Karen Bergman - IR-BCC Partners William Rice - Chairman, President and CEO Gregory Chow - SVP and CFO Avanish Vellanki - SVP and CBO.

Adnan Butt - RBC Capital Markets.

Good afternoon. My name is Andrew, and I’ll be your conference operator for today. I would like to welcome everyone to the Aptose Biosciences Conference Call for the First Quarter ended March 31, 2016. At this time, all participants are in a listen-only mode. After the speaker’s remarks, there will be a question-and-answer session.

[Operator Instructions] Thank you. As a reminder this conference may be recorded. I would like to introduce Ms. Karen Bergman. Please go ahead..

Thank you, Andrew. Good afternoon and welcome to the Aptose Biosciences conference call to discuss financial and operational results for the first quarter ended March 31, 2016. 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 during 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 actual 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 first quarter ended March 31, 2016.

During our year in conference call, which was only about a month ago, we updated you on current clinical and business activities including the steps our team has taken and reviewing the past manufacturing cost of season procedures to produce clinical material for APTO-253 or 253 as I’ll refer to it.

We also discussed some of the specific progress in establishing a new methodology to produce formulated drug product for 253 that will not cause clogging of in line filters in the clinic.

Indeed, we are hopeful that our efforts will address the limitations of the prior drug product and will allow us to reinitiate dosing in our Phase 1b clinical trial in patients with Acute Myeloid Leukemia and other Hematologic Malignancies.

As you know, Aptose has maintained an opening candidate as opening candidate a dialogue is possible with our analyst shareholders and investors with the understanding that all decisions and actions will be made in collaboration with the FDA.

So on today’s call, we plan to further update you on progress in just the last month with 253, which gives us good reason for optimism. In addition to our lead development program, we also will review our quarterly financials and then open the call for your questions.

We have taken a methodological approach to getting 253 and our clinical trials back on line and meeting FDA criteria.

This approach speaks to the integrated team effort ongoing today at Aptose from the top down and has provided us with an unusual jump start on a product optimization steps that are typically implemented much further downstream in clinical development programs. So first, I’d like to begin with an update on 253.

As you may be aware, we have investigated the manufacturing issues associated with the clogging of an inline filter in the clinical setting and with the result in temporary suspension of our Phase 1b clinical study of 253.

In our last call, we reviewed in detail how we with our new contract manufacturing organization have been exploring formulation methodologies for 253 in order to enhance the solubility and stability properties for maintaining the same excipients or ingredients. With the goal of creating a drug product that does not result in filter clogging.

You may recall my cooking analogy. We can maintain the ingredients but alter the conditions or methodologies related to the order of audition, time, temperature, pressure, pH and most of dispersion. And the different methodologies can produce remarkable differences in solubility and stability of the drug product.

Formulation for this reason is evaluated over the life of pharmaceutical product from pre-clinical and clinical development through approval and commercial manufacturing with an eye toward continuous optimization.

From an operations in clinical perspective, this last quarter has been an extremely productive and dedicated period for the 253 development and manufacturing teams.

We’ve been actively evaluating these formulation and production methodologies in order to select the best approach to optimizing the delivery system of the product to patients and from manufacturing drug product to batches with improved solubility and stability characteristics that can avoid filter clogging.

So today, I’m pleased to report on our progress. We have developed multiple methodologies that yield formulation of prototypes of 253 that appear highly stable and soluble for weeks at room temperature.

That is a significant step forward because a call that the drug product administered previously in the clinic was acquired to be frozen prior to processing in the hospital pharmacy before treatment.

In addition, we continue to assess the stability of the prototype formulation and the relative solubility when placed into various ID solution, intravenous solutions whether it would be water, D5W, lactated ringers, sailin [ph] or other obvious solutions.

As we continue to test these prototypes in the delivery systems that we are planning to use in the clinical setting which includes the in line filter, we expect to resolve the filter clogging issue that occurred with the drug product that was administered previously in the clinic and the core through results to the FDA when they are completed.

We now can began to see a clear path forward for the re-initiation of the 253 clinical trial, of course, after the FDA has approved our return to the trial. And we look forward to reporting back to you.

