Karen Bergman – Inventor Relation-BCC Partners William G. Rice – Chairman, President and Chief Executive Officer Avanish Vellanki – Senior Vice President and Chief Business Officer Gregory Chow – Senior Vice President and Chief Financial Officer.

Adnan Butt – RBC Capital Markets John Newman – Canaccord.

Good day ladies and gentlemen and welcome to the Aptose Biosciences Fourth Quarter 2015 Results Conference Call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will be given at that time. As a reminder this conference is being recorded.

I would now like to hand the meeting over to Karen Bergman. Please go ahead..

Thank you, Karen. Good afternoon and welcome to the Aptose Biosciences conference call to discuss financial and operational results for the year and quarter ended December 31, 2015. My name is Karen Bergman with BCC Partners, the investor relations representative for Aptose Biosciences. Joining me on the call today are Dr. William G.

Rice, Chairman, President and Chief Executive Officer; Mr. Gregory Chow, Senior Vice President and Chief Financial Officer; and Mr. Avanish Vellanki, Senior Vice President and Chief Business Officer.

Before we proceed, I would like to remind everyone that certain statements made on this call will include forward-looking statements within the meaning of the U.S. and Canadian securities laws. Forward-looking statements reflect Aptose’s current expectations regarding future events, but are not guarantees of performance.

And it is possible that actual results and performance could differ materially from those stated expectations. They involve known and unknown risks, uncertainties, and assumptions that may cause results, performance, and achievements to differ materially from those expressed.

To learn more about these risks and uncertainties, please read the Risk Factors set forth in Aptose’s most recent annual report on Form 20-F, and SEC and SEDAR filings. All forward-looking statements made during this call speak only as of the day they are made.

Aptose undertakes no obligation to revise or update the statements to reflect events or circumstances after the date of this call, except as required by law. I will now turn the call over to Dr. Rice, Chairman, President, and CEO of Aptose Biosciences. Dr.

Rice?.

Thank you, Karen. I’d like to welcome everyone to our call for the year and quarter ended December 31, 2015. On today’s call, we’ll present the quarterly financials as well as update you on the status of our Phase 1b clinical trial of APTO-253 or 253 and patients with AML and hematologic malignancies.

We’ll also review news and business highlights including research and pipeline development activities and data that represented at the American Society of Hematology Meeting in December.

I’d like to begin with an update on the 253 Phase 1b clinical trial and our progress on developing a newly formulated drug product for returning to the clinic and reinitiating dosing. Today, I’ll walk through next steps that we’ve taken internally and discuss the progress our team has made at the up most level of quality.

The FDA however, will need to review our analysis, our methodology, and our final drug product to provide recommendations for next steps for the program and for the newly formulated drug product, which includes lifting the clinical hold.

As you may recall in late November, we voluntarily suspended dosing of 253 in our ongoing Phase 1b trial, following a report from one of the clinical sites of an operational difficulty encountered during an IV infusion to a patient.

This was characterized as a clogging of the in line filter and was not tied any safety or tolerability events in the trial.

Upon learning of the filter clogging a bit, we immediately performed an intensive independent third-party review of manufacturing processes and procedures either used to produce the clinical material also referred to as the formulated drug product. With a commitment to ensuring that 253 was being produced at the highest standards.

As a reminder, the HCl or hydrochloride salt of 253 had been formulated with multiple excipients or ingredients to create a liquid formulation. The formulated drug product is in place into the infusion bag at the clinical sites for patient dosing.

That batch of formulated drug product was manufactured in 2013 and it clearly had a problem that led to clogging of the filter. The material needed to be pulled from the clinical trial and we did so immediately to ensure that we could investigate the drug product and evaluate what had caused the clogging in the filter at the clinical site.

We also immediately brought our findings to the FDA, which formally placed the trial on clinical hold. Fortunately, a complete safety review of all patient files had just been completed. And there were no drug related serious adverse events or SAE is reported.

Also the observed pharmacokinetic levels in the patients treated were within the expected exposure ranges. So what have we done to fully assess or address these manufacturing issues? Well, first you need to understand that we want to return to the clinic with the same overall formulation.

But in a form that is soluble and stable such that it will not cause the filter clogging again in the future. This means we need to maintain the same ingredients as were found in the original formulation. But we do have latitude on how to blend those ingredients.

