be materially adversely affected. It is specifically recognized by Executive that (i) Executive is significantly responsible for the growth and development of the Company and its Affiliates and the creation and preservation of their goodwill, (ii) money damages are insufficient to protect such interests, (iii) such prohibitions would be necessary and appropriate without regard to compensation being provided to Executive hereunder, and (iv) the Company would not enter into this Agreement with Executive without the restrictions contained in Sections 5 and 6. Executive further acknowledges that the restrictions contained in Sections 5 and 6 do not impose an undue hardship on him and that, since he has general business skills which may be used for a business other than a Competitive Business, do not deprive Executive of his livelihood. Executive agrees that the covenants made in Sections 5 and 6 shall be construed as agreements independent of any other provision(s) of this Agreement and shall survive any order of a court of competent jurisdiction terminating any other provision(s) of this Agreement.

b. If, at the time of enforcement of Section 5 or 6, a court holds that the restrictions stated herein are unreasonable under circumstances then

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existing, the Parties agree that the maximum period, scope or geographical area reasonable under such circumstances shall be substituted for the stated period, scope or area. Because Executive’s services are unique and because Executive has access to Confidential Information, customers and Prospective Customers of the Company and Work Product, and for the other reasons set forth herein, the Parties agree that money damages would not be an adequate remedy for any breach of this Agreement. Therefore, in the event of a breach or threatened breach of any of Sections 5 or 6 of this Agreement, the Company and its successors and assigns shall, in addition to other rights and remedies existing in their favor, be entitled to obtain specific performance and injunctive or other relief in order to enforce, or prevent any violations of, the provisions hereof (without posting a bond or other security). To the fullest extent permitted by applicable law, in the event of a breach by Executive of Section 5 hereof, the Restricted Period shall be tolled until such breach or violation has been duly cured. Executive agrees that the provisions of this Section 7 are reasonable and necessary to protect the Company.

8. Notices. Any notice provided for in this Agreement shall be in writing and shall be either personally delivered, mailed by first class mail (return receipt requested), or sent by overnight courier service: if to the Company or to Athenex, to Athenex’s then-current headquarters, attention: Teresa Bair, Esq., and if to Executive, to Executive’s primary residence then on record with the Company (the Company shall be entitled to rely upon information provided by Executive from time to time concerning the address of Executive’s primary residence). Any notice under this Agreement shall be deemed to have been given on the earlier of when so delivered or three (3) business days after being deposited in the mail (as the case may be).

9. Cooperation; Return of Company Property. For a period of one (1) year following termination of Executive’s employment for any reason, Executive agrees to cooperate in good faith with the Company and to be reasonably available to the Company with respect to continuing or future matters arising out of Executive’s services to the Company and its Affiliates in exchange for compensation at an hourly rate of one hundred ninety-five dollars ($195.00), provided, however, that the Executive shall provide such cooperation at no additional charge to the Company during any periods in which Executive is receiving compensation from the Company pursuant to Sections 4.c.ii., or 4.f. Upon termination, Executive shall promptly return to the Company all property of the Company and its Affiliates, whether tangible or intangible, which he possessed or had control over at any time during the employment relationship, including, without limitation, credit cards, building and office access cards, keys, computer equipment, cell phones, electronic devices, manuals, files, documents, records, software, customer database and other data, research, fmancial data and information, correspondence, statistics and payroll and other data, and any copies, compilations, extracts, excerpts, summaries and other notes thereof or relating thereto.

10. Executive’s Representations. Executive hereby represents and warrants to the Company that: (a) the execution, delivery and performance of this Agreement by Executive do

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not and shall not conflict with, breach, violate or cause a default under any contract, agreement, instrument, order, judgment or decree to which Executive is a party or by which he is bound; and (b) this Agreement is the valid and binding obligation of Executive, enforceable in accordance with its terms.

11. Definitions.

“Affiliate” shall mean any of the following: (a) any “affiliate” as defined under Rule 12b-2 of the Securities Exchange Act of 1934, as amended, (b) any individual or entity who directly or indirectly controls, is controlled by or is under common control with the specified individual or entity, and (c) any pair of entities or an individual and an entity in which one of the two parties (in such pair) owns, directly or indirectly, at least twenty percent (20%) of the outstanding equity interests of the other party.

“Cause” shall mean (i) documented nonperformance or nonperformance of the Executive Duties, or refusal to abide by or comply with the reasonable directives of the CEO, or the Company’s policies and procedures that continues without cure or remedy for thirty (30) days after the CEO has given written notice to Executive specifying in reasonable detail the manner in which Executive has failed to perform such duties or comply with such directions, (ii) conviction for, or plea of nolo contendere to, any felony causing material harm to the Company or the reputation of the Company, or any other conviction for, or plea of nolo contendere to, any act or omission involving fraud, theft or embezzlement, (iii) the commission of any other act or omission involving fraud with respect to the Company or any of its Affiliates that could reasonably constitute a crime under applicable law based on the facts and circumstances as alleged, (iv) a breach by the Executive of Sections 5 or 6 of this Agreement (v) the commission of any act that is in breach of Executive’s fiduciary duties of care or loyalty to Company, (vi) gross negligence or willful misconduct with respect to the Company or any of its Affiliates that continues without cure or remedy for thirty (30) days after the CEO has given written notice to Executive specifying in reasonable detail the manner in which Executive has engaged in gross negligence or willful misconduct with respect to the Company or any of its Affiliates, or (vii) a breach by Executive of any other material provision of this Agreement that is not susceptible to remedy or cure, or if susceptible to remedy or cure, that is not cured or remedied and continues beyond thirty (30) days after the CEO has given written notice to Executive specifying in reasonable detail the manner in which Executive has breached this Agreement.

“Change in Control” shall mean (i) any merger, reorganization, or consolidation transaction or series of transactions, whether or not Athenex is the surviving or continuing corporation in such transaction; provided that such transaction or series of related transactions shall not be a Change in Control if the holders of the equity interests in Athenex immediately prior to such transaction or transactions will, immediately after such transaction or transactions (by virtue of securities issued as consideration for the transaction or otherwise) hold at least fifty percent (50%) of the voting power of the surviving, continuing or purchasing entity; or (B) any sale, lease or other disposition of all or substantially all of the assets (tangible or intangible) of Athenex; or (C) any transfer, or series of related transfers, of at least 50% of the outstanding equity interests of Athenex, other than to Affiliates of Athenex and/or the existing stockholders; and (D) Dr. Johnson Lau is not in the Chief Executive Officer Position within three years of the execution of this agreement.

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“Competitive Business” shall mean any business or enterprise engaged in or contemplated to be engaged in the manufacturing of active pharmaceutical ingredients.

“Confidential Information” includes, but is not limited to, proprietary information, Intellectual Property, technical data, and trade secrets concerning or consisting of research, development, manufacturing and production of pharmaceutical products and/or medical devices, product plans, products, services, customer proposals and contracts, customer lists and customers (including, but not limited to, customers of the Company or any of the Company’s Affiliates on whom Executive called or with whom Executive became acquainted during the course of employment), requirements and contact information of customers and suppliers, customer leads, data, markets, software, programs, source codes and object codes, developments, inventions, processes, designs, product designs, drawing, engineering, hardware configuration information, formulas, formulations, prototypes, products, compositions, manuals, research, studies, equipment, machines, blueprints, specifications, discoveries, concepts, patent applications, technology, licenses, trade secrets, know-how, techniques, original works of authorship and any other information of a similar nature, whether or not patentable or copyrightable, documents or data stamped “Confidential”, marketing plans, this Agreement, any document related to the Acquisition, finances or other business information or strategies disclosed to Executive, either directly or indirectly, in writing, by drawings or by observation; provided, that “Confidential Information” shall not include information that: (a) is generally known to the public prior to disclosure, or after disclosure becomes generally known to the public through no act or failure to act on the part of the Executive; or (b) is rightfully furnished to the Executive by a Person without breaching any agreement, understanding or confidential relationship between such Person and the Company.

“Good Reason” shall mean, without Executive’s consent, the occurrence of one of the following: (i) a material diminution of the Executive Duties or change in Executive’s position or compensation or change or removal of both titles specified in Section 2; (ii) the Company’s material breach of any provision of this Agreement; or (iv) resignation by the Executive after an act by the CEO or the Board of Directors of Athenex that would constitute a breach of the Company’s or Athenex’s code of ethics, if any, or fiduciary duties, a crime or material fraud; provided, however, Executive’s termination pursuant to Section 4.a.ii. shall not be for Good Reason unless Executive shall have given written notice to the Company within ninety (90) days after any event which has resulted in any such material diminution and the Company has failed to cure any such material diminution within thirty (30) days of receipt of such written notice from Executive.

“Intellectual Property” shall mean (a) all Work Product (whether or not patentable and whether or not reduced to practice), all improvements thereto, and all patents, patent applications, and patent disclosures, together with all reissuances, continuations, continuations-in-part, revisions, extensions, and reexaminations thereof, (b) all trademarks, service marks, trade dress, logos, trade names, and corporate names, together with all translations, adaptations, derivations, and combinations thereof and including all goodwill associated therewith, and all

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applications, registrations, and renewals in connection therewith, (c) all copyrightable works, all copyrights, and all applications, registrations, and renewals in connection therewith, (d) all mask works and all applications, registrations, and renewals in connection therewith, (e) all trade secrets (as defined in the Uniform Trade Secrets Act and under corresponding foreign statutory and common law) and confidential business information (including ideas, research and development, formulas, compositions, manufacturing and production processes and techniques, technical data, designs, drawings, specifications, customer and supplier lists, pricing and cost information, and business and marketing plans and proposals) related to the Work Product, (f) all software (including firmware and other software embedded in hardware devices), software code (including source code and executable or object code), subroutines, interfaces, including APIs, and algorithms, (g) all other proprietary rights, and (h) all copies and tangible embodiments thereof (in whatever form or medium).

“Person” shall mean an individual, a partnership, a limited liability company, a corporation, an association, a joint stock company, a trust, a joint venture, an unincorporated organization and a governmental entity or any department, agency or political subdivision thereof.

“Prospective Customer” shall mean a Person (i) to whom the Company or any Affiliate of the Company previously provided services within the two (2) years immediately preceding Executive’s termination, (ii) from whom the Company or any Affiliate of the Company has actively solicited business within the two (2) years immediately preceding the Executive’s termination, or (iii) to whom the Company or any Affiliate of the Company has planned to solicit business within the six (6) months immediately preceding the Executive’s termination as evidenced by inclusion on a prospective customer list, business plans, pipeline reports, or sales meetings.

“Work Product” shall mean any and all inventions, innovations, improvements, original works of authorship, developments, concepts, methods, trade secrets, designs, analyses, drawings, reports and all similar or related information (whether or not patentable or registrable under copyright or similar laws) which are solely or jointly conceived, developed, made or reduced to practice, or caused to be conceived, developed, made or reduced to practice, by Executive while employed by the Company or any of its Affiliates with respect to pharmaceutical products and/or medical devices; provided, however, that “Work Product” shall not include any invention that Executive developed entirely on his own time without using the Company’s equipment, supplies, facilities or Confidential Information except for those inventions that either (a) relate at the time of conception or reduction to practice of the invention to the Company’s business, or actual or demonstrably anticipated research or development of the Company, or (b) result from any work performed by Executive for the Company or any of its Affiliates.

12. Severability. Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other provision or any other jurisdiction, but this Agreement shall be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision had never been contained herein.

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13. Complete Agreement. This Agreement, including all Exhibits attached hereto, and the Proprietary Rights Agreement between the Company and Executive, a copy of which is attached as Exhibit A hereto, embodies the complete agreement and understanding among the Parties with respect to the subject matter hereof and thereof and supersedes and preempts any prior understandings, agreements or representations by or among the Parties, written or oral, that may have related to the subject matter hereof or thereof in any way.

14. Counterparts. This Agreement may be executed by electronic or facsimile signature and in separate counterparts, each of which is deemed to be an original and all of which taken together constitute one and the same agreement.

15. Successors and Assigns. This Agreement is intended to bind and inure to the benefit of and be enforceable by Executive and the Company, and their respective heirs, successors and assigns. Executive may not assign his rights or delegate his obligations hereunder without the prior written consent of the Company. Any attempted assignment of this Agreement in contravention of this Section 15 shall be null and void.

16. Jurisdiction and Venue. Any controversy, claim or dispute arising out of or relating to any provision of this Agreement (collectively, a “Dispute”) shall be venued exclusively in the state or federal courts located in the Western District of New York. Such courts are together referred to as the “Exclusive Venues” for litigation. The Parties agree not to institute any litigation except in the Exclusive Venues and further agree that specific enforcement of this covenant with respect to Exclusive Venues may be awarded to the Parties by means of all available legal or equitable remedies, including, without limitation, a temporary restraining order. The Parties hereby submit to the personal jurisdiction of the Exclusive Venues, and waive any defense of inconvenient forum to the maintenance of any action or proceeding to be brought.

17. Amendment. The provisions of this Agreement may be amended or waived only with the prior written consent of the Company and Executive, and no course of conduct or failure or delay in enforcing the provisions of this Agreement shall affect the validity, binding effect or enforceability of this Agreement.

18. Survival. The obligations of the Parties in Sections 5, 6, 7, 8, 9, 12, 16, 19 and 20 shall survive indefinitely (unless otherwise limited in duration in this Agreement) regardless of any termination or cancellation (for any reason) of this Agreement.

19. Costs and Expenses. In the event of any legal proceedings in connection with this Agreement, the non-prevailing party shall pay the reasonable fees and costs (including without limitation, attorney’s fees, costs and expenses) of the prevailing party.