I want to emphasize that we still have work ahead of us and the FDA has the final determination regarding the suitability of our root cause rational and the performance of our new drug supply in the clinical setting.

Moreover, we still may encounter delays in returning 253 at the clinic, but I’ll assure you that we’ll work tirelessly to solve any complications that may arise. I’d now like to speak about certain 253 mechanistic studies.

In parallel with the formulation studies, our laboratories in San Diego have been studying the mechanistic activities of 253 and we’ve had a number of investors requesting an update on such activities recalled that we previously demonstrated that 253 can induce the expression of the KLF4 gene, thereby reversing leukemia genic dysregulation of the KLF4 gene in AML.

More recently, we demonstrated that 253 inhibit expression of the c-Myc oncogene. End levels of the c-Myc oncoprotein and the concentration in ton dependent manner in AML cells.

The c-Myc oncogene is a major driver of cancer cell proliferation and inhibition of c-Myc by 253 suggest that 253 may have broader anti-cancer application among the host of hematologic malignancies and solid tumor indications.

In other in vitro studies, we demonstrated that AML cells are killed by sub macro motor [ph] concentrations of 253, while Peripheral Blood Mononuclear Cells or PBMCs that are derived from normal healthy volunteers are not killed by even 100 macro motor 253 over 72-hour period.

Moreover, the normal PBMCs in response to treatment by 253 demonstrated the different gene expression profile in the AML cells thereby, potentially providing us with the ability to measure pharmacodynamics effect in normal blood cells in patients receiving the drug.

We also have identified key signaling pathways that lead to the modulation of KLF4, P21 and c-Myc regulation. This deeper understanding of the mechanism of action of 253 can also bring us new IP.

Once the collect the information and have it prepared for our P protection and presentation at scientific conferences and publications we will be able to disclose it to the public.

We are proud of our research group and we are committed to fully understanding the multiple actions of 253 and different types of cancers in normal cells so we can fully exploit this molecule to deliver the optimal efficacy in each patient population.

In separate in vitro studies, our collaboration with the Beat AML initiative is ongoing and quite productive. Today, we have collected data from more than 350 patient’s samples across AML, CLL and other hematologic malignancies.

Of note, we have now observed 253 appears to achieve strong cell killing at a concentration of 1 mark more or less and about 40% of AML and CLL samples. Further 253 continue to demonstrate synergy with inhibitors of Bromodomain proteins. I’ll now turn the call over to our Chief Financial Officer, Mr.

Greg Chow, who will review financial results for the quarter..

Thank you, Bill and good afternoon everyone. As of March 31, 2016, which I refer to as a quarter, we had $15 million in cash, cash equivalents and investments compared to $19.7 million at December 31, 2015. Our cash use in operating activities before changes in working capital was $4.3 million in the quarter. We had no revenues during the quarter.

Research and development expenses were $2.3 million for the quarter compared to $884,000 for the quarter ended March 31, 2015. This increase was due to cost associated with the Laxai Avanti Life Sciences and Moffitt collaboration increased CR expenses and formulation manufacturing and root cause analysis associated with 253.

General and administrative expenses for the quarter were $2.6 million for the quarter versus $2.7 million for the quarter ended March 31, 2015.

This slight decrease was due to lower stock based compensation in the quarter that was offset by increased salary costs due to higher headcount, rent, patent cost and the depreciation of the Canadian dollar versus the U.S. dollar during the period.

For the reasons mentioned above, our net loss for the quarter increased to $5.1 million or $0.42 per share compared to $3.6 million or $0.30 per share for the quarter ended March 31, 2015. I will now turn the call back over to Dr. Rice.

Bill?.

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

Certainly, our first question or comment comes from the line of Adnan Butt with RBC Capital Markets. Your line is now open..

Hi, folks. Thanks for the update again. Couple of questions, first if I just wanted to understand the steps needed remaining for 253.

Did I hear correctly that of the formulations created the next step would we receive which if any do not fog and then look for stability for that formulation and then determine if the FDA -- that's the first question?.

All right. Hi, Adnan. Thanks for the question. So what we’ve done is we’ve created a series of prototype formulations. So again, I’ll just remind you that we did not want to go after a new formulation.