Not to simplify this approach too greatly, but in much like cooking, the manner in which you add the ingredients can alter the taste and consistency of the meal. In our case, we can maintain the ingredients, but alter the conditions related to the order of addition, time, temperature, pressure, pH and the most of dispersion.

Such changes to the methodology can yield formulations with vastly different solubility and stability properties. To perform these formulation development studies, we wanted to have plenty of the API or the powder form of 253 to use in the studies and then still have plenty of the API to manufacture the final formulated drug product.

Fortunately during 2015, we had already qualified a new contract manufacturing organization or CMO to manufacture the new API for our future studies. We also had created a new synthetic pathway to reproducibly deliver high quality API and a simple two step synthesis and we have all the starting materials purchased and qualified.

So we treated the new CMO to convert the starting materials to the freebase form of 253 in the first step of the synthesis and then convert a portion of that freebase to the HCl salt form of the drug in the second step of the reaction.

All this was performed under GMP conditions and we brought this GMP material in-house and then stated that an induced gene expression levels of multiple genes in multiple cell lines equivalently to the earlier batches of API. So we qualified the material from both chemical and biological perspectives.

It’s important to note that the company years ago had originally decided to use the HCl salt form of the drug as the API, because they expected it would have greater solubility.

After the HCl salt of 253 is placed in solution, the hydrochloric acid moiety dissociates with the intent of – to maintain the formulation at a low pH and increase the solubility of 253.

However, it’s also possible that the three base form of the drug along with the addition separately of hydrochloric acid can perform the same function and have superior solubility and stability properties. So we’ve prepared plenty of the freebase and HCl salt forms of the API to perform formulation optimization studies.

Now to perform such formulation development studies and to manufacture the new drug product, we needed another contract manufacturing organization. In this case a new and highly qualify formulation CMO with an extensive expertise in IV products. Fortunately, during 2015, we had also initiated work with and qualified such a CMO.

This included a review and completion of studies last year to begin developing a new formulation for Phase 2 studies and beyond.

To-date the CMO under our guidance has perform systematically numerous formulation studies using a variety of methodologies to evaluate the solubility and stability of 253 beginning with either the HCl salt or the freebase form of the drug.

Indeed the differences in solubility and stability among the different methodologies are striking even when using the same excipients. We have undertaken preparation of a series of such test articles and are now evaluating our solubility and stability over time so that we can select the best among them.

And use that methodology to manufacture the new batch of drug product and amend this material in our IND for 253 to submit to the FDA. I should also note that we have undertaken studies to develop new formulations, entirely new formulations. In an event that using the existing set of excipients is unsuccessful.

We are hopeful that the combination of this new methodology with the existing excipients will yield a soluble and stably formulated drug product that we always plan for such contingencies. This has been an immense effort under accelerated timelines for such a thorough analysis and the steps that we’ve taken.

Our management team is committed to delivering a high quality and safe clinical drug product in the best interest of the patients, the company, and our shareholders.

We’ve made significant progress and we remained hopeful that we can sled to conditions that will deliver the same overall formulation but with improved solubility and stability properties.

However, before we disclose this information publicly, first we must submit this information to the FDA and demonstrate the root cause of the filter clogging by the old drug product, and demonstrate that our fresh batch of GMP clinical supply is highly unlikely to cause filter clogging in the future.

From an operations and clinical perspective, this last quarter has been an extremely busy and dedicated time for our development, operations, and manufacturing team working on 253. Aptose has taken a thorough and comprehensive approach to verifying the root cause of the manufacturing issue and determining the path forward.

We have qualified CMOs, contract manufacturing organizations, and establish new efficient and well embedded synthetic chemistry processes for manufacturing API. Relaying – remember also to bring onboard additional clinical sites, once we return to the clinic and this is – I need to show that we have a rapid patient accrual into the future.

Plus we’ve optimized and validated our biomarker analysis for seizures so that we can accurately quantitate the CDX2, KLF4, and p21 gene expression levels, and clinical samples at baseline and after treatment of patients with 253 in the clinic.

In addition, we demonstrated that treatment of AML cells can induce expression of KLF4 and p21 as previously described. But also 253 inhibits the expression of the c-Myc oncogene at the mRNA and protein levels.

It’s quite remarkable that a single small molecule can lead to the transcriptional regulation of these key genes and yet not cause myelosuppression of normal bone marrow. I’d now like to mention progress during 2015 in other areas of our business.