20. Governing Law. The Parties agree that this Agreement shall be governed by and construed in accordance with the domestic laws of the State of New York without giving effect

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to any choice or conflict of law provision or rule (whether of the State of New York or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of New York.

21. No Strict Construction. The Parties have participated jointly in the negotiation and drafting of this Agreement. Executive was represented by and consulted with counsel during the negotiation and preparation of this Agreement. In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the Parties and no presumption or burden of proof shall arise favoring or disfavoring any Party by virtue of the authorship of any provisions of this Agreement.

22. Paragraph Headings. Headings and subheadings herein are for convenience of reference only and are not of substantive effect.

23. Incorporation of Recitals. The recitals in the preamble of this Agreement are hereby incorporated by reference into this Agreement in their entirety.

24. Taxes. The Company may withhold from any payments made under this Agreement all applicable taxes, including but not limited to income, employment and social insurance taxes, as shall be required by law.

[Signature Page Follows.]

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IN WITNESS WHEREOF, the Parties have executed this Employment Agreement as of the Effective Date.

ATHENEX, INC.
By:
	Johnson Lau
	CEO

J. Nick Riehle

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EX-10

Exhibit 10.28

EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT (this “Agreement”) is made and entered into as of February 21, 2017 (the “Effective Date”) by and between ATHENEX, INC., a company existing under the laws of Delaware having its principal office at Conventus Building, 1001 Main Street, Suite 600, Buffalo, New York 14203 (the “Company”), and Mr. Jeffrey Yordon, an individual residing at #### ## ### ##### #####, #########, ## #####, USA (“Executive”).

1.    Employment; Term. Subject to the terms and conditions set forth in this Agreement, the Company hereby agrees to employ Executive, and Executive hereby accepts employment, as Chief Operating Officer of the Company, for the period beginning on the Effective Date of this Agreement and continuing for an initial term of three (3) years (the “Term”) unless earlier terminated as hereinafter set forth. Upon the end of the Term, this Employment Agreement shall continue to renew for additional one (I) year Terms until terminated pursuant to this Agreement.

2.    Position and Duties. During the employment relationship, Executive shall serve as Chief Operating Officer of the Company, and will report to the Chief Executive Officer, and will have such responsibilities, duties and authorities, and render such services to the Company as are reasonably consistent with such positions and as the Chief Executive Officer may from time to time direct. Executive acknowledges that his duties and responsibilities will require 80% of his full-time business efforts and agrees that during the employment relationship, he will not engage in any other business activity or have any business pursuits or interests except activities or interests which the Chief Executive Officer has determined, in his reasonable judgment, after notice by Executive, do not conflict with the business of the Company or interfere with the performance of Executive’s duties hereunder. Executive agrees to perform his duties and discharge his responsibilities in a diligent, efficient and faithful manner, and to promote the best interests of the Company. Notwithstanding the foregoing, Executive may devote a reasonable amount of time to civic, educational, community, or charitable activities that do not interfere with the performance of Executive’s duties and responsibilities hereunder and, with the prior consent of the Chief Executive Officer, serve as a director of entities other than the Company. Executive’s duties (the “Executive Duties”) shall include such duties as are assigned to Executive by the Chief Executive Officer from time to time and:

a. preserving the business relationships of the Company;

b. participating in the creation, communication, and implementation of the Company’s vision, mission, and overall direction;

c. participating in the creation of the long- and short-term strategies surrounding the marketing of products and services, as well as the research and development of current and new products;

d. participating in the execution of delivering the Company’s products and services;

e. advising and consulting with the Chief Executive Officer regarding employee performance, evaluating employees, hiring and firing employees;

f. actively advancing, developing, and improving the products and services of the Company; and

g. becoming an active member of Athenex’s executive management team.

3.    Salary and Benefits. As consideration and compensation for the Executive Duties, the Company shall compensate Executive in the following manner:

a. Base Salary. The Company shall pay Executive a salary of USD Four Hundred Thousand Dollars ($400,000) per year, as may be adjusted upward from time to time (the “Base Salary”), payable in accordance with the customary payroll practices of the Company appropriate for his level to be determined by the Compensation Committee of the Board.

b. Bonus. The Executive will also be considered for year end bonus with other top executives at his level and will be awarded at the same range with the exact amount to be determined by the Compensation Committee of the Board of Directors.

c. Stock Options. The Compensation Committee of the Board will also recommend to the full Board an additional 230,000 shares of Athenex stock options under the current Stock Option Plan during the Initial Public Offering with a term of ten (10) years, vested in equal installments over three (3) years, and the exercise price the same as the Initial Public Offering Price.

d. Other Benefits. Executive shall be entitled to fifteen (15) business days of paid time off and all paid holidays provided by Athenex to its senior executives. At the end of the annual measurement period, any accrued and unused paid time off shall be forfeited, except that Executive may defer, for a period not to exceed one (1) year, up to five (5) business days of his accrued and unused paid time off. In addition, Executive shall, during the Term, be entitled to participate in any and all employee welfare (including health) plans, fringe benefits, employee benefit plans and similar plans of the Company, which shall be comparable to those offered by Athenex to its senior executives (collectively, “Company Benefits”), now or hereafter in effect and open to participation by qualifying employees of the Company generally. Said participation shall be in accordance with eligibility and other requirements, and on terms and conditions, no less generous than as provided to senior executives of Athenex.

e. Expenses. The Company shall pay or reimburse Executive for all reasonable and necessary out-of-pocket expenses incurred by Executive in the performance of his Executive Duties, subject to the presentation of appropriate receipts and expense reports in accordance with the Company’s policies for expense verification.

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4. Termination.

a. Executive’s employment hereunder shall continue from the date hereof until terminated upon the first to occur of the following events:

i. death or Disability (defined below);

ii. termination by Executive, either for or for no Good Reason; or

iii. termination by the Company, either with or without Cause;

b. Upon termination pursuant to clause 4.a.i. above, Executive (or Executive’s estate, in the event of termination as a result of the death of Executive) shall be entitled to receive (i) all compensation or benefits required under applicable law or offered generally by the Company to its employees in the event of death or disability, (ii) an Annual Bonus, if earned, for the calendar year in which the termination occurred (prorated for any partial year), and (iii) in the event of “Disability”, an amount sufficient to provide Executive with one (1) year of healthcare coverage comparable to that which Executive and his family, if applicable, received while employed by the Company. For purposes of this Section 4, the Executive shall be deemed “Totally Disabled” (and termination of his employment shall be deemed to be due to such “Disability”) if the Executive is unable to perform the essential functions of the job set forth in this Agreement, with or without a reasonable accommodation, and the accommodation would not be an undue hardship for the Company, for a period of (120) consecutive or one hundred eighty (180) non-consecutive days out of any consecutive twelve (12) month period as a result of physical or mental illness or loss of legal capacity. If the Executive is prevented from performing his duties because of Disability, upon request by the Company, the Executive shall submit to an examination by a physician selected by the Company, at the Company’s expense, and the Executive shall also authorize his personal physician to disclose to the selected physician all of the Executive’s relevant medical records.

c. Upon termination pursuant to clause 4.a.ii. without Good Reason, all compensation, rights and benefits provided to Executive pursuant to this Agreement shall cease immediately, except that Executive shall be entitled to receive (i) all compensation or benefits required under applicable law, and (ii) if applicable, the amounts paid during the Non-Compete Period, at the Company’s option, pursuant to Section 5.c.ii. It is the intention of the Company to renew the employment contract with the said executive with a new contract before 2019.

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f. Upon termination pursuant to clause 4.a.iii. for Cause, all compensation, rights and benefits provided to Executive pursuant to this Agreement shall cease immediately, except that Executive shall be entitled to receive all compensation or benefits in a timely manner required under applicable law.

g. In the event of a termination of the employment relationship pursuant to clause 4.a.ii. for Good Reason or clause 4.a.iii. for any reason other than for Cause, Executive shall continue to receive (i) the Base Salary provided pursuant to Section 3.a. for the period from the date of such termination until the second (2nd) anniversary of the Effective Date (the “Severance Period”), and (ii) in the event that the Non-Compete Period extends beyond the Severance Period, if applicable, the amounts paid during the Non-Compete Period, at the Company’s option, pursuant to Section 5.c.ii.

h. Notwithstanding anything to the contrary herein, the payment by the Company of the amounts described in Section 4.b.ii, 4.b.iii, 4.c.ii and 4.f. shall be contingent upon Executive, or in the case of Executive’s death, the executor of Executive’s estate, executing a release in form and substance satisfactory to the Company.

5. Non-Solicitation; Non-Competition. Executive acknowledges and agrees that the expertise and experience of Executive in the business of the Company is essential for the growth, success and stability of the Company. Executive further acknowledges and understands that the covenants set forth in this Section 5 are reasonable and necessary and part of the consideration provided to Executive by Athenex pursuant to the Acquisition. Therefore, in consideration of the various covenants and obligations of the Company pursuant to this Agreement and the other agreements described herein, as long as Executive receives the Base Salary, or if applicable, amounts paid during the Non-Compete Period and an appropriate severance appropriate for the industry standard, Executive shall not, directly or indirectly:

a. during the employment relationship and up to six (6) months following the termination of the employment relationship, knowingly solicit any Person in the employment of the Company (other than via a general advertisement or other solicitation not addressed specifically to such Person) to: (y) terminate such employment, and/or (z) accept employment or enter into any consulting arrangements with any Person other than the Company; provided, however, this provision is not intended to and does not preclude Executive, on behalf of himself or another, from offering employment to or hiring any Person in the employment of the Company who initiates contact with Executive, inquires about employment or consulting opportunities, and/or otherwise responds to a general employment or similar notice issued on behalf of the Executive or

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another Person, in each case, without any inducement from or on behalf of the Executive. The prohibitions in this Section 5.a. include, but are not limited to using social media, such as Linkedln, Facebook, and/or Twitter, to directly communicate with any employee, customer, supplier, licensee, licensor, Prospective Customer or other business relation of the Company or any of its Affiliates, it being understood that any general update to Executive’s title or employer on Executive’s profile on such social media shall not be considered such direct communication;

b. during the employment relationship and up to six (6) months following the termination of the employment relationship, call on, solicit, accept business from, or provide service to, or sell to any supplier, licensee, licensor, customer, Prospective Customer, or other business relation of the Company, or induce, encourage or cause any such supplier, licensee, licensor, customer, Prospective Customer, or other business relation to reduce or terminate its business relationship with the Company;

c. (i) Except as provided in Section 5.c.iii. and subject to Section 5.c.ii. below, during the employment relationship and one (I) year following the termination of the employment relationship (the “Non-Compete Period”), either for himself or for any other Person, own, manage, control, participate in, consult with, render services for, permit his name to be used or in any other manner or capacity engage in any business or enterprise which constitutes a Competitive Business within ninety (90) miles of the principal office of the Company as set forth in the introduction to this Agreement (or as may be changed on the records of the Company pursuant to Section 8 hereof) (the “Territory”). For purposes of this Agreement, the term “participate” includes any direct or indirect interest in any enterprise, whether as an officer, director, employee, partner, sole proprietor, agent, representative, independent contractor, consultant, executive, franchisor, franchisee, creditor, owner, member, shareholder or otherwise; provided, that the Competitive Business activities prohibited hereunder shall not include passive ownership of less than 5% of the stock of a privately-held or publicly-held corporation.

(ii) Notwithstanding the provisions of Section 5.c.i. or any other provision in this Agreement to the contrary, in the event of (A) a termination of the employment relationship upon or after the expiration of the initial Term, (B) a termination of this Agreement pursuant to clause 4.a.ii. without Good Reason, or (C) a termination of this Agreement pursuant to clause 4.a.ii. for Good Reason or clause 4.a.iii. for any reason other than Cause at any point when the Non-Compete Period extends beyond the Severance Period, and only for such time period after the Severance Period, then the Company shall be deemed to have waived Executive’s compliance with the provisions of Section 5.c.i., and shall have no further obligations to the Executive other than those described in Sections 4.b.i., 4.b.ii., 4.d.i., and 4.f.i. unless the Company shall, at its sole option, provide Executive with written notice within ten (I 0) business days of

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the effective date of such termination that the Company has elected to enforce the provisions of Section 5.c.i following such termination, in which case the Company shall continue pay to Executive (I) the full amount of the Base Salary, and (II) an amount equal to the Company’s contribution toward the healthcare insurance coverage which Executive and his family, if applicable, was or were receiving as of the date of termination, in each case in cash, payable at the same times and iri a materially similar manner as Company payroll for the entire Non-Compete Period. For the avoidance of doubt, the provisions of this Section 5.c.ii., and any waiver by the Company of the provisions of Section 5.c.i. pursuant hereto, shall in no way affect Executive’s obligations and covenants contained in Sections 5.a., 5.b. and 6.

(iii) The provisions of Section 5.c.i and 5.c.ii shall be of no force and effect following a termination of employment relationship after a Change in Control.

