7.	Share capital:

(a)

Financing:

On November 10, 2014, the Company completed an initial public offering (“IPO”) of 4,600,000 of its common shares at a purchase price of $9.00 per common share. On November 10, 2014, the Company also completed a private placement, in which the Company issued 495,000 of its common shares to an affiliate of Genentech, a member of the Roche Group, at a price of $9.00 per common share. The Company received $38.5 million of proceeds, net of underwriting discounts and commissions but before offering expenses, from the IPO and $4.1 million of proceeds, net of underwriters’ fees but before offering expenses, from the concurrent private placement.

Immediately prior to the closing of the IPO, all outstanding Series A and B redeemable convertible preferred shares were converted into common shares on a 1:1 basis and Series E redeemable convertible preferred shares were converted into common shares on a 1:1.2 basis, subject to certain adjustments. These adjustments differed for some of the Company’s outstanding Series E preferred shares depending on the date of issue, resulting in different conversion ratios for different Series E preferred shares. All outstanding convertible preferred shares were converted into 7,725,924 common shares and 10,201 outstanding subscription rights were converted into 10,201 common shares. Following the IPO, there were no preferred shares or subscription rights outstanding.

On September 13, 2016, the Company completed an underwritten public offering of 3,450,000 of its common shares at a public offering price of $7.50 per common share. The Company received approximately $24.3 million of proceeds, net of underwriting discounts and commissions but before offering expenses.

(b)

Authorized share capital:

Immediately prior to the closing of the Company’s IPO, all outstanding Series A, B, C, D and E preferred shares were converted into common shares.

Post IPO, the Company’s authorized share capital consists of an unlimited number of common and preferred shares without par value.

(c)

Stock-based compensation:

On June 25, 2014, the shareholders of the Company approved the 2014 Equity Incentive Plan (the “2014 Plan”) which permits the grant of stock-based compensation awards to directors, officers, employees and consultants of the Company. The Company’s pre-existing stock option plan (the “Amended and Restated Stock Option Plan”) was limited to the granting of stock options as equity incentive awards whereas the 2014 Plan also allows for the issuance of restricted shares, restricted share units, share appreciation rights and performance shares. The 2014 Plan replaced the Amended and Restated Stock Option Plan. No further options will be granted under the Company’s Amended and Restated Stock Option Plan.

The Amended and Restated Stock Option Plan provided for the grant of options for the purchase of common shares to directors, officers, employees and consultants prior to the Company’s IPO. The options granted under the Amended and Restated Stock Option Plan vest on a graduated basis over a four-year period or less and each option’s maximum term is ten years. The Amended and Restated Stock Option Plan will continue to govern the options granted thereunder.

Under the 2014 Plan, options granted generally vest on a graduated basis over a four-year period or less. The exercise price of the options is determined by the Board but must at least be equal to the fair market value of the common shares on the date of grant. Options may be exercised over a maximum term of ten years. As of December 31, 2016, a total of 65,132 stock options remain to be granted under the 2014 Plan. The number of common shares available for issuance under the 2014 Plan was increased by 500,000 in January 2017 as approved by the Board in accordance with the terms of the 2014 Plan.

Summary of stock option activity is as follows:

	Number of			Weighted Average Exercise Price				Aggregate
	Options			CAD $		U.S. $		Intrinsic Value
Outstanding, January 1, 2014		1,333,099			3.98		3.88		8,300
Granted		205,170			10.84		9.35
Exercised		(2,417	)		6.07		5.23		23
Forfeited, cancelled or expired		(51,634	)		5.96		5.14
Outstanding, December 31, 2014		1,484,218			4.88		4.20		15,551
Granted		529,288			18.73		14.67
Exercised		(270,254	)		4.66		3.65		2,426
Forfeited, cancelled or expired		(21,780	)		11.21		8.78
Outstanding, December 31, 2015		1,721,472			9.62		6.95		1,880
Granted		323,794			9.79		7.39
Exercised⁽¹⁾		(121,292	)		3.67		2.77		568
Forfeited, cancelled or expired		(13,151	)		14.98		11.31
Outstanding, December 31, 2016		1,910,823			9.84		7.32		4,464
Exercisable, December 31, 2016		1,292,012			7.77		5.78		4,351

(1)	During the year ended December 31, 2016, 47,413 (2015 - 70,438) stock options were exercised for the same number of common shares in exchange for cash. In the same period, the Company issued 47,841 (2015 - 133,565) common shares for the cashless exercise of 73,879 (2015 - 199,816) stock options.