We continue to attract great talent to the company and made important additions to our team, and staff and members of our boards and committees. And addition to the promotion of Mr. Ernest Kitt, the Vice President of Development and Technical Operations, we appointed Dr.

Michael Andreeff from MD Anderson Cancer Center, a world-class researcher in hematopoietic and epithelial malignancies to our Scientific Advisory Board.

Dr Andreeff joined Dr Brian Druker, Director of the Oregon Health & Science University or OHSU, Knight Cancer Institute and joined Dr Daniel Von Hoff, Physician-in-Chief and Distinguished Professor of Translational Research at Translational Genomics Research Institute in Phoenix, as Scientific Advisors for Aptose.

As I’ve stated before, Aptose is committed to building one of the foremost hematology-focused scientific advisor boards in industry and we’re fortunate to have the interesting guidance to this premier group as we pioneer a new classes of drugs for AML and other hematologic malignancies.

And now I’d like to turn the call over to our Chief Business Officer, Mr. Avanish Vellanki, who will provide an update on orphan drug designation, our findings through the Beat AML Initiative and other business development activities related to our pipeline.

Avanish?.

Thank you, Bill and good afternoon everyone. During the prior year, many of you will recall that the FDA granted Aptose orphan drug designation for our 253 for the treatment of AML conferring seven years of marking exclusivity along with other benefits. In addition, the prior quarter also brought updates to the ongoing efforts with Beat AML.

253 is now been tested in over 150 AML patients samples and over 120 CLL patient samples. We’re reviling potency in approximately 45% of AML samples and approximately 35% of CLL samples. 253 continue to exhibit strong synergy when using combination with bromodomain inhibitors. This time using OTX015, which is now owned by Merck.

We call the 253 previously demonstrated synergy with the bromodomain inhibitor JQ1. Finally our collaborators at OHSU is part of Beat AML continue to report the trend of greater potency of 253 in patient samples with lower baseline KLF4 expression and higher CDX2 expression in line with our expectations.

Looking beyond 253, we continue to prepare a pipeline for the addition of new and valuable assets and eliminate legacy programs that do not fit with a new vision of Aptose. In the prior quarter, Aptose officially terminated two legacy Lorus programs.

One, the IL-17E peptide program, and two, the small molecule program developed to inhibit MELK or maternal embryonic leucine zipper kinase. The IL-17E program has a peptide does not fit with existing small molecule expertise of Aptose nor is the cost structure for large molecule program development attractive for Aptose at the present time.

While Aptose processed a use patent for IL-17E an oncology, the composition of matter patent was license from Genentech. Notification of license termination was provided to Genentech in the most recent quarter.

The small molecule MELK program, while novel was primarily applicable to solid tumor opportunities, well such a scenario could have been attracted to Aptose for lack of intellectual property, the discovery stage nature of the program, and lack of a clear role from MELK across hematologic and solid tumors made it a poor fit for Aptose.

Finally, internal development around the dual inhibitors of bromodomain proteins and relevant kinases can use continues to progress with a focus on identifying a lead clinical candidate. Recall, Aptose announced the in-licensing of numerous chemical structures from Moffitt Cancer Center in December of 2015 to jump start this program.

I’ll now turn the call over to our Chief Financial Officer, Greg Chow, who review results in the quarter..

Thank you, Avanish, and good afternoon everyone. As a reminder, effective July 17 of last year, the company changes its fiscal year from May 31 to December 31.

As a result, the period that we are reporting today for the year ended December 31, 2015, which will compare to the seven months ended December 31, 2014 and the quarter ended December 31, 2015 which I will refer to as the quarter, which will compared to the three months ended December 31, 2014.

In addition our reporting currency is in Canadian dollars, and now turning to the financial results. We ended the quarter with $19.7 million in cash, cash equivalents and investments, compared to $30.5 million at the end of December 31, 2014, and $23.4 million at the end of the prior quarter on September 30, 2015.

We utilize approximately $12.7 million of cash in our operating activities for the year ended December 31, 2015, and $3.7 million of cash during the quarter. Moving on to the income statement, we had no revenues in year ended December 31, 2015 or the quarter.

R&D expenses were approximately $6.3 million for the year ended December 31, 2015 and $2.3 million for the quarter, compared to $2.4 million for the seven months ended December 31, 2014 and $1.1 million for three months ended December 31, 2014.

This increase was due to the initiation of the Phase 1b dose escalation trial in January 2015, as well as the related formulation manufacturing and compliance costs. Costs related to the clinical hold activities as Dr. Rice described earlier and the development costs related to the market Lorus program, which was initiated during the quarter.