6. Confidential Information, Work Product; Confidentiality of Terms.

a. Executive shall keep secret and retain the confidential nature of all Confidential Information (as hereinafter defined) of or belonging to the Company or any of its Affiliates and take such other precautions with respect thereto as the Company, in its sole discretion, may reasonably request. Executive shall not at any time, whether before or after the termination of his employment hereunder, use, copy, disclose, divulge or make available any Confidential Information or Work Product to any natural person, partnership, limited liability company, corporation, trust, governmental body or any other legal entity; except that Executive may use, copy or disclose to any Person any Confidential Information (i) to the extent required in the performance of his duties pursuant to this Agreement, (ii) to the extent it becomes publicly available through no fault of Executive, (iii) to the extent he is required to do so pursuant to applicable law, court order and/or court-issued subpoena, or (iv) with the prior written consent of the Chief Executive Officer.

b. Executive agrees, subject to applicable law, to treat the terms of this Agreement as “Confidential Information” and to not disclose or discuss or release any such terms to any Person (except to Executive’s attorneys, accountants and other consultants who have agreed to keep such information confidential) without the consent of the CEO.

c. If, during the employment relationship, Executive is engaged in or associated with the research, investigation, planning or implementation of any project, program or venture on behalf of or involving the Company, all rights in the project, program or venture shall belong exclusively to the Company and shall constitute an opportunity belonging exclusively to the Company. Except as approved in advance and in writing by the Board of Directors of Athenex, Executive shall not be entitled to any interest in

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such project, program or venture or to any commission, finder’s fee or other compensation in connection therewith, other than the compensation to be paid to Executive by the Company as provided herein. Moreover, Executive hereby acknowledges that all Work Product is owned by the Company, and Executive covenants not to take any position or action contrary to such acknowledgement.

d. All Confidential Information disclosed or made available by the Company or its Affiliates to Executive shall at all times remain the personal property of the Company or such Affiliates as the case may be, and all documents, lists, plans, proposals, records, computer disks and other tangible items supplied to Executive that constitute or contain Confidential Information shall, together with all copies thereof, and all other property of the Company, be returned to the Company immediately upon termination of employment for whatever reason or if sooner, immediately upon demand by the Company.

7. Enforcement.

a. Executive further acknowledges that the scope of the business of the Company and its Affiliates is independent of location in the Territory and that as a senior executive of the Company, Executive has and will have direct and indirect responsibility, oversight and duties with respect to all of the businesses and enterprises of the Company and its controlled Affiliates and its and their current and prospective employees, vendors, customers, clients and other business relations, and that, accordingly, the restrictions contained in Sections 5 and 6 are reasonable in all respects and necessary to protect the goodwill, Confidential Information, customer relationships and Work Product of the Company and its Affiliates and that, without such protection, the Company’s and its Affiliates’ customer and client relations and competitive advantage would be materially adversely affected. It is specifically recognized by Executive that (i) Executive is significantly responsible for the growth and development of the Company and its Affiliates and the creation and preservation of their goodwill, (ii) money damages are insufficient to protect such interests, (iii) such prohibitions would be necessary and appropriate without regard to compensation being provided to Executive hereunder, and (iv) the Company would not enter into this Agreement with Executive without the restrictions contained in Sections 5 and 6. Executive further acknowledges that the restrictions contained in Sections 5 and 6 do not impose an undue hardship on him and that, since he has general business skills which may be used for a business other than a Competitive Business, do not deprive Executive of his livelihood. Executive agrees that the covenants made in Sections 5 and 6 shall be construed as agreements independent of any other provision(s) of this Agreement and shall survive any order of a court of competent jurisdiction terminating any other provision(s) of this Agreement.

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b. If, at the time of enforcement of Section 5 or 6, a court holds that the restrictions stated herein are unreasonable under circumstances then existing, the Parties agree that the maximum period, scope or geographical area reasonable under such circumstances shall be substituted for the stated period, scope or area. Because Executive’s services are unique and because Executive has access to Confidential Information, customers and Prospective Customers of the Company and Work Product, and for the other reasons set forth herein, the Parties agree that money damages would not be an adequate remedy for any breach of this Agreement. Therefore, in the event of a breach or threatened breach of any of Sections 5 or 6 of this Agreement, the Company and its successors and assigns shall, in addition to other rights and remedies existing in their favor, be entitled to obtain specific performance and injunctive or other relief in order to enforce, or prevent any violations of, the provisions hereof (without posting a bond or other security). To the fullest extent permitted by applicable law, in the event of a breach by Executive of Section 5 hereof, the Restricted Period shall be tolled until such breach or violation has been duly cured. Executive agrees that the provisions of this Section 7 are reasonable and necessary to protect the Company.

8.    Notices. Any notice provided for in this Agreement shall be in writing and shall be either personally delivered, mailed by first class mail (return receipt requested), or sent by overnight courier service: if to the Company or to Athenex, to Athenex’s then-current headquarters, attention: Teresa Bair, Esq., and if to Executive, to Executive’s primary residence then on record with the Company (the Company shall be entitled to rely upon information provided by Executive from time to time concerning the address of Executive’s primary residence). Any notice under this Agreement shall be deemed to have been given on the earlier of when so delivered or three (3) business days after being deposited in the mail (as the case may be).

9.    Cooperation; Return of Company Property. For a period of one (1) year following termination of Executive’s employment for any reason, Executive agrees to cooperate in good faith with the Company and to be reasonably available to the Company with respect to continuing or future matters arising out of Executive’s services to the Company and its Affiliates in exchange for compensation at an hourly rate of one hundred fifty dollars ($150.00), provided, however, that the Executive shall provide such cooperation at no additional charge to the Company during any periods in which Executive is receiving compensation from the Company pursuant to Sections 4.c.ii., or 4.f. Upon termination, Executive shall promptly return to the Company all property of the Company and its Affiliates, whether tangible or intangible, which he possessed or had control over at any time during the employment relationship, including, without limitation, credit cards, building and office access cards, keys, computer equipment, cell phones, electronic devices, manuals, files, documents, records, software, customer database and other data, research, financial data and information, correspondence, statistics and payroll and other data, and any copies, compilations, extracts, excerpts, summaries and other notes thereof or relating thereto.

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10.    Executive’s Representations. Executive hereby represents and warrants to the Company that: (a) the execution, delivery and performance of this Agreement by Executive do not and shall not conflict with, breach, violate or cause a default under any contract, agreement, instrument, order, judgment or decree to which Executive is a party or by which he is bound; and (b) this Agreement is the valid and binding obligation of Executive, enforceable in accordance with its terms.

11. Definitions.

“Affiliate” shall mean any of the following: (a) any “affiliate” as defined under Rule 12b-2 of the Securities Exchange Act of 1934, as amended, (b) any individual or entity who directly or indirectly controls, is controlled by or is under common control with the specified individual or entity, and (c) any pair of entities or an individual and an entity in which one of the two parties (in such pair) owns, directly or indirectly, at least twenty percent (20%) of the outstanding equity interests of the other party.

“Cause” shall mean (i) documented nonperformance or nonperformance of the Executive Duties, or refusal to abide by or comply with the reasonable directives of the CEO, or the Company’s policies and procedures that continues without cure or remedy for thirty (30) days after the CEO has given written notice to Executive specifying in reasonable detail the manner in which Executive has failed to perform such duties or comply with such directions, (ii) conviction for, or plea of nolo contendere to, any felony causing material harm to the Company or the reputation of the Company, or any other conviction for, or plea of nolo contendere to, any act or omission involving fraud, theft or embezzlement, (iii) the commission of any other act or omission involving fraud with respect to the Company or any of its Affiliates that could reasonably constitute a crime under applicable law based on the facts and circumstances as alleged, (iv) a breach by the Executive of Sections 5 or 6 of this Agreement (v) the commission of any act that is in breach of Executive’s fiduciary duties of care or loyalty to Company, (vi) gross negligence or willful misconduct with respect to the Company or any of its Affiliates that continues without cure or remedy for thirty (30) days after the CEO has given written notice to Executive specifying in reasonable detail the manner in which Executive has engaged in gross negligence or willful misconduct with respect to the Company or any of its Affiliates, or (vii) a breach by Executive of any other material provision of this Agreement that is not susceptible to remedy or cure, or if susceptible to remedy or cure, that is not cured or remedied and continues beyond thirty (30) days after the CEO has given written notice to Executive specifying m reasonable detail the manner in which Executive has breached this Agreement.

“Change in Control” shall mean (i) any merger, reorganization, or consolidation transaction or series of transactions, whether or not Athenex is the surviving or continuing corporation in such transaction; provided that such transaction or series of related transactions shall not be a Change in Control if the holders of the equity interests in Athenex immediately prior to such transaction or transactions will, immediately after such transaction or transactions

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(by virtue of securities issued as consideration for the transaction or otherwise) hold at least fifty percent (50%) of the voting power of the surviving, continuing or purchasing entity; or (B) any sale, lease or other disposition of all or substantially all of the assets (tangible or intangible) of Athenex; or (C) any transfer, or series of related transfers, of at least 50% of the outstanding equity interests of Athenex, other than to Affiliates of Athenex and/or the existing stockholders; and (D) Dr. Johnson Lau is not in the Chief Executive Officer Position within three years of the execution of this agreement.

“Competitive Business” shall mean any business or enterprise engaged in or contemplated to be engaged in the manufacturing of active pharmaceutical ingredients.

“Confidential Information” includes, but is not limited to, proprietary information, Intellectual Property, technical data, and trade secrets concerning or consisting of research, development, manufacturing and production of pharmaceutical products and/or medical devices, product plans, products, services, customer proposals and contracts, customer lists and customers (including, but not limited to, customers of the Company or any of the Company’s Affiliates on whom Executive called or with whom Executive became acquainted during the course of employment), requirements and contact information of customers and suppliers, customer leads, data, markets, software, programs, source codes and object codes, developments, inventions, processes, designs, product designs, drawing, engineering, hardware configuration information, formulas, formulations, prototypes, products, compositions, manuals, research, studies, equipment, machines, blueprints, specifications, discoveries, concepts, patent applications, technology, licenses, trade secrets, know-how, techniques, original works of authorship and any other information of a similar nature, whether or not patentable or copyrightable, documents or data stamped “Confidential”, marketing plans, this Agreement, any document related to the Acquisition, finances or other business information or strategies disclosed to Executive, either directly or indirectly, in writing, by drawings or by observation; provided, that “Confidential Information” shall not include information that: (a) is generally known to the public prior to disclosure, or after disclosure becomes generally known to the public through no act or failure to act on the part of the Executive; or (b) is rightfully furnished to the Executive by a Person without breaching any agreement, understanding or confidential relationship between such Person and the Company.

“Good Reason” shall mean, without Executive’s consent, the occurrence of one of the following: (i) a material diminution of the Executive Duties or change in Executive’s position or compensation or change or removal of both titles specified in Section 2; (ii) the Executive’s principal place of work is relocated by the Company or any acquiring or successor entity (or parent or subsidiary thereof) to a location more than one hundred ( I 00) miles from the Company’s present location in Clarence, New York; (iii) the Company’s material breach of any provision of this Agreement; or (iv) resignation by the Executive after an act by the CEO or the Board of Directors of Athenex that would constitute a breach of the Company’s or Athenex’s code of ethics, if any, or fiduciary duties, a crime or material fraud; provided, however, Executive’s termination pursuant to Section 4.a.ii. shall not be for Good Reason unless Executive shall have given written notice to the Company within ninety (90) days after any event which has resulted in any such material diminution and the Company has failed to cure any such material diminution within thirty (30) days of receipt of such written notice from Executive.

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“Intellectual Property” shall mean (a) all Work Product (whether or not patentable and whether or not reduced to practice), all improvements thereto, and all patents, patent applications, and patent disclosures, together with all reissuances, continuations, continuations -in-part, revisions, extensions, and reexaminations thereof, (b) all trademarks, service marks, trade dress, logos, trade names, and corporate names, together with all translations, adaptations, derivations, and combinations thereof and including all goodwill associated therewith, and all applications, registrations, and renewals in connection therewith, (c) all copyrightable works, all copyrights, and all applications, registrations, and renewals in connection therewith, (d) all mask works and all applications, registrations, and renewals in connection therewith, (e) all trade secrets (as defined in the Uniform Trade Secrets Act and under corresponding foreign statutory and common law) and confidential business information (including ideas, research and development, formulas, compositions, manufacturing and production processes and techniques, technical data, designs, drawings, specifications, customer and supplier lists, pricing and cost information, and business and marketing plans and proposals) related to the Work Product, (t) all software (including firmware and other software embedded in hardware devices), software code (including source code and executable or object code), subroutines, interfaces, including APis, and algorithms, (g) all other proprietary rights, and (h) all copies and tangible embodiments thereof (in whatever form or medium).

“Person” shall mean an individual, a partnership, a limited liability company, a corporation, an association, a joint stock company, a trust, a joint venture, an unincorporated organization and a governmental entity or any department, agency or political subdivision thereof.

“Prospective Customer” shall mean a Person (i) to whom the Company or any Affiliate of the Company previously provided services within the two (2) years immediately preceding Executive’s termination, (ii) from whom the Company or any Affiliate of the Company has actively solicited business within the two (2) years immediately preceding the Executive’s termination, or (iii) to whom the Company or any Affiliate of the Company has planned to solicit business within the six (6) months immediately preceding the Executive’s termination as evidenced by inclusion on a prospective customer list, business plans, pipeline reports, or sales meetings.

“Work Product” shall mean any and all inventions, innovations, improvements, original works of authorship, developments, concepts, methods, trade secrets, designs, analyses, drawings, reports and all similar or related information (whether or not patentable or registrable under copyright or similar laws) which are solely or jointly conceived, developed, made or reduced to practice, or caused to be conceived, developed, made or reduced to practice, by Executive while employed by the Company or any of its Affiliates with respect to pharmaceutical products and/or medical devices; provided, however, that “Work Product” shall not include any invention that Executive developed entirely on his own time without using the Company’s equipment, supplies, facilities or Confidential Information except for those

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inventions that either (a) relate at the time of conception or reduction to practice of the invention to the Company’s business, or actual or demonstrably anticipated research or development of the Company, or (b) result from any work performed by Executive for the Company or any of its Affiliates.