We wanted to utilize a different method that takes advantage of the same excipients to create a – I’ll call it an equivalent formulation but with superior properties. We’ve done this. We’ve created a series of prototype formulations and among them we found many of them now that are very soluble and very stable.

That’s the first major step is to create a formulation with the same excipients in which the 253 is soluble, stable over a period of time. So now we’ve seen that we’ve done that and this is stable and soluble for a period of weeks and this is at room temperature and even heating at higher temperatures we’ve seen it to be stable.

So that’s the first step. Then you have to look at each of those and say if we take each of those and we place them into the IV solutions which ones remain soluble and stable, which ones my call precipitation immediately or how long they may stay clear. We’ll call it clear in these IV solutions.

And among those, we’ve actually identified one now that appears to be the best among them all. So again, that’s a major step forward for us.

So now we’re in the process of making certain that as we take different concentrations of 253 and this prototype formulation we’re going to call it for now that we can place it into different IV solutions all different types, different concentrations of 253 and ensure that does take soluble and clear and does not precipitate out.

So we’re in the process of those studies as well as evaluating it in the entire in line filtration system. It’s the same one used in the clinical setting. So we’re able to take these, place them in the large IV bags whether it would be say D5W, lactated ringers run it through the pump and the filter and make sure that we’re able to continue.

So we’re in the process of that now. In parallel, we’re testing to be certain that this formulation – prototype formulation remains stable overtime, because remember we have to do all of the accelerated stability studies.

So right now, we’re very pleased with where we are and so we have collect all of the data, take it back to the FDA and show them this is the root cause of what happened with the prior drug product.

This is how we modified the methodology with that original formulation to create a new prototype formulation and show them that it should not cost filter clogging into the future. So those are the next steps.

Does that fully answer your question?.

Bill thanks. Yes, it’s helpful. The company seems to have made a bunch of progress in the month or so since the last call.

So, would you be able to estimate that the time it might take for the next steps before you’re able to go to FDA or is it too soon for that?.

Well, everyone wants to know the timeline, but what you said was true. Last time we spoke which was just a few weeks ago in reality, we told you we were developing these prototypes and we were assessing them, but that's all we could say legitimately. We could not over-promise.

We have made a great deal of progress in the last few weeks and we already had some of that progress last time we spoke to you. That's kind of where we're now.

We've made really good progress, but we know what must be done and it just depends on how seamlessly everything flows from here and we want to make sure and we want to make sure that we give the FDA everything they need. Again we have a great relationship with the FDA on this, because remember we found out about this, we told the FDA.

And we want to go back to them and say legitimately, this is what happened with the prior drug product and rather than creating an entirely new formulation, we took the same excipient new methodologies, we have something now that really looks truly superior in terms of the prototype formulations.

And at this point, I couldn’t be happier with what we're seeing, but we still have to do some of these studies and they are being done in parallel. All the studies to make sure we don't get filter clogging.

We want to make sure that we're able to use the most concentrated drug product possible in the new formulation, but doesn’t cause the filter clogging. So, we still have to evaluate that. Let's see we have to do in parallel all the stability study, we already have all of our analytical and bioanalytical procedures.

And we also have studies underway in the laboratory, because remember, if they will likely want to -- will ask us this new formulation, does it perform equivalently to the old. So, we're testing it in our laboratories in San Diego to make sure it works equivalently. All of those are ongoing, but I hate to put an absolute timeline on it.

Just know that we -- believe me, we want to get this back as soon as possible..

Just one more and then I'll get in the queue.

This -- these prototypes or the new formulations that you said back, in terms of using the same excipients, how does that translate to the tolerability, the MTD and the pre-clinical animal work we've seen to-date, does it apply or could it be different?.

Well, that's the reason we wanted to utilize the same excipients and not change the excipients, because once you start changing the excipients adding in different ones, then it's really a different drug product. And the FDA will require you very often to do different pre-clinical studies in animals.

We hope that the FDA will see that this is an equivalent formulation, just a different methodology. We hope they do not require us to do bridging studies. We can the argument, but ultimately, it's their decision. So, that's the reason that we really put all the effort into using these same excipients and not changing them.