General and administrative expenses totaled $9.8 million for the year ended December 31, 2015 and $2.3 million for the quarter compared to $5.5 million for the seven months ended December 31, 2014 and $2.6 million for the three months ended December 31, 2014.

On an annualized basis, the increase in G&A is attributable to increased costs associated with our NASDAQ listing, including listing fees, insurance charges, internal control documentation work completed during the year, as well as the devaluation of the Canadian dollar, which has increased the cost of our U.S.

dollar denominated expenditures which includes board fees, legal, and other corporate expenses. These increases have been offset by charges related to the termination of the Toronto facility lease in December 2014 as well as costs incurred in 2014 related to our rebranding for which no comparable costs were incurred in the current year.

Salary costs on an annualized basis increased slightly in the year ended December 31, 2015, compared with the seven months ended December 31, 2014. This increase was primarily due to increased headcount in the U.S. and partially offset by a reduction in bonuses primarily due to executives voluntarily for going to annual cash bonuses.

We reported net finance income of $1.47 million for the year ended December 31, 2015, compared to net finance income of $175,000 for the seven months ended December 31, 2014. This increase was primarily due to a foreign exchange gain of $1.2 million during the current year.

Finally, our net loss for the year ended December 31, 2015 was $14.6 million or $1.23 per share, compared with a loss of $7.8 million or $0.67 per share in the seven months ended December 31, 2014. And $4.4 million for the quarter or $0.38 per share, compared to a loss of $3.6 million or $0.31 per share for the three months ended December 31, 2014.

I will now turn the call back over to Dr. Rice..

Thank you, Greg. I’d now like to open the call for questions. Operator, if you could please introduce the first question..

Certainly. [Operator Instructions] Our first question comes from the line of Adnan Butt from RBC Capital Markets..

Hi there, thanks for taking the question. Thanks for the detail. Bill, I think you outlined four or five steps before can be determined when and where the Phase 1 would start.

So are you able at this time that the timelines around those steps such as how long it takes to develop the new formulation, but with the rearrange excipients and tested and then submitted to the FDA..

Hi, Adnan, thanks for the question. I’ll answer this in multiple ways. First of all, let’s talk about the steps to get there. We’ve had to evaluate the freebase as well as the HCl salt in the existing excipients, look at all the different – the change of sequence of addition of all of these as well as the dispersion technologies.

And we have seen, I mean, vast differences in the solubilities and stabilities of these solutions, even though it’s effectively the same ingredients, just put together in different order. So at this point we’ve prepared a variety of those. We’re letting them go overtime to ensure that they are not only soluble, but stable overtime.

I’m not going to put a defined timeline on that and I’m going to be very careful with these, because ultimately before I release anything publicly, we have to present this to the FDA. We have to show them what happened with the root cause in the prior drug product effect.

We have to be able to say, taken that HCl salt with those excipients under that methodology caused the precipitation and the filter clogging. And we’ve been able to recapitulate that. So we know that is true.

But now we have to take the new methodologies for preparing these and show that not only always soluble, but it stays soluble over a period of time. So we’re doing those studies now.

And then we will be able to take all of that to the FDA and present them with the root cause and then the new formulation methodology that we do not expect to cause this into the future. So into the coming few months we will be able to roll out more of this information. Hopefully, we’ll have a good bit of information on the order of weeks.

But we will not be able to roll out information on all of this and get back into the clinic for a bit longer. That’s just the nature of the beast. We’ve been very careful in this to make sure we do it right the first time. That’s what happened beforehand people took shortcuts and we ended up having to pull the drug product from the clinic.

Although that was – it had nothing to do with us and the manufacture of that drug product, we’re having to deal with this. And we’re going to go right, do it right at first time so that we won’t have to deal with this again in the future.

So I wish I could give you a defined timeline, but I first have to present it to the FDA, get their [bile] and then we’ll bring it to you guys immediately to the street..

Sure. Just one follow-up.

So if this new formulation considered the same as the prior formulation or does anymore preclinical work needs to be done before the new rearrange formulation can get back to the clinic?.

Well, that’s a key issue. The reason why I said we want to use just a different methodology, to create this same formulation. So we won’t be able to use all the same excipients, the same content. So once we get this in solution, it should appear equivalently to the prior formulations except it should be soluble and stable.