12.    Severability. Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other provision or any other jurisdiction, but this Agreement shall be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision had never been contained herein.

13.    Complete Agreement. This Agreement, including all Exhibits attached hereto, and the Proprietary Rights Agreement between the Company and Executive, a copy of which is attached as Exhibit A hereto, embodies the complete agreement and understanding among the Parties with respect to the subject matter hereof and thereof and supersedes and preempts any prior understandings, agreements or representations by or among the Parties, written or oral, that may have related to the subject matter hereof or thereof in any way.

14.    Counterparts. This Agreement may be executed by electronic or facsimile signature and in separate counterparts, each of which is deemed to be an original and all of which taken together constitute one and the same agreement.

15.    Successors and Assigns. This Agreement is intended to bind and inure to the benefit of and be enforceable by Executive and the Company, and their respective heirs, successors and assigns. Executive may not assign his rights or delegate his obligations hereunder without the prior written consent of the Company. Any attempted assignment of this Agreement in contravention of this Section 15 shall be null and void.

16.    Jurisdiction and Venue. Any controversy, claim or dispute arising out of or relating to any provision of this Agreement (collectively, a “Dispute”) shall be venued exclusively in the state or federal courts located in the Western District of New York. Such courts are together referred to as the “Exclusive Venues” for litigation. The Parties agree not to institute any litigation except in the Exclusive Venues and further agree that specific enforcement of this covenant with respect to Exclusive Venues may be awarded to the Parties by means of all available legal or equitable remedies, including, without limitation, a temporary restraining order. The Parties hereby submit to the personal jurisdiction of the Exclusive Venues, and waive any defense of inconvenient forum to the maintenance of any action or proceeding to be brought.

17.    Amendment. The provisions of this Agreement may be amended or waived only with the prior written consent of the Company and Executive, and no course of conduct or failure or delay in enforcing the provisions of this Agreement shall affect the validity, binding effect or enforceability of this Agreement.

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18.    Survival. The obligations of the Parties in Sections 5, 6, 7, 8, 9, 12, 16, 19 and 20 shall survive indefinitely (unless otherwise limited in duration in this Agreement) regardless of any termination or cancellation (for any reason) of this Agreement.

19.    Costs and Expenses. In the event of any legal proceedings in connection with this Agreement, the non-prevailing party shall pay the reasonable fees and costs (including without limitation, attorney’s fees, costs and expenses) of the prevailing party.

20.    Governing Law. The Parties agree that this Agreement shall be governed by and construed in accordance with the domestic laws of the State of New York without giving effect to any choice or conflict of law provision or rule (whether of the State of New York or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of New York.

21.    No Strict Construction. The Parties have participated jointly in the negotiation and drafting of this Agreement. Executive was represented by and consulted with counsel during the negotiation and preparation of this Agreement. In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the Parties and no presumption or burden of proof shall arise favoring or disfavoring any Party by virtue of the authorship of any provisions of this Agreement.

22.    Paragraph Headings. Headings and subheadings herein are for convenience of reference only and are not of substantive effect.

23.    Incorporation of Recitals. The recitals in the preamble of this Agreement are hereby incorporated by reference into this Agreement in their entirety.

24.    Taxes. The Company may withhold from any payments made under this Agreement all applicable taxes, including but not limited to income, employment and social insurance taxes, as shall be required by law.

[Signature Page Follows.]

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IN WITNESS WHEREOF, the Parties have executed this Employment Agreement as of the Effective Date.

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EX-10

Exhibit 10.29

            

December 8, 2016

Flint Besecker

Orchard Park, New York

Via Hand Delivery

Dear Flint,

Pursuant to our conversations over the past week, this letter contains the terms of our agreement for the transition of your services (the “Letter Agreement”) with Athenex, Inc. (the “Company”). The effective date of this Letter Agreement is the date that you sign and date this Letter Agreement (the “Effective Date”).

1. You agree to resign your positions as Executive Vice President, Chief Financial Officer, Chief Business Officer and Secretary of the Company immediately as of the Effective Date.

2. You agree to resign your position as a member of the Company’s Board of Directors (the “Board”) and any committee of the Board as of the Effective Date.

3. The parties hereby agree that the employment agreement between you and the Company originally effective July, 1, 2013, restated March 10, 2014 (the “2014 Agreement”), and amended and restated June 1, 2015 (the ‘‘2015 Agreement”)(collectively the “Employment Agreement”) is terminated as of the Effective Date.

4. Beginning on the Effective Date, you will be reassigned to the position of Strategic Operations and will be based at the Company’s office in Buffalo, New York. You will report to Johnson Lau, the Chief Executive Officer of the Company. Your position with the Company will be on a part-time basis, which shall be Sixty Percent (60%) of the the full-time employment equivalent.

5. Your employment is “at will” and, accordingly, either the Company or you may terminate your employment at any time and for any reason, with or without cause or prior notice. Nothing in this Letter Agreement shall be construed as, or shall interfere with, abridge, limit, modify, or amend the “at will” nature of your employment.

6. Your annual base salary, adjusted for your part-time status (60% of your effort/time), shall be Two Hundred Thousand Dollars ($200,000), payable in regular installments by, and in accordance with, the general payroll practices of the Company. All compensation payable hereunder is subject to customary deductions for withholdings, including, without limitation, federal and state withholding taxes, social security taxes and state disability insurance.

7. At the discretion of the Company’s Board of Directors and during your employment with the Company, you may participate in all retirement, disability, health, medical, dental, insurance and other fringe benefits or plans of the Company generally available to other employees of the Company.

8. During your employment with the Company, you have been granted multiple stock awards, including stock options, restricted stock awards, and stock grants (collectively the “Stock Awards”). You agree that the Stock Awards listed in Exhibit A (“Stock Awards (Vested and Unvested Shares) and Shareholdings”) accurately reflects all Stock Awards granted to you by the Company and your holdings of shares of Company Common Stock (the “Shares”) as of the Effective Date. You further agree that the “Vested Shares” and “Unvested Shares” information set forth for each individual Stock Award in Exhibit A is accurate as of the Effective Date.

9. You acquired Four Hundred Forty Thousand (440,000) shares of the Company’s Series A Preferred Stock (subsequently converted to Shares and reflecting 1:4 stock split), on or about March 9, 2014 under the terms and conditions set forth in Sections 3 and 4 of the 2015 Agreement prior to the amendment of the 2014 Agreement (the “2014 Restricted Shares”). The 2014 Restricted Shares are subject to the following vesting schedule: one-third (1/3) of the 2014 Restricted Shares vested on March 9, 2015 and one-third (1/3) of the 2014 Restricted Shares vested on March 9, 2016 (the “2014 Vested Shares”) and one-third (1/3) will vest on March 9, 2017 (the “2014 Unvested Shares”). The total number of 2014 Unvested Shares is One Hundred Forty Six Thousand Six Hundred Sixty Seven (146,667) Shares. As consideration for entering into this Letter Agreement, you agree that on the Effective Date the 2014 Unvested Shares shall be repurchased by the Company, notwithstanding your continued employment with the Company, under the terms set forth in this Letter Agreement. The repurchase price to be paid by the Company for the 2014 Unvested Shares shall be One Dollar ($1), which you agree is sufficient consideration for the repurchase of the 2014 Unvested Shares. The Company shall pay the repurchase price for the 2014 Unvested Shares to you within ten (10) days of the Effective Date. You agree to timely execute any documents provided by Company to facilitate the Company’s repurchase of the 2014 Unvested Shares.

10. On or about January 30, 2015, the Company and you entered into a restricted stock purchase agreement (“RSPA”) for the purchase by you of Six Hundred Thousand (600,000) Shares (post 1:4 stock split) (attached hereto as Exhibit B) (the “2015 Restricted Shares). One-third (1/3) of the 2015 Restricted Shares vested on January 30, 2016 (the “2015 Vested Shares”), one-third (1/3) will vest on January 30, 2017 and one-third (1/3) will vest on January 30, 2018 (together, the 2015 Unvested Shares”). The total number of 2015 Unvested

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Shares is Four Hundred Thousand (400,000) Shares. As consideration for entering into this Letter Agreement, you agree that on the Effective Date the 2015 Unvested Shares shall be repurchased by the Company, notwithstanding your continued employment with the Company, under the terms set forth in this Letter Agreement. Notwithstanding any share repurchase terms set out in the RSPA, you and the Company have determined that the repurchase price to be paid by the Company for the 2015 Unvested Shares shall be One Dollar ($1), which you agree is sufficient consideration for the repurchase of the 2015 Unvested Shares. The Company shall pay the repurchase price for the 2015 Unvested Shares to you within ten (10) days of the Effective Date. You agree to timely execute any documents provided by Company to facilitate the Company’s repurchase of the 2015 Unvested Shares.

11. On or about January 30, 2015, the Company granted to you Two Hundred Thousand (200,000) Shares (post 1:4 stock split) (the “2015 Stock Grant”). At the time of the 2015 Stock Grant was made to you, the Company withheld One Hundred Thousand (100,000) Shares from the 2015 Stock Grant for the payment of income taxes owed by you as a result of the income imputed to you from the 2015 Stock Grant. Accordingly, a net total of One Hundred Thousand (100,000) Shares were issued to you under the 2015 Stock Grant (the 2015 Stock Grant Net-Share Issuance). The 2015 Stock Grant was fully vested as of the grant date. As consideration for entering into this Letter Agreement, you agree that on the Effective Date the 2015 Stock Grant Net-Share Issuance shall be repurchased by the Company, notwithstanding your continued employment with the Company, under the terms set forth in this Letter Agreement. The repurchase price to be paid by the Company for the 2015 Stock Grant Net-Share Issuance shall be One Dollar ($1), which you agree is sufficient consideration for the repurchase of the 2015 Stock Grant Net-Share Issuance. The Company shall pay the repurchase price for the 2015 Stock Grant Net-Share Issuance to you within ten (10) days of the Effective Date. You agree to timely execute any documents provided by Company to facilitate the Company’s repurchase of the 2015 Stock Grant Net-Share Issuance.

12. On May 22, 2015, you received an award from the Company of options to purchase up to One Million Two Hundred Eighty Thousand (1,280,000) Shares (post 1:4 stock split) with an exercise price of Seven Dollars and Fifty Cents ($7.50) per share (the “2015 Option”) pursuant to a Common Stock Option Ageement (the “2015 Option Agreement”). A copy of the 2015 Option Agreement is attached hereto as Exhibit C. As consideration for entering into this Letter Agreement, you hereby agree to terminate the 2015 Option Agreement and forfeit any and all rights that you may have to the 2015 Option and any Shares issuable upon exercise of the 2015 Option, whether or not vested. On the Effective Date, the 2015 Options and the 2015 Option Agreement shall be automatically terminated and of no further force and effect, and neither the Company nor you shall have any further rights or obligations with respect to thereto. You agree to timely execute any documents provided by Company to facilitate the termination of the 2015 Options and 2015 Option Agreement.

13. With the exception of the Company’s repurchase of the 2014 Unvested Shares pursuant to Paragraph 9 of this Letter Agreement, the Company’s repurchase of the 2015 Unvested Shares pursuant to Paragraph 10 of this Letter Agreement, the Company’s repurchase

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of the 2015 Stock Grant Net-Share Issuance pursuant to Paragraph 11 of this Letter Agreement, and the termination of the 2015 Option pursuant to Paragraph 12 of this Letter Agreement, the remaining Stock Awards set forth on Exhibit A and all other Shares held by you shall, in addition to the terms and conditions of the original stock award agreements, be subject to the following limitations on the sale or transfer of the shares currently held under those Stock Awards or received upon exercise of a Stock Award:

• While you have or are aware of “inside” information (that is, material information about the Company that is not yet public but that a reasonable investor would consider important in deciding whether to buy or sell Shares), you are prohibited by U.S. securities laws and the Company’s policy on insider trading from trading the shares until the information has been disclosed to the public and absorbed by the stock market (which, in most cases, is at least the second trading day after the information has been made public). All sales of Shares must comply with the Company’s policy on insider trading, including any applicable window and blackout periods.

• You may not sell, offer, pledge, contract to sell, grant any option or contract to purchase, purchase any option or contract to sell, grant any right or warrant to purchase, lend or otherwise transfer or encumber, directly or indirectly, any shares of the Company Common Stock held by you during the period from the filing of the first registration statement of the Company filed under the Securities Act of 1933, as amended (the “1933 Act”), that includes securities to be sold on behalf of the Company to the public in an underwritten public offering under the 1933 Act through the end of the 180-day period following the effective date of such registration statement (or such other period as may be requested by the Company or the underwriters to accommodate regulatory restrictions on (i) the publication or other distribution of research reports and (ii) analyst recommendations and opinions, including, but not limited to, the restrictions contained in NASD
Rule 2711(f)(4) or NYSE Rule 472(f)(4), or any successor provisions or amendments thereto). You agree, if so requested by the Company or any representative of its underwriters, to enter into such underwriter’s standard form of “lockup” or “market standoff” agreement in a form satisfactory to the Company and such underwriter.

• As a former officer and director of the Company, you may be deemed to be an “affiliate” of the Company (within the meaning of Rule 405 under the 1933 Act and may be subject to restrictions when reselling any Shares held by you. Any such resales must be either described in a separate prospectus or, in certain instances, registered in a separate registration statement, or sold in accordance with the requirements of Rule 144 under the 1933 Act or another exemption available under the 1933 Act.