The following table summarizes the stock options outstanding and exercisable at December 31, 2016:

	Options Outstanding								Options Exercisable
Range of Exercise Prices	Number of Options Outstanding		Weighted Average Remaining Contractual Life		Weighted Average Exercise Price				Number of Options Exercisable		Weighted Average Exercise Price
			(years)		CAD $		U.S. $				CAD $		U.S. $
$1.93 - $2.31		228,570		4.90		2.67		1.99		227,222		2.67		1.99
$2.32 - $4.86		615,475		2.98		3.74		2.78		615,475		3.74		2.78
$4.87 - $7.72		467,592		8.90		9.98		7.42		118,964		10.06		7.48
$7.73 - $7.91		1,200		9.79		10.62		7.90		—		—		—
$7.92 - $17.70		263,116		7.16		12.24		9.10		162,924		11.84		8.81
$17.71 - $18.23		333,800		7.61		23.88		17.76		166,891		23.88		17.76
$18.24 - $21.82		1,070		8.10		26.79		19.92		536		26.85		19.97
		1,910,823		6.05		9.84		7.32		1,292,012		7.77		5.78

At December 31, 2016, there were 1,292,012 options exercisable with a weighted average remaining contractual life as at December 31, 2016 of 4.86 years.

A summary of the Company’s non-vested stock option activity and related information for the year ended December 31, 2016 is as follows:

	Number of Options			Weighted Average Grant Date Fair Value
				CAD $		USD $
Non-vested, January 1, 2016		686,896			10.60		8.54
Granted		323,794			6.54		4.94
Vested		(382,491	)		11.15		8.42
Forfeited and cancelled		(9,388	)		10.25		7.73
Non-vested, December 31, 2016		618,811			9.58		7.13

The aggregate fair value of options vested during the year ended December 31, 2016 was $3,220 (2015 - $999, 2014 - $722).

The fair value of stock options at the date of grant is estimated using the Black-Scholes option-pricing model which requires multiple subjective inputs. The risk-free interest rate of the options is based on the U.S. Treasury yield curve in effect at the date of grant for a term similar to the expected term of the option. Prior to the IPO, the Company’s shares did not have a readily available market; therefore, the Company lacks company-specific historical and implied volatility information. Consequently, the expected volatility of stock options was estimated based on a historical volatility analysis of peers that were similar to the Company with respect to industry, stage of life cycle, size, and financial leverage. The expected term of the Company’s stock options has been determined utilizing the “simplified” method. Under this method, the expected term represents the average of the vesting period and the contractual term. The dividend yield is based on the fact that the Company has never paid cash dividends and has no present intention to pay cash dividends. Forfeitures are recognized as they occur.

The weighted-average option pricing assumptions are as follows:

	Years ended December 31
	2016			2015			2014
Average risk-free interest rate		1.58	%		1.75	%		1.94	%
Expected volatility		75	%		75	%		73	%
Average expected term (in years)		6.22			6.23			6.13
Expected dividend yield		0.00	%		0.00	%		0.00	%
Weighted average fair value of options granted	$	4.94		$	9.83		$	6.10

Stock-based compensation expense is classified in the consolidated statements of operations and comprehensive income (loss) as follows:

	Years ended December 31,
	2016		2015		2014
Research and development	$	874	$	624	$	194
General and administrative		1,287		3,105		566
	$	2,161	$	3,729	$	760

As of December 31, 2016, the unrecognized stock-based compensation cost related to the non-vested stock options was $3,975, which is expected to be recognized over a weighted-average period of 2.36 years.