So, that we could avoid having it be viewed as a different. We try to call it an equivalent formulation, just a new method. And it is remarkable just by moving around the order of addition in some of these activities what you can -- what happens, just remarkable the difference is..

Okay. Thanks..

All right. Thank you, Adnan..

[Operator Instructions].

And I'd also say, its time -- Adnan had one additional question..

Yes. Our next question or comment comes from the line of John Newman with Canaccord Genuity. Your line is now open..

Hi this is Andrew [Indiscernible] going in for John.

Just had a question on your new understanding for your mechanism of action, have you thought about any possible combinations based on these new learnings?.

Yes. And certain ones of those have been underway and our planned into the future.

Good example is we've been testing all along the ability of this drug to work well in combination with drugs that already commercialized, Cytarabine and daunorubicin and for instance for AML for the hypomethylating agents, as well as the main inhibitors, quizartinib, FLT3 inhibitors, so we've been testing against a variety of other molecules and we found that it works very well in combination with these other molecules.

The question you're getting at is these new pathways and new mechanism is they are suggesting other potential combinations and answer to that is absolutely yes. So, these are some early, but starting findings and it does suggest to us other molecules with which we want to combine this molecule.

Some that were completely unanticipated until we're getting some of these pathway analysis and data. And if you want to speak more on how we're getting some of these data and different procedures, I'm happy to do that. But thank you Andrew for the question.

And did I answer your question fully?.

Yes.

Can you actually share some of your thoughts; can you provide some more color?.

Around the particular drugs that we might want to combine with, well I had to clear, if I do that and start reveling the pathways that we've identified and I really can’t do that yet until we get intellectual property protection and start preparing these for conferences as well as publications.

All I can say is, yes, it points to drugs that we might want to combine with, but at this point, I really shouldn’t say which ones. But thing you know the studies that are you're able to look at, for instance, phosphorylation pathways and cascades that tell you which pathways are being activated.

We use RNA-seq to look at all the different pathways that are affected both in cells that are sensitive as well as resistant to the drug. So, we've come a long way in the past couple of months towards these mechanism studies. So, I think that’s most that I could say at this time..

Okay, great. Thanks..

Thank you, Andrew..

And we have a follow-up question or comment coming from the line of Adnan Butt with RBC Capital Markets. Your line is now open..

Thanks. Just thought if I had the chance, I might as well ask on the dual Bromodomain JQ2 inhibitor work.

If any of you've been able to do since you've bought the candidate in?.

So, Adnan, I'm going to direct that to Avanish Vellanki who is here with us today.

Avanish?.

Hi Adnan. Thanks for the question. So, it’s a good question. What we can tell you at this point is that we have made progress and we have now identified select structures to keep moving forward with this hit stage discovery stage effort.

And, of course, we have to fully characterized these structures for the targets of interest as well as fully characterize its safety profile. But at this point, we continue to be hopeful that we'll be able to identify a lead preclinical candidate by very late this year..

Yeah. And you'll notice we always try to be relatively conservative on what we say, not to over speak..

Okay. Thanks..

Yeah. Thank you, Adnan..

And at this time, I'm showing no further questions or comments. So, with that said, I would like to turn the conference back over to Dr. Rice for closing remarks..

All right. Well, thanks for joining us today. We thank you all for your support and we take necessary steps to reinitiate patient dosing and the 253 clinical trial at the current and new sites.

I would also like to give a special thank you to our employees for their dedication to a high quality and safe clinical drug product in the best interest of patients.

We remain confident in the potential of our lien therapeutic as an important option for patients with acute myeloid leukemia and other hematologic malignancies and we look forward to reporting on our progress, on this program, and our emerging pipeline.

Finally, I'd like to express my deepest gratitude to the patients on our trial, the clinicians that are involved, the CRLs, as well as all, of you listening today for your continued patience and support during this trailing period. Please note our recent webcast and presentations can be found on our website at www.aptose.com.

Thank you again, and have a great evening..

Ladies and gentlemen, thank you for participating in today’s conference. This concludes the program you may now disconnect..