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14. In addition to the regulatory restrictions on the sale or transfer of any of the Shares currently held by you, including under those Stock Awards or received upon exercise of a Stock Award held by you as described in Paragraph 13 of this Letter Agreement, you and the Company agree that your right to sell or otherwise transfer any of these Shares will be further restricted under the following terms:

• During the time period between six (6) months and twelve (12) months after an initial public offering of its Shares by the Company, you may only sell, dispose or otherwise deal in up to Twenty-Five Percent (25%) of the Shares currently held by you, include those under the Stock Awards or received upon exercise of a Stock Award.

• During the time period between twelve (12) months and eighteen (18) months after an initial public offering of its Shares by the Company, you may only sell, dispose or otherwise deal in Shares to the extent that when such sales, disposals or dealings are aggregated with other sales of Shares by you since the Company’s initial public offering of its Shares by the Company they would not exceed Fifty Percent (50%) of the Shares currently held by you, include those under the Stock Awards or received upon exercise of a Stock Award.

• During the time period between eighteen (18) months and twenty-four (24) months after an initial public offering of its Shares by the Company, you may only sell, dispose or otherwise deal in Shares to the extent that when such sales, disposals or dealings are aggregated with other sales of Shares by you since the Company’s initial public offering of its Shares by the Company they would not exceed Seventy-Five Percent (75%) of the Shares currently held by you, include those under the Stock Awards or received upon exercise of a Stock Award.

• After twenty-four (24) months following an initial public offering of its Shares by the Company, you may sell, dispose or otherwise deal in up to One Hundred Percent (100%) of the Shares currently held by you, include those under the Stock Awards or received upon exercise of a Stock Award.

• Any sale of the Shares currently held by you, including those under the Stock Awards or received upon exercise of a Stock Award must be processed through a broker designated by the Company. The Company shall provide you with the information on the designated broker upon your request.

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15. You understand and agree that the Company shall cause the legends set forth below, or substantially equivalent legends, to be placed upon any certificate(s) evidencing ownership of the Shares, together with any other legends that may be required by the Company or by applicable state or federal securities laws:

THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE “1933 ACT”) AND MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER THE ACT OR, IN THE OPINION OF COUNSEL SATISFACTORY TO THE ISSUER OF THESE SECURITIES, SUCH OFFER, SALE OR TRANSFER, PLEDGE OR HYPOTHECATION OTHERWISE COMPLIES WITH THE ACT.

THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER AND A LOCK-UP PERIOD IN THE EVENT OF A PUBLIC OFFERING AS WELL AS THE BYLAWS OF THE COMPANY, COPIES OF WHICH MAY BE OBTAINED AT THE PRINCIPAL OFFICE OF THE ISSUER. SUCH TRANSFER RESTRICTIONS AND LOCK-UP PERIOD ARE BINDING ON TRANSFEREES OF THESE SHARES.

16. You agree that to ensure compliance with the sale and transfer restrictions applicable to the Shares as referred to herein this Letter Agreement, the Company may issue appropriate “stop transfer” instructions to its transfer agent, if any, and that, if the Company transfers its own securities, it may make appropriate notations to the same effect in its own records. The Company shall not be required (i) to transfer on its books any Shares which have been sold or transferred in violation of the provisions of this Letter Agreement, nor (ii) to treat as the owner of the Shares, or otherwise to accord voting or dividend rights to, any transferee to whom the Shares have been transferred in contravention of this Letter Agreement.

17. You shall at all times, both during your employment with the Company and after termination of your employment, whether by the Company or by you, maintain in confidence and not utilize the Proprietary Information or the Intellectual Property of the Company, or technology, business or proprietary information of others under confidential evaluation or use by the Company, including information with respect to the Company’s Field of Interest and with respect to the Company’s application for the public offering of its shares (collectively, “Confidential Information”) except in performing services for the Company. Maintaining Confidential Information in confidence shall include refraining from disclosing Confidential Information to any third party (except when duly and specifically authorized in writing to do so for purpose of furthering the business of the Company), and refraining from using Confidential Information for your

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account or for any other person or business entity. You will not file patents based on the Company’s Confidential Information, nor seek to make improvements thereon, without written approval.

For purposes of this Letter Agreement, the following definitions shall apply:

“Intellectual Property” means all Inventions, writing, trade name, trademark, service mark or any other material registered or otherwise protected or protectable under state, federal, or foreign patent, trademark, copyright, or similar laws.

“Inventions” includes ideas, discoveries, inventions, developments and improvements, whether or not reduced to practice and whether or not patentable or otherwise protected or protectable under state, federal, or foreign patent, trade mark, copyright or similar laws.

“Proprietary Information” includes any business plans, strategies, and all other non-public information concerning the Company, as well as scientific, technical, trade or business secrets of the Company and any scientific, technical, trade or business materials that the Company treats, or is obligated to treat, as confidential or proprietary, including, but not limited to, Inventions belonging to the Company and confidential information obtained by or given to the Company about or belonging to its suppliers, licensors, licensees, partners, affiliates, customers, potential customers or others.

18. You shall, upon request of the Company, promptly communicate and disclose to the Company all information, observations, and data obtained by you in the course of your employment. All written materials, records and documents made by the you or coming into your possession during your employment concerning the Company’s business (collectively, “Business Information”), shall be the sole and absolute property of the Company, and upon termination of employment, or upon request of the Company during your employment by the Company, you shall promptly deliver the same to the Company.

19. If during your employment with the Company, you produce, develop, create, invent, conceive or reduce to practice, Inventions and Intellectual Property in the Company’s Field of Interest, you shall maintain and furnish to the Company complete and current records of all such Inventions and Intellectual Property. You agree that all such Inventions and Intellectual Property are and shall be the exclusive property of the Company, and that the Company may use or pursue them without restriction or additional compensation to you. You (i) hereby assign, set over and transfer to the Company all of your right, title and interest in and to such Inventions and Intellectual Property; (ii) to the extent consistent with the Copyright Act of 1976 (the “Copyright Act”), each such Invention or Intellectual Property shall be a “work made for hire” as that term is defined in Section 101 of the Copyright Act, and shall be the sole

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property of the Company and the Company shall be the sole author thereof within the meaning of the Copyright Act, and if any such Invention, Intellectual Property or any portion thereof is not deemed to be a “work made for hire,” this Letter Agreement shall operate as an irrevocable assignment of the copyright to the Invention or Intellectual Property throughout the world, and (iii) agree that you and your agents shall, during and after the period you are retained by the Company, cooperate fully in obtaining patent, trademark, service mark, copyright, mask work or other proprietary protection for such Inventions and Intellectual Property, which action may be initiated in the Company’s sole and absolute discretion, all in the name of the Company at its own expense, and, without limitation, shall execute all requested applications, assignments and other documents in furtherance of obtaining such protection or registration and confirming full ownership by the Company of such Inventions and Intellectual Property. You hereby designate the Company as your agent, and grant to the Company a power of attorney with full substitution, which power of attorney shall be deemed coupled with an interest, for the purposes of effecting the foregoing assignments from you to the Company. You shall, upon leaving the Company, provide to the Company in writing a full, signed statement of all Inventions and Intellectual Property in which you participated prior to termination of your employment.

20. During your employment with the Company and at all times following your termination of employment for any reason, you covenant and agree that you will not, nor induce others to, disparage the Company, its past and present officers, directors, employees, shareholders, affiliates, products or services. Nothing herein shall prohibit you from responding truthfully to any governmental investigation, legal process or inquiry related thereto. For purposes of this Letter Agreement, the term “disparage” means any statements, whether orally, in writing or through any medium (including, but not limited to, the press or other media, computer networks or bulletin boards, or any other form of communication), that intentionally disparage, defame, or otherwise damage or assail the reputation, integrity or professionalism of any of the persons or entities described above.

21. You recognize and acknowledge the competitive and proprietary nature of the Company’s business operations. You acknowledge and agree that a business will be deemed competitive with the Company if it provides products or services related to the current or proposed products or services, or information now or hereafter provided or offered by the Company or under development by the Company that are in the Company’s “Field of Interest,” For purpose of clarity, the Company’s Field of Interest is the discovery, development, commercialization and marketing of therapeutics based on (i) kinase inhibitors discovered through Mimetica and OPAL, (ii) pre-tubulin polymerization inhibitors, (iii) small molecules oncology drugs, or (iv) P-glycoprotein inhibitors based on oral absorption.

You further acknowledge and agree that during the course of performing services for the Company, the Company has or will furnish, disclose or make available to you confidential and proprietary information related to the Company’s business and that you have had and will have access to, and develop relationships with, the customers, vendors, partners and employees of the Company. You also acknowledge that such confidential and proprietary information and relationships have been developed and will be developed by the Company through the expenditure by the Company of substantial time, effort and money and that all such confidential information and relationships could be used by you to compete with the Company.

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The restrictive covenants provided herein are made in consideration of your compensation for services rendered or to be rendered to the Company and in view of the positions held by you, the relationships that have been and will be developed and maintained by you on behalf of the Company, and the confidential nature and proprietary value of the information which the Company may share with you, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged. During your employment and for a period of twenty-four (24) months following the termination of your employment, whether such termination is voluntary or involuntary, you shall not, without the prior written consent of the Company:

directly or indirectly, either as principal, agent, stockholder, employee, consultant, representative or in any other capacity, own, manage, operate or control, or be concerned, connected or employed by, or otherwise act in any manner with, engage in or have a financial interest in any business which is engaged in the Field of Interest anywhere in the world, except that nothing contained herein shall preclude you from purchasing or owning stock in any such business if such stock is publicly traded, and provided that your holdings are less than five percent (5%) of the issued and outstanding capital stock of such business; or

either individually or on behalf of or through any third party, solicit, divert, hire or otherwise appropriate or attempt to solicit, divert, hire or otherwise appropriate, for the purpose of competing in the Field of Interest anywhere in the restricted territory, which is any region in which the Company and its subsidiaries have business, with the Company or with any present or future parent, subsidiary or other affiliate of the Company, any employee or agent of the Company, any joint venture or strategic partners of the Company, or any customers, vendors or prospective customers or vendors of the Company.

You further recognizes and acknowledges that (i) the types of employment which are prohibited by this paragraph are narrow and reasonable in relation to the skills which represent your principal salable asset both to the Company and to your other prospective the Companys or customers, and (ii) the specified but broad geographical scope of the provisions of this paragraph is reasonable, legitimate and fair to you in light of the Company’s need to perform its research and to develop and market its services and to develop and sell its products in the global markets in order to have a sufficient customer base to make the Company’s business profitable and in light of the limited restrictions on the type of employment prohibited herein compared to the types of employment for which you are qualified to earn his livelihood.

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If any part of this section should be determined by a court of competent jurisdiction to be unreasonable in duration, geographic area, or scope, then this section is intended to and shall extend only for such period of time, in such area and with respect to such activity as is determined to be reasonable.

22. You agree that any breach of the provisions of this Letter Agreement by you will result in irreparable damage to the Company, and it is agreed that the Company may prevent any such breach by injunctive proceedings or may specifically compel performance by you of your obligations hereunder. You agree that if you violate any term of this Letter Agreement, the Company, in addition to any other remedies it may have at law or in equity, may require an accounting and repayment of all profits, compensation, remuneration or other benefits realized, directly or indirectly, as a result of such violations (i) by you, or (ii) by any business engaged in the Company’s Field of Interest controlled, directly or indirectly, by you.

23. This Letter Agreement shall be governed by and construed in accordance with the laws of the state of New York, without regard to its choice of laws principles. You consent to the jurisdiction and venue of the courts of the State of New York and any federal court situated in New York.

24. If any court of competent jurisdiction determines that any provision contained in this Letter Agreement, or any part thereof, is unenforceable for any reason, you agree that such court shall have the power to reduce the duration or scope of such provision, or otherwise modify such provision, as the case may be, and, in its reduced form, such provision shall then be enforceable. If, notwithstanding the immediately preceding sentence, any court of competent jurisdiction determines that any provision contained in this Letter Agreement, or any part thereof, is unenforceable and cannot for any reason be reduced and enforced as described above, you agree that such determination shall not affect, impair or invalidate the remainder of this Letter Agreement.

25. You hereby irrevocably waive any right to trial by jury that you may have in the event that litigation is commenced between the parties at any time in the future.

26. This Letter Agreement shall inure to the benefit of and be binding upon the Company, its successors and assigns, including without limitation any company which may acquire all or substantially all of the Company’s assets or business or into which the Company may be consolidated or merged, and shall likewise inure to the benefit of and be binding upon you, your heirs, executors, administrators and legal representatives. You may assign your right to payment or compensation, but may not assign any duties or responsibilities or obligations assumed as a result of your employment with the Company.

27. The Company’s failure to exercise any of its rights in the event you breach any of the separate and distinct promises in this Letter Agreement, or the Company’s failure to exercise any of its rights under similar contracts with other executives, shall not be construed as a waiver of any breach or prevent the Company from later enforcing strict compliance with any and all promises in this Letter Agreement.

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28. In exchange for the continuation of employment and other consideration provided to you in this Letter Agreement, you agree to execute the release agreement attached hereto as Exhibit D.

29. You hereby represent and warrant that you (i) have had an opportunity to review this Letter Agreement and ask the Company questions about the Letter Agreement and (ii) consult with legal counsel about the meaning and effect of each Section of this Letter Agreement.

30. The Company will obtain and maintain “Directors and Officer” insurance coverage for you with regard to your former positions as Chief Financial Officer and Chief. Operations Officer of the Company. Such insurance may offset the Company’s indemnification obligations to you under its certificate of incorporation and bylaws. The Company’s indemnification obligations to you may not be diminished by future amendments to its certificate of incorporation or bylaws.