If we can do that then it’s unlikely that we would have to do additional studies, for toxicology studies. Because these happen all the time, these types of activities happen in Phase 1 all the times, all the time.

People are changing formulations, especially during Phase 1 as you go through new APIs made, new formulations and any transition within, as long as it’s “the overall same.” The overall same content even though you may have prepared it using different methodology.

If we have to go away from this current methodology or the same -- if we go away from the same formulation, then depending on how far away if we get from this original formulation, we will have to likely do certain other talk studies. It may just require certain crossover studies, if it’s reasonably close.

And we can show the pharmacokinetics and the safety and the efficacy are similar. But if it’s a dramatically different formulation, we may have to do more extensive preclinical. We just don’t know the answer at this point. We still – we are very hopeful. I’ll be careful on my choice of words, we’re very hopeful.

It’s going to be the same formulation within the balance of the word same, and just using different methodology..

Okay. Thanks, I will get back in line..

Thank you, Adnan..

Thank you. [Operator Instructions] Our next question comes from the line of John Newman from Canaccord..

Hi, guys. Thanks for taking the question.

First question I had for Bill is when you restart the clinical development; will you be restarting dose escalation at the lowest dose? And then I’m curious given the changes that you are making in terms of the formulation, will you ultimately be able to file additional patents on the manufacturing process after that’s completed? Thanks..

It’s actually a really good point. If we’re able to identify a methodology that gives us much greater soluble and stability, you bet we’ll file IP on that because it was – clearly was unanticipated, because it’s quite difficult to find such conditions. So that’s the first part of the question.

The second part is what dose as we believe will be able to go back into in the clinic? Again, we are hopeful we’ll be able to take off – to start where we left off at the 100 mg/m2. Ultimately that is the FDA’s call. The burden is upon us to show that this is effectively the same formulation in the same pharmacokinetics.

We will have data in animals showing that this – the new, I call it the newly – the new methodology delivers the same pharmacokinetics and especially in mouse PK efficacy studies. So we’ll do that and we’ll have that to present to the FDA.

As long as it’s the same constituents and it’s just more soluble and stable, typically the FDA is relatively lenient on those matters especially in Phase 1. We are hopeful that we go back at 100. They may ask us to drop back one or they may go ultra conservatives and tell us to start over. I don’t know the answer to that yet.

But I could also make the case that if the pharmacokinetics are equivalent, which we expect they will be, that I think it’s unethical to go back and start at the 20 mg/m2 where we didn’t have efficacy in the clinic and we didn’t have the exposures that we think would have efficacy.

So we make those arguments, but ultimately that is the FDA’s decision and I don’t want to try to precondition the market or the FDA, we’ll present them with the data..

And I could ask one additional question..

Please..

In terms of the stability work that you’re doing, will you be looking at just short-term stability to start or will you be looking at six months or can you look at maybe accelerated stability just to get a sense as to which one of the formulation to take forward?.

Yes. So all of those have to be done. So as we select – for instance we have a variety of – I’ll call these tests articles at this point. We look at those and we look at the stability and then we watch it overtime to make sure it stays in solution and it’s stable. Then among those we can select several, to put on accelerated conditions.

And then among those you want to test. So again the accelerated conditions you’ve got much elevated temperature, humidity, light, all of those accelerated activities, stability will know those and those are on just on the order of a couple of weeks.

But at the same time you don’t have to turn around and the formulation that you want to take back in the clinic. You have to put it on long-term stability of ambient conditions. And that’s just part of the program and that’s already in the contracts. That’s well understood. So we’ll be doing all of that.

But we’ll only do that on the ones that we – the ones that we plan to take back to the clinic. All right..

Great. Thank you..

Thank you. And that concludes our question-and-answer session for today. I would like to turn the conference back over to Dr. Rice for any closing remarks..

All right, thank you so much. Everyone thank you for joining us today and we thank you for your support, especially as we address the unexpected delay in the 253 clinical trial. We remain confident in the potential of our lead therapeutic has an important option for patients with acute myeloid leukemia and other hematologic malignancies.

And look forward to reporting further progress to you on this program and our emerging pipeline. Please note our recent webcast and presentations can be found on our website at www.aptose.com. Once again, thank you, and everyone have a great evening. Bye-bye..

Ladies and gentlemen, thank you for your participation in today’s conference. This does conclude the program. And you may now log-off and disconnect. Everyone have a good day..