31. Except as set forth in this paragraph, this Letter Agreement supersedes the 2015 Agreement and any other prior agreements, representations or promises of any kind, whether written, oral, express or implied, between the parties hereto with respect to the subject matters herein. This Letter Agreement constitutes the full, complete and exclusive agreement between you and the Company with respect to the subject matters herein.

To indicate your acceptance of the terms of this Letter Agreement, sign and return a copy of this Letter Agreement on or before December 15, 2016.

By:
	JOHNSON LAU
	CHIEF EXECUTIVE OFFICER and
	CHAIRMAN OF THE BOARD

Agreed and Accepted

Date: December 8, 2016

FLINT BESECKER

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EXHIBIT A

Stock Awards (Vested and Unvested Shares) and Shareholdings

Grant Date	Type of Award	No. of Shares (post 1:4 split)		Strike Price (USD, post 1:4 split)		Vested Shares		Unvested Shares
May 22, 20151	Options		1,280,000		7.50		426,667		853,333
January 30, 20152	Stock		100,000		—		100,000		0
January 30, 20153	Restricted Stock		600,000		5.50		200,000		400,000
March 9, 20144	Restricted Stock		440,000		4.55		293,333		146,667
July 1, 2013	Options		400,000		4.55		400,000		0
January 2, 2013 (Director Compensation)	Options		90,000		4.55		90,000		0
March 26, 2012 (Director Compensation)	Options		16,000		4.55		16,000		0
June 15, 2011 (Director Compensation)	Options		20,000		4.55		20,000		0

¹  The May 22, 2015 stock option award will be terminated pursuant to the terms of the Letter Agreement.

²  The total number of Shares received under this stock award, One Hundred Thousand (100,000) Shares will be repurchased by the Company pursuant to the terms of the Letter Agreement.

³  The unvested portion of the January 13, 2015 restricted stock award will be repurchased by the Company pursuant to the terms of the Letter Agreement.

⁴  The unvested portion of the March 9, 2014 restricted stock award will be repurchased by the Company pursuant to the terms of the Letter Agreement.

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EXHIBIT B

Restricted Stock Purchase Agreement

Dated January 30, 2015

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RESTRICTED STOCK PURCHASE AGREEMENT

This RESTRICTED STOCK PURCHASE AGREEMENT, dated as of January 30, 2015 (this “Agreement”), by and among Flint Besecker, an individual (“Executive”) and Kinex Pharmaceuticals, Inc., a Delaware corporation (“Employer”).

WITNESSETH:

WHEREAS, Executive is employed by Employer as Executive Vice President and Chief Financial Officer pursuant to that certain Employment Agreement dated as of July 1, 2013 (the “Employment Agreement”);

WHEREAS, Executive desires to purchase and Employer desires to sell 150,000 shares of Employer’s common stock, $.001 par value per share (the “Restricted Shares”) on the terms and conditions set forth herein; and

WHEREAS, Executive is, concurrently herewith, making in favor of Employer a Full Recourse Promissory Note (the “Note”), in full satisfaction of the payment of the Purchase Price (as defined below).

NOW, THEREFORE, in consideration of the premises and mutual covenants set forth herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto (each, a “Party” and collectively the “Parties”) agree as follows:

1. Definitions; Employment Agreement. The terms and conditions of the Employment Agreement are hereby incorporated herein by reference. Capitalized terms used but not defined herein shall have the meanings given to such terms in the Employment Agreement.

2. Note Installments. With respect to the Restricted Stock purchase described herein, during the employment period (and the period following thereafter that is described in Section 6 of the Executive’s Employment Agreement), any installment that becomes due under the promissory note that is executed by Executive pursuant this Purchase Agreement shall be paid by Employer to Executive as additional compensation. Employer’s obligation hereunder expires upon a material breach by Executive of the restricted covenants in Sections 6,7 or 9, the termination of Executive for Cause (as defined in section 5(c)) of the Executive’s Employment Agreement or the resignation of Executive without Good Reason (as defined in Section 5(c)).

3. Restricted Stock Purchase. The Employer hereby sells and issues to Executive, and Executive hereby purchase and receives from the Employer, the Restricted Shares, subject to the terms and conditions set forth herein and in the Employment Agreement. The aggregate purchase price for the Restricted Shares shall be $3,300,000.00, which is the fair market value of such shares, as determined by the Board in good faith and in consultation with the Executive (the “Purchase Price”), which fair market value results in a per share purchase price of $22 (the “Per Share Purchase Price”). The Purchase Price is being paid in full by Executive by the delivery of the Note, in substantially the form attached hereto as Exhibit A, executed by Executive ‘for the benefit of the Employer.

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4. Vesting of Restricted Shares.

(a) Except as provided in Section 3(b), the Restricted Shares acquired hereunder shall vest according to the following schedule, conditioned on Employee continuing to provide services under the Employment Agreement, which services include compliance with the restrictive covenants described in Sections 6, 7 and 9 of the Employment Agreement for a period of up to two years following the termination of the Employment Period, provided that Executive makes himself reasonably available to Employer as an advisor or consultant (for reasonable compensation) during such period. Any Restricted Shares which have fully vested pursuant to this Section 1 shall be referred to in this Agreement as “Vested Shares.” Any Restricted Shares which have not become Vested Shares shall be referred to in this Agreement as “Unvested Shares.”

(i) One-third of the Restricted Shares shall vest on January 30, 2016;

(ii) An additional one-third of the Restricted Shares shall vest on January 30, 2017;

(iii) An additional one-third of the Restricted Shares shall vest on January 30, 2018.

(b) Other Vesting Events. The Restricted Shares that have not become forfeited hereunder will become vested, as described below, upon the occurrence of the following:

(i) The Restricted Shares shall become 100% vested upon the occurrence of a Liquidity Event described in clause (A) of Section 3(c)(i) of the Employment Agreement.

(ii) The Restricted Shares shall become 100% vested upon the occurrence of a Change of Control described in Section 5(g) of the Employment Agreement, whether or not Executive’s employment is terminated.

(iii) Upon Death or Permanent Disability, the portion of the Restricted Shares that have become Vested Shares is the aggregate of (A) the Vested Shares determined under Section 3(a), and (B) a fraction of the Restricted Shares that are subject to vesting during the calendar year, the numerator determined by the number of months service performed during the year by Executive and the denominator is twelve (12). A month of service will be credited for a partial month in which the Executive is employed for at least ten (10) days.

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5. Restrictions on Transfer of Unvested Shares. The Unvested Shares shall not be sold, exchanged, transferred, assigned, pledged, hypothecated or otherwise disposed of, directly or indirectly, and shall not be subject to execution, attachment or similar process.

6. Repurchase by the Employer.

(a) Upon the termination of the Employment Period and Executive’s provision of services as a consultant pursuant to Section 5(f) of the Employment Agreement, or pursuant to Section 10 hereof, the Employer shall have the right, but not the obligation, to repurchase all or any portion of the Restricted Shares, including any Vested Shares and/or Unvested Shares (the “Repurchase Right”).

(b) The purchase price (the “Repurchase Price”) shall be determined as follows:

(i) The Repurchase Price for each of the Unvested Shares pursuant to which the Repurchase Right is being exercised shall be equal to the Per Share Purchase Price.

(ii) The Repurchase Price for each of the Vested Shares pursuant to which the Repurchase Right is being exercised shall be equal to the Fair Market Value (as defined in Section 6 below).

(c) The Employer shall have the right to exercise the Repurchase Right (i) for ninety (90) days after the period described above by giving to Executive written notice of such exercise, or (ii) upon not less than ten business day’s prior written notice in the event of any exercise pursuant to Section 10 hereof, in each case, specifying the number of Vested Shares and Unvested Shares to be repurchased by the Employer and the aggregate Repurchase Price thereof. In the event that the Employer has elected to exercise the Repurchase Right as to part or all of the Restricted Shares within the period described above, Executive shall deliver to the Employer certificate(s) representing the Restricted Shares to be acquired by the Employer within twenty (20) days following the date of the notice from the Employer, or within ten (10) days following determination of Fair Market Value, whichever is later. The Employer shall deliver to Executive against delivery of the Restricted Shares the Repurchase Price. The Employer may pay the Repurchase Price by offsetting any amounts due under Note and paying the balance due in cash to Executive.

(d) The Repurchase Right shall terminate with respect to Vested Shares and Unvested Shares for which it is not timely exercised under Section 5(c) above. In addition, the Repurchase Right shall terminate with respect to Vested Shares upon (A) a Change of Control, or (B) the occurrence of Liquidity Event described in clause (A) of Section 3(c)(i) of the Employment Agreement.

7. Fair Market Value. For purposes of the Repurchase Right described in this Agreement, the term “Fair Market Value” shall mean the fair market value per share of the Vested Shares as agreed to in good faith between Executive and the Employer. The parties acknowledge that the purchase price set forth in Section 2 above represents the Fair Market Value of the Restricted Shares on the date hereof. If Executive and the Employer are unable to agree upon a fair market value per share within twenty (20) days following the notice of the

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exercise of the Repurchase Right pursuant to Section 5, the value of the Vested Shares shall be determined by an independent appraiser selected by the mutual agreement of such parties. If such parties are unable to agree upon a mutually acceptable appraiser within twenty (20) days following the notice of exercise of the Repurchase Right pursuant to Section 5, an independent appraiser selected by the Employer and an independent appraiser selected by Executive shall appraise the fair market value of the Vested Shares. If the two appraisers cannot agree as to the fair market value of the Vested Shares, the fair market value shall be determined by a third appraiser selected by each of the appraisers selected by the Employer and Executive. The Employer and Executive shall share equally the costs of any appraisers.

8. Representations and Warranties of the Employer. The Employer hereby represents and warrants to Executive as follows:

(a) All corporate action on the part of the Employer, its officers and directors necessary for the authorization, execution and delivery of this Agreement, the performance of all obligations of the Employer hereunder and the authorization, issuance (or reservation for issuance) and delivery of the Restricted Shares being granted hereunder has been taken or will be taken prior to the execution of this Agreement, and this Agreement constitutes a valid and legally binding obligation of the Employer which is enforceable in accordance with its terms.

(b) The Restricted Shares which are being sold hereunder, when issued, sold and delivered in accordance with the terms hereof for the consideration expressed herein will be duly and validly issued, fully paid and nonassessable (except as set forth herein) and, based in part upon the representations of Executive in this Agreement, will be issued in compliance with all applicable federal and state securities laws.

9. Representations and Warranties of Executive. Executive represents and warrants to Employer as follows:

(a) Executive represents that the Restricted Shares are being acquired for a personal account, for investment purposes only, and not with a view to the distribution, resale or other disposition thereof.

(b) Executive acknowledges that the Employer is issuing the Restricted Shares without registering such Shares under the Securities Act of 1933, as amended (the “Securities Act”), or the securities laws of any state, on the basis of certain exemptions from such registration requirements.

(c) Executive recognizes that the Restricted Shares (including the Vested Shares) must be held indefinitely unless they are subsequently registered or qualified under applicable federal or state securities laws or an exemption from such registration or qualification is available, and further recognizes that the Employer is under no obligation to register or qualify such Restricted Shares or to comply with any exemption from such registration or qualification.

(d) Executive further agrees in no event to make any disposition of all or any part of the Vested Shares unless and until (i) Executive shall have notified the Employer of the proposed disposition; (ii) Executive shall have received an opinion of counsel to the effect that such disposition will not require the registration or qualification of the Vested Shares under

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applicable securities laws; and (iii) such opinion of counsel shall have been concurred in by the Employer’s counsel and the Employer shall have advised Executive of such concurrence. Executive acknowledges that any certificates representing the Restricted Shares may bear legends that arc deemed appropriate by Employer’s counsel regarding the restrictions on disposition of the Restricted Shares.

(e) Executive acknowledges receipt of all such information as Executive deems necessary and appropriate to enable Executive to evaluate the financial risk inherent in acquiring the Restricted Shares and acknowledges receipt of satisfactory and complete information covering the business and financial condition of the Employer, including the opportunity to obtain information regarding the Employer’s financial status, in response to all inquiries in respect thereof. Executive acknowledges and represents that (A) Executive has a preexisting personal or business relationship with the Employer and with certain of the Employer’s officers and directors, and (B) Executive has the business and financial experience necessary to evaluate this investment.

10. Section 83(b) Election. Executive may at his option make and submit a written election effective under Section 83(b) of the Internal Revenue Code with the Internal Revenue Service within thirty (30) days of the date of this Agreement to be taxed on the fair market value of the Restricted Shares on the date of this Agreement over the Purchase Price.

11. Tax Withholdings. In the event that Employer is obligated to withhold any amounts with respect to the Restricted Shares in order to satisfy withholding tax obligations under federal, state or local law, which may occur due to the terms of repayment of the promissory note described in this Agreement, if the Executive does not remit sufficient funds to satisfy such withholding obligations or make other satisfactory arrangement therefore, the Employer may satisfy such withholding obligations by repurchasing Shares from Executive at fair market value under the terms of Section 5 sufficient to cover the minimum withholding obligation.

12. Entire Agreement. This Agreement, together with the Note and the Employment Agreement, contains and constitutes the entire agreement and understanding between Executive and Employer and supersedes and cancels all prior agreements and understandings relating to the subject matter hereof, whether written or oral. Neither this Agreement nor any term hereof may be changed, waived, discharged or terminated, except in writing signed by the Parties hereto.

13. Severability. Should any one or more of the provisions of this Agreement or any agreement entered into pursuant hereto be determined to be illegal or unenforceable, all other provisions of this Agreement and such other agreements shall be given effect separately from the provision or provisions determined to be illegal or unenforceable and shall not be affected thereby.

14. Governing Law. This Agreement shall be construed and enforced in accordance with the laws of the State of New York without regard to its principles of conflicts of laws. Each Party hereby irrevocably and unconditionally consents to submit to the jurisdiction and venue of the courts of the State of New York and of the United States of America located in the State of New York.

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15. Further Assurances. Each Party covenants that at any time, and from time to time, it will execute such additional instruments and take such actions as may be reasonably requested by the other Party to confirm or perfect or otherwise to carry out the intent and purposes of this Agreement.

16. Waiver. Any failure on the part of any Party to comply with any of its obligations, agreements or conditions hereunder may be waived by any other Party to whom such compliance is owed. No waiver of any provision of this Agreement shall be deemed, or shall constitute, a waiver of any other provision, whether or not similar nor shall any waiver constitute a continuing waiver.

17. Assignment. This Agreement shall not be assignable by any Party hereto, by operation of law or otherwise, without the prior written consent of the other Party.

18. Binding Effect. All of the terms of this Agreement, whether so expressed or not, shall be binding upon the respective personal representatives, successors and assigns of the Parties hereto and shall inure to the benefit of and be enforceable by the respective personal representatives, successors and assigns of the Parties hereto.

19. Headings. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof.

20. Counterparts. This Agreement may be executed by facsimile or other electronic signature and in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

21. Costs. Each Party shall bear its own costs and expenses in connection with the transactions contemplated by this Agreement.

[SIGNATURE PAGES FOLLOW]

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IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date first above written.

EXECUTIVE:

Flint D. Besecker

EMPLOYER:
Kinex Pharmaceuticals, Inc.
By:
Name:	Jinn Wu
Title:	Chair, Compensation Committee

[Signature page — Restricted Stock Purchase Agreement]

EXHIBIT C

Stock Option Agreement

Dated May 22, 2015

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NO. 200

KINEX PHARMACEUTICALS, INC.

2013 COMMON STOCK OPTION PLAN

COMMON STOCK OPTION AGREEMENT

THIS AGREEMENT made as of May 22, 2015, by and between Kinex Pharmaceuticals, Inc. a Delaware corporation (the “company”), and FLINT BESECKER (the “Grantee”).

WITNESSETH:

WHEREAS, the Company has adopted the Kinex Pharmaceuticals, Inc. 2013 Common Stock Option Plan, as amended (the “Plan”), for the benefit of its Employees, Directors and Consultants; and

WHEREAS, the Committee has authorized the grant to the Grantee of a Common Stock Option under the Plan, on the terms and conditions set forth in the Plan and as hereinafter provided;

NOW, THEREFORE, in consideration of the premises contained herein, the Company and the Grantee hereby agree as follows:

1. Definitions.

Except as set forth above, Terms used in this Agreement which are defined in the Plan shall have the same meaning as set forth in the Plan.

2. Grant of Option.

The Committee hereby grants to the Grantee an option to purchase THREE HUNDRED TWENTY THOUSAND (320,000) shares of the Company’s Common Stock for an Option price per share equal to USD $30.00 (the “Option”).

3. Option Terms and Exercise Period.

(a) The Option shall be exercised, and payment by the Grantee of the Option price shall be made, pursuant to the terms of the Plan.

(b) All or any part of the Option may be exercised by the Grantee no later than the tenth anniversary of the date of this Agreement.

(c) This Agreement and the Option shall terminate on the earlier of (i) the tenth anniversary of the date of this Agreement, or (ii) the date on which the Option is fully exercised.

NO. 200

4. Vesting.

The Option shall vest and become exercisable pursuant to the following schedule:

33% upon the first anniversary date of this Option;

33% upon the second anniversary date of this Option; AND

34% upon the third anniversary date of this Option.

The Grantee shall forfeit any unvested portion of the Option upon termination of his or her status as an Employee, Director or Consultant for any reason. Notwithstanding the above schedule, upon the occurrence of a Change of Control, the Grantee shall automatically become 100% vested in the Option.

5. Termination of Consultant Status.

Except for the mandatory exercise periods set forth in the last sentence of subsection (a), last sentence of subsection (c) and second sentence of subsection (d), Section 3 of Article II of the Plan shall control.

6. Restrictions on Transfer of Option.

This Agreement and the Option shall not be transferable otherwise than (a) by will or by the laws of descent and distribution, or (b) by inter vivos gift to any Family Member, and the Option shall be exercisable, during the Grantee’s lifetime, solely by the Grantee, except on account of the Grantee’s Disability, and solely by the transferee in the case of a transfer by inter vivos gift to a Family Member.

7. Exercise of Option.

(a) The Option shall become exercisable at such time as shall be provided herein or in the Plan and shall be exercisable by written notice of such exercise, in the form prescribed by the Committee, to the Secretary of the Company, at its principal office. The notice shall specify the number of Common Stock for which the Option is being exercised.

(b) Common Stock purchased pursuant to the Option shall be paid for in full at the time of such purchase in cash or by check, bank draft or postal or express money order or by “cashless exercise,” as prescribed by the Committee.

8. Regulation by the Committee.

This Agreement and the Option shall be subject to any administrative procedures and rules as the Committee shall adopt. All decisions of the Committee upon any question arising under the Plan or under this Agreement, shall be conclusive and binding upon the Grantee and any person or persons to whom any portion of the Option has been transferred by will, by the laws of descent and distribution or by inter vivos gift to a Family Member.

9. Reservation of Common Stock.

With respect to the Option, the Company hereby agrees to at all times reserve for issuance and/or delivery upon payment by the Grantee of the Option price, such number of Common Stock as shall be required for issuance and/or delivery upon such payment pursuant to the Option.

2

NO. 200

10. Delivery of Share Certificates.

Within a reasonable time after the exercise of the Option the Company shall cause to be delivered to the Grantee, his legal representative or his beneficiary, a certificate for the Common Stock purchased pursuant to the exercise of the Option.

11. Amendment.

The Committee may amend this Agreement at any time and from time to time; provided, however, that no amendment of this Agreement that would materially and adversely Impair the Grantee’s rights or entitlements with respect to the Option shall be effective without the prior written consent of the Grantee.

12. Plan Terms.

The terms of the Plan are incorporated herein by reference.

13. Effective Date of Grant.

The Option shall be effective as of the date first written above.

14. Grantee Acknowledgment.

By executing this Agreement, the Grantee hereby acknowledges that he (a) has received and read the Plan and this Agreement and agrees to be bound by all of the terms of both the Plan and this Agreement, and (b) upon exercising any portion of the Option, shall enter into and be bound by all of the terms of the Company’s Limited Liability Company Agreement, as amended, or any shareholders agreement if the Company converts to a corporation.

KINEX PHARMACEUTICALS, INC.
By:
Jinn Wu, Chair of Compensation Committee
		Grantee
Flint Besecker

3

NO. 200

KINEX PHARMACEUTICALS, INC.

EXERCISE FORM

DATED:             , 20    

The undersigned hereby irrevocably elects to exercise Kinex Pharmaceuticals, Inc. (the “Company”) Option No.      to the extent of purchasing                      shares of Common Stock of the Company and hereby makes a payment of $         in payment of the exercise price per share set forth in the Option.

INSTRUCTIONS FOR REGISTRATION AND DELIVERY OF COMMON SHARES

NAME:

(Please typewrite or print in block letters)

ADDRESS:

Please forward the stock certificate to the registered owner of the Common Shares upon issuance.

SIGNATURE:

4

EXHIBIT D

Release Agreement

Except as provided for in, and subject to, the “Retention of Rights Regarding Government Agencies” clause of this Release Agreement, for the time period up to the date you sign this Release Agreement (the “Release Execution Date”), you hereby irrevocably and unconditionally release and forever discharge, for yourself and for your heirs, estate, spouse and child or children (if any), attorneys, representatives, heirs, executors, administrators, successors, assigns, and agents, Athenex, Inc. and each of its past and present affiliates, parents, subsidiaries, related companies, directors, employees, predecessors, and successors, and each of their respective past and present directors, officers, benefit plans, management committees, members, agents, employees, trustees, representatives, attorneys, shareholders, partners, benefit plan fiduciaries and administrators, and assigns, and all persons acting by, through, under, or in concert with any of them (collectively, the “Athenex, Inc. Releasees”), from any and all actions, complaints, rights, claims, charges, causes of action, liabilities, costs, and damages, known or unknown, asserted or unasserted, suspected or not, fixed or contingent, and in law or in equity, which you now have, or may ever have had, against any of the Athenex, Inc. Releasees, including but not limited to any and all actions, complaints, rights, claims, charges, causes of action, liabilities, costs, and damages concerning, relating to, predicated upon, or arising out of, directly or indirectly, your employment with the Company and/or separation therefrom.

Except as provided for in, and subject to, the “Retention of Rights Regarding Government Agencies” clause of this Release Agreement, this Release Agreement expressly includes any and all actions, complaints, rights, claims, charges, causes of action, liabilities, costs, and damages based upon any conduct occurring up to and including, or that have accrued as of, the date that you sign the Release Agreement (and any obligations or causes of action arising from or predicated upon such claims), including but not limited to any and all claims:

• arising under common law, including wrongful or retaliatory discharge, breach of contract, or based upon a violation of public policy;

• sounding in tort, including fraud, conversion, libel, slander, defamation, or intentional infliction of emotional distress;

• arising under the Age Discrimination in Employment Act of 1967, the Older Workers Benefit Protection Act, the Civil Rights Acts of 1866 and 1867, Title VII of the Civil Rights Act of 1964, the Civil Rights Act of 1991, the Employee Retirement Income Security Act, the Fair Labor Standards Act, the Americans with Disabilities Act, the National Labor Relations Act, the Worker Adjustment and Retraining Notification Act, the Occupational Safety and Health Act, the Genetic

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Information Nondiscrimination Act, the Lilly Ledbetter Fair Pay Act of 2009, the Fair Credit Reporting Act, the Family and Medical Leave Act, the Equal Pay Act of 1963, as amended, the Consolidated Omnibus Budget Reconciliation Act, the Rehabilitation Act, Section 1981 of the Civil Rights Act of 1866, the New York State Executive Law, the New York State Human Rights Law, the New York City Administrative Code, the New York City Human Rights Law, the New York Labor Law, the New York Retaliatory Action by Employers Law, the New York State Worker Adjustment and Retraining Notification Act, the New York Nondiscrimination for Legal Actions Law, the New York Wage Theft Prevention Act, the New York City Earned Sick Time Act, or the New York Civil Rights Law;

• of discrimination, harassment, retaliation, improper wage payment, or any other unlawful employment practice under federal, state, municipal, local, or foreign law;

• arising under any federal, state, municipal, local, or foreign law, rule, or regulation that in any way prohibits discrimination, harassment, retaliation, improper wage payment, or any other unlawful employment practice, or that is in any way related to employment and/or the separation therefrom; and

• arising under any other federal, state, municipal, local, or foreign law, rule, or regulation, including but not limited to civil rights laws, wage-hour, wage-payment, pension, or labor laws, rules, and regulations, constitutions, ordinances, public policy, contract or tort laws, or any other action.

Except as provided for in, and subject to, the “Retention of Rights Regarding Government Agencies” clause of this Release Agreement, you expressly acknowledge that this Release Agreement is also intended to include in its effect, without limitation, any and all claims which you do not know of or suspect may exist in your favor at the time of execution of this Agreement, and that this Agreement will also extinguish any such claim. The provisions of any laws providing in substance that releases shall not extend to claims which are unknown or unsuspected, at the time of execution, to the person executing such waiver or release, are hereby expressly waived by you.

Except as provided for in, and subject to, the “Retention of Rights Regarding Government Agencies” clause of this Agreement, you further acknowledge and understand that you are waiving any right you may have to sue any of the Athenex, Inc. Releasees for any of the claims you have released, or to receive any compensation, recovery, monetary relief, damages, settlement, or other individual relief arising as a result of any action, claim, lawsuit, grievance, complaint, or proceeding commenced by anyone else against any of the Athenex, Inc. Releasees.

You represent and warrant that you have not, either individually or on a collective basis, commenced, maintained, prosecuted, or participated in any action, claim, lawsuit, grievance, complaint, or proceeding of any kind against any of the Athenex, Inc. Releasees in any court or before any administrative or investigative body or agency. Further, to the extent that you have, and except as provided for in,

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and subject to, the “Retention of Rights Regarding Government Agencies” clause of this Release Agreement, you agree that you shall withdraw or dismiss, and shall undertake all measures necessary to effectuate the withdrawal or dismissal of, any such action, claim, lawsuit, grievance, complaint, or proceeding, with prejudice, within thirty (30) business days following the Release Execution Date. In the event that you are unable to unilaterally withdraw or dismiss any such action, claim, lawsuit, grievance, complaint, or proceeding, you represent and warrant that you shall request, to the fullest possible extent, the withdrawal or dismissal with prejudice of such action, claim, lawsuit, grievance, complaint, or proceeding. In the event that any action, claim, lawsuit, grievance, complaint, or proceeding is commenced by you or on your behalf, you hereby waive any right to compensation, recovery, monetary relief, damages, settlement, or other individual relief.

Notwithstanding the foregoing, by entering into this Release Agreement, you are not releasing claims that may not be waived or released as a matter of law, including but not necessarily limited to any claims for enforcement of this Release Agreement, claims that arise after the date that you sign the Release Agreement, or any rights or claims you may have to receive workers’ compensation or unemployment insurance benefits.

Retention of Rights Regarding Government Agencies. Nothing in this Release Agreement is intended to, or shall, limit or interfere, in any way, with your right or ability, under federal, state, or local law, to file or initiate a charge, claim, or complaint of discrimination, or any other unlawful employment practice, that cannot legally be waived, or to communicate, with any federal, state, or local government agency charged with the enforcement and/or investigation of claims of unlawful employment practices, including but not necessarily limited to the U.S. Equal Employment Opportunity Commission and any state or city fair employment practices agency. Further, nothing in this Release Agreement is intended to, or shall, limit or interfere, in any way, with your right or ability to participate in or cooperate with any investigation or proceeding conducted by any such agency. Further, nothing in this Release Agreement shall be construed as, or shall interfere with, abridge, limit, restrain, or restrict your (or your attorney’s) right, without prior authorization from or notification to the Company, to engage in any activity or conduct protected by Section 7 or any other provision of the National Labor Relations Act; to report possible violations of federal, state, or local law or regulation to any government agency or entity, including but not limited, to the extent applicable, to the U.S. Department of Labor, the Department of Justice, the Securities and Exchange Commission (the “SEC”), the Congress, and/or any agency Inspector General, or make other disclosures that are protected under the whistleblower provisions of federal, state, or local law or regulation; or to communicate directly with, respond to any inquiry from, or provide testimony before, to the extent applicable, the SEC, the Financial Industry Regulatory Authority, any other self-regulatory organization, or any other federal, state, or local regulatory authority, regarding this Release Agreement or its underlying facts or circumstances. You and the Company acknowledge and agree that your right and ability to engage and participate in the

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activities described in this paragraph shall not be limited or abridged, in any way, by any term, condition, or provision of, or obligation imposed by, this Release Agreement, including but not limited to the confidentiality and non-disparagement clauses. You and the Company further acknowledge and agree that nothing in this Release Agreement is intended to deter you from engaging or participating in any of the activities described in this paragraph. To the extent that any term or condition of this Release Agreement is inconsistent with this paragraph of the Release Agreement, this paragraph shall supersede and invalidate such term or condition to the extent necessary to ensure that your rights under federal, state, and local law are fully protected and guaranteed. Notwithstanding the foregoing, you understand that the waivers and releases in this Release Agreement shall be construed and enforced to the maximum extent permitted by law.

However, you also understand and acknowledge that, by signing this Release Agreement, you have completely waived your right to receive any individual relief, including monetary damages, in connection with any such claim, charge, complaint, investigation, or proceeding, and if you are awarded individual relief and/or monetary damages in connection therewith, you hereby unconditionally assign to the Company, and agree to undertake any and all measures necessary to effectuate such assignment of, any right or interest you may have to receive such individual relief and/or monetary damages. Notwithstanding the foregoing, this Release Agreement does not limit your right to receive an award for information provided to the SEC.

In addition, you shall not be held criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret that: (A) is made (i) in confidence to a federal, state, or local government official, either directly or indirectly, or to an attorney and (ii) solely for the purpose of reporting or investigating a suspected violation of law; or (B) is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal. Further, in the event that you file a lawsuit for retaliation by the Company for reporting a suspected violation of law, you may disclose the trade secret to your attorney and use the trade secret information in the court proceeding, if you: (A) file any document containing the trade secret under seal; and (B) do not disclose the trade secret, except pursuant to court order.

Legal Representation. You acknowledge and represent that you have had ample opportunity to receive the advice of independent legal counsel prior to the execution of this Release Agreement – and the Company hereby advises you to do so – and ample opportunity to receive an explanation from such legal counsel of the legal nature and effect of this Release Agreement, that you have fully exercised that opportunity to the extent you desired, and that you fully understand the terms and provisions of this Release Agreement as well as its nature and effect. You further acknowledge and represent that you are entering into this Release Agreement completely freely and voluntarily.

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Waiver. No waiver of any of the provisions of this Release Agreement shall be deemed, or shall constitute, a waiver of any other provision, whether or not similar. No waiver shall constitute a continuing waiver. No waiver shall be binding unless executed in writing by the party charged with the waiver.

Severability. Should any provision of this Release Agreement be declared illegal or unenforceable by any court, administrative agency, or other entity, the parties agree that said court, administrative agency, or other entity shall possess full discretion to interpret or modify all such provisions to the minimum extent necessary to be declared enforceable. If such interpretation or modification is not possible, such provision shall immediately become null and void, leaving the remainder of the Release Agreement in full force and effect. However, in the event a court, administrative agency, or other entity finds the Release set forth above to be illegal, void, or unenforceable, you agree, at the Company’s option, to execute a release, waiver, and/or covenant that is legal and enforceable to effectuate the terms of this Release Agreement.

Successors and Assigns. This Release Agreement shall not be assignable by you, but shall be binding upon you and upon your heirs, administrators, representatives, executors, and successors. This Release Agreement shall be freely assignable by the Company without restriction and, without limitation of the foregoing, shall be deemed automatically assigned by the Company with your consent in the event of any sale, merger, share exchange, consolidation, or other business reorganization. This Release Agreement shall inure to the benefit of the Company, the Athenex, Inc. Releases, and their successors and assigns.

Governing Law. This Release Agreement shall in all respects be interpreted, enforced, and governed by and in accordance with the internal substantive laws (and not the laws of choice of laws) of the State of New York. Any dispute arising out of or concerning this Release Agreement shall be brought in, and the parties hereby consent to the personal jurisdiction of, any federal or state court located in New York County.

Consideration Period. You have a period of twenty-one (21) calendar days from the date of this Release Agreement to consider this Release Agreement before signing it (the “Consideration Period”). You may use as much of the Consideration Period as you wish before signing this Release Agreement, and any material or immaterial changes to the Release Agreement will not restart the running of the Consideration Period. If the last day of the Consideration Period falls on a Saturday, Sunday, or holiday, then the last day of the Consideration Period shall be deemed to be the next business day. In the event that you do not sign and return this Release Agreement to the Company prior to the expiration of the Consideration Period, this Release Agreement will expire and be rendered null, void, and unenforceable, and you will not be entitled to receive the Separation Payment.

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Revocation Period. In accordance with the Older Workers Benefit Protection Act, you may revoke your consent to this Release Agreement for a period of seven (7) calendar days following your signing of this Release Agreement (the “Revocation Period”). The parties agree that such revocation shall be effective only if an originally executed written notice of revocation is delivered to Athenex, Inc., at Conventus Building, 1001 Main Street, Suite 600 Buffalo, New York 14203, Attention: Johnson Lau, on or before 5:00 p.m. on the seventh calendar day after the date you execute this Release Agreement. If the last day of the Revocation Period falls on a Saturday, Sunday, or holiday, then the last day of the Revocation Period shall be deemed to be the next business day. This Release Agreement does not become effective or enforceable until the Revocation Period has expired (without revocation), at which time the Release Agreement becomes forever binding and fully effective and enforceable. In the event that you revoke this Release Agreement prior to the expiration of the Revocation Period, this Release Agreement will be rendered null, void, and unenforceable, and you will not be entitled to receive the Separation Payment.

Voluntary Release Agreement. You acknowledge that you are entering into this Release Agreement voluntarily and that you have read and understand the provisions of this Release Agreement. You further acknowledge and understand that, except as provided for in, and subject to, the “Retention of Rights Regarding Government Agencies” clause of this Release Agreement, this Release Agreement contains a full and final release of all of your claims against the Company and the Athenex, Inc. Releasees, as described above. You have the right to consult with an attorney. The Company hereby advises you, again, to consult with an attorney of your choice before signing this Release Agreement.

Counterparts. This Release Agreement may be executed in one or more counterparts or multiple originals, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument or document. The parties agree that facsimile and electronic signatures shall have the same force and effect as originals thereof.

[Signature Page to Follow]

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Please acknowledge your understanding and acceptance of this Release Agreement by signing below and returning it to me no later than twenty-one (21) days from the date of this letter. A second copy of this Release Agreement has been signed by me and is attached for your records.

ATHENEX, INC.
JOHNSON LAU
Chief Executive Officer and
Chairman of the Board
Dated:	Dec 8, 2016

ACKNOWLEDGED AND AGREED:

Signature
FLINT BESECKER
Dated:	Dec 8, 2016

EX-10

Exhibit 10.29.1

FIRST AMENDMENT TO THE LETTER AGREEMENT BETWEEN ATHENEX, INC.

AND FLINT D. BESECKER DATED DECEMBER 8, 2016

Reference is made to the letter agreement between Athenex, Inc., a Delaware corporation (the “Company”), and Flint D. Besecker (“Besecker”) dated December 8, 2016 (the “December 8 Agreement”). This first amendment to the December 8 Agreement is made by and between the Company and Besecker and is effective as of 5:01 pm EST on 4/17, 2017 (the “Amendment”).

RECITALS

WHEREAS, in connection with your termination of employment from the Company, the parties have agreed to amend certain provisions of the December 8 Agreement.

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows:

Defined terms used herein but not defined herein have the meaning given to them in the December 8 Agreement.

1. Section 14 of the December 8 Agreement is hereby deleted in its entirety.

2. Section 30 of the December 8 Agreement is hereby deleted in its entirety.

3. This Amendment shall be governed by and construed in accordance with the laws of the State of New York, without regard to its choice of law principles.

4. Except as specifically amended hereby, the December 8 Agreement remains in full force and effect.

[Signature Page Follows]

IN WITNESS WHEREOF, this Amendment has been duly executed and delivered by the parties hereto effective as of the date first written above.

ATHENEX, INC.
By:
	Name:    J.N. Riehle
	Title:      CFO
FLINT D. BESECKER

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EX-21

Exhibit 21.1

Athenex, Inc.

March 31, 2016

Subsidiary Companies	Jurisdiction of Incorporation	Ownership
Athenex API Limited	Hong Kong		100	%
Athenex Biomedical International Holdings Limited	Hong Kong		100	%
Athenex HK Innovative Limited	Hong Kong		100	%
Athenex Manufacturing China Limited	British Virgin Islands		100	%
Athenex Pharma Solutions, LLC	Delaware		100	%
Athenex Pharmaceutical Division, LLC	Delaware		100	%
Athenex Pharmaceuticals (China) Limited	Hong Kong		100	%
Athenex Pharmaceuticals (Chongqing) Limited	People’s Republic of China		100	%
Athenex Pharmaceuticals (Hong Kong) Limited	Hong Kong		100	%
Athenex Pharmaceuticals International Holdings Limited	Hong Kong		100	%
Athenex Pharmaceuticals LLC	New York		100	%
Athenex R&D LLC	Delaware		100	%
Athenex Therapeutics Limited	Hong Kong		100	%
AtheSino Holdings Limited	British Virgin Islands		100	%
Bioksy Investments Ltd.	British Virgin Islands		100	%
Chongqing MJ Medical Devices Co., Ltd.	People’s Republic of China		63.3	%
Chongqing MJ Medical Sciences Co., Ltd.	People’s Republic of China		95	%
Chongqing Taihao Pharmaceutical Co., Ltd.	People’s Republic of China		100	%
Chongqing Taurus Pharmaceutical Co., Ltd.	People’s Republic of China		100	%
Comprehensive Drug Enterprises Limited	Hong Kong		100	%
Excel Bloom Limited	British Virgin Islands		100	%
Golden Wood Limited	Hong Kong		100	%
Maxinase Life Sciences Limited	Hong Kong		100	%
Meridian East Limited	British Virgin Islands		100	%
MJ Medical Gel Systems Limited	Hong Kong		95	%
Polygum Technologies Limited	Hong Kong		25	%
Polymed Therapeutics, Inc.	Texas		100	%
Renascence Therapeutics Limited	Hong Kong		29	%
TransPKPD, LLC	Delaware		100	%

EX-99

EXHIBIT 99.1

CONSENT TO BE NAMED

I hereby confirm my consent to being named as a person who will become a director of Athenex, Inc. (the “Company”), in the Registration Statement on Form S-1, including any all amendments and post-effective amendments thereto and any amendments filed under Rule 462(b) increasing the number of shares for which registration is sought (collectively, the “Registration Statement”), relating to the proposed initial public offering of common stock of the Company. This consent may be filed as an exhibit to the Registration Statement.

DATED: March 6, 2017

/s/ Michael Cannon

Michael Cannon

EX-99

EXHIBIT 99.2

CONSENT TO BE NAMED

I hereby confirm my consent to being named as a person who will become a director of Athenex, Inc. (the “Company”), in the Registration Statement on Form S-1, including any all amendments and post-effective amendments thereto and any amendments filed under Rule 462(b) increasing the number of shares for which registration is sought (collectively, the “Registration Statement”), relating to the proposed initial public offering of common stock of the Company. This consent may be filed as an exhibit to the Registration Statement.

DATED: March 6, 2017

/s/ Sheldon Trainor-Degirolamo

Sheldon Trainor-Degirolamo

EX-99

EXHIBIT 99.3

CONSENT TO BE NAMED

I hereby confirm my consent to being named as a person who will become a director of Athenex, Inc. (the “Company”), in the Registration Statement on Form S-1, including any all amendments and post-effective amendments thereto and any amendments filed under Rule 462(b) increasing the number of shares for which registration is sought (collectively, the “Registration Statement”), relating to the proposed initial public offering of common stock of the Company. This consent may be filed as an exhibit to the Registration Statement.

DATED: March 6, 2017

/s/ James Zukin

James Zukin