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

Arshad Haider - RBC Capital Markets John Newman - Canaccord Genuity.

Good afternoon. My name is Catherine and I’ll be your conference operator today. I would like to welcome everyone to the Aptose Biosciences Conference Call for the Second Quarter Ended in June 30, 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 call may be recorded. I would like to introduce Ms. Karen Bergman. Please go ahead..

Thank you, Catherine. Good afternoon and welcome to the Aptose Biosciences conference call to discuss financial and operational results for the second quarter ended June 30, 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 & Chief Executive Officer; Mr. Gregory Chow, Senior Vice President & Chief Financial Officer; and Mr. Avanish Vellanki, Senior Vice President & 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 date 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 & CEO of Aptose Biosciences. Dr.

Rice?.

Thank you, Karen. I’d like to welcome everyone to our call for the second quarter ended June 30, 2016. During the quarter, we continued to make notable progress with APTO-253 or 253 and with our entire pipeline.

Today we’ll update you on these developments, our expectations for taking 253 back to the clinic and on our newest pipeline addition CG’806, which has already generated considerable excitement at a relatively early stage of development. Following we will review our quarterly financials and then open the call to your questions. But first APTO-253.

For those of you who may be new to Aptose, APTO-253 or again 253 as I will call it our lead compound is a first in class inducer of the Kruppel-Like Factor 4 or KLF4 tumor suppressor gene.

As the only clinical stage compound targeted for patients having cancers with suppressed KLF4 levels and of note suppressed KLF4 levels have been reported in the scientific literature as a key event in the transformation of normal bone marrow cells to AML and high risk myelodysplastic syndromes or MDS cells.

Recent mechanistic studies by our team have revealed more about the mechanism of 253 and its ability to inhibit the expression of the c-Myc oncogene which is a major driver of cancer cell proliferation.

253 has demonstrated us a favorable safety profile with no evidence of bone marrow suppression which not only differentiates our candidates from other AML therapies but also underscores the importance of its clinical development.

Our Phase 1b trial of 253 is temporarily suspended late last year because of the report of an operational difficulty with an IV infusion pump at the clinical site.

During dosing of the patient with the 100 mgs per meter square dose the clinical site experienced an infusion pump stoppage caused by backload pressure as a result of clogging of the inline filter used during the infusion.

As you’re likely aware, our team has been diligent in creating the new formulation methodologies for 253 in order to enhance its solubility and stability properties and to meet FDA’s criteria so that we may have the hold lifted and subsequently be allowed to reinitiate the clinical trial.

As we mentioned in our last call, we have been very disciplined in our approach to getting 253 back into the clinic.

A significant amount of high quality work has gone into this process, which had included identifying the root cause of the clogging issue and actively evaluating multiple formulation and production methodologies in order to select the best approach to optimizing the delivery of the product decisions.

It’s difficult to capture all of the strides we have made to get to this point. But since our last quarterly call, we’ve selected the new formulation for 253 and we’ve been performing extensive studies with it. I’d like to highlight a few of the steps that we’ve taken.

One, the identification of a chemistry based cause for the filter clogging that was observed with the prior drug product. Two, selection of an appropriate solid state form of 253 to use in future clinical supplies may form other than the HCL salt that can be formulated into a safe soluble and stable drug product.

Three, manufacture under GMP conditions of the drug substance representing the appropriate solid state form of 253. Four, evaluation of many combinations of excipients or co-solvents and many methodologies to identify an appropriate formulation for a new drug product.

And five, performing marked or simulated infusion studies with the new formulation at multiple CROs to test various technical parameters and ensure that filter clogging does not occur, as well as conducting extensive physiochemical and biochemical analyses to demonstrate the properties of the new drug product meets our standards and those of the agency.

We are hopeful that the FDA lifts the clinical hold and subsequently allows us to reinitiate patient dosing and we look forward to reporting back to you. It is our expectation to be back in the clinic during the fourth quarter of this year.

Finally, it’s important to note that formulation enhancement studies will continue, why? Because these efforts will make certain that we give 253 every opportunity to succeed and pick out new formulations to the extent the lifetime the intellectual property around the molecule.

We still have risks until the FDA lifts the hold and allows us to reenter the clinic, but we’re taking every step imaginable to reduce the risk, to remain disciplined, to promote speed not hate to prevent future missteps and to draw our 253 back into AML patients for we believe the drug has the best chance to demonstrate efficacy.

Well while we have been deeply focused on 253 formulation work members of our clinical team have been very active in expanding the number of clinical sites that will be prepared to initiate dosing. Soon after 253 reenters the clinic assuming the FDA allows us to do so, we should have up to 15 clinical sites on board at that time.

As you may recall the Phase 1b study was originally designed for approximately 15 patients to be enrolled in each of two arms of the dose escalation phase of the study. RMG would include patients with acute leukemia, including acute myeloid leukemia or AML and high risk myelodysplastic syndromes or MDS.

RMG would include patients with lymphoma, hodgkins and non-hodgkins lymphoma and the multiple myeloma. Followed by enrollment of an additional 15 patients in each of the two separate disease specific expansion cohorts for a total estimated enrollment of 60 patients.

Aptose now has modified the clinical trial design for the Phase 1b study, pending approval from the FDA. Under the proposed modifications we will focus on patients with AML and MDS. RMG of the dose escalation Phase 1b study will be discontinued.

RMA of the study focused on patients with acute leukemia in particular AML and myelodysplastic syndrome or MDS and that remains unchanged RMA remains unchanged. The rationale underlying this modification is to focus all resources on the patient population most likely to benefit from 253.

Indeed the study of design to assist the safety, tolerability and Pharmacodynamics and pharmacokinetic responses as well as the efficacy of 253 as a single agent. From the date of clinical trial restarts we would estimate that the efficacy read out would take approximately six to 12 months.

Finally, I want to remind you of several other highlights, as Mr. Avanish Vellanki, our Chief Business Officer will describe we have also been busy profiling and advancing our CG’806 kinase inhibitor program to draw this very unique milestone towards the clinic.

Plus we have submitted three abstracts to the 2016 ASH Conference, two are related to 253 and the third is related to our early preclinical program. I’d now like to turn the call over to Avanish who will provide an update on CG’806 and the dual Bromodomain JAK2 inhibitor program.

Avanish?.

Thank you, Bill and good afternoon everyone. This is the first earnings call post announcing the transaction with CrystalGenomics for CG’806 the multi-kinase BTK/FLT3 inhibitor. So I will review first why this molecule was so compelling to us as well as the top-line deal terms.

I will also comment briefly on the status of our early preclinical program which is focused on the development of an inhibitor of BRD4 a key oncogenic member of the BET family of proteins and JAK2. First, CG’806.

Recall that Aptose affected a definitive agreement with CrystalGenomics in June of this year under the option structure of the agreement Aptose will be responsible for a preclinical development and upon potential exercise of the option prior to submitting an IND application with the FDA Aptose will assume all development and commercialization rights outside of Korea and China.

What intrigued us about this program was the in vivo data from CrystalGenomics and studies conducted by Aptose had U.S.

CLO partners confirmed two important things about the program, one, CG’806 can rapidly eliminate tumors not just inhibit tumor growth in multiple heme cancer mouse models without any safety issues and two, it can do so at various doses.

We believe that therapeutic window to be quite broad and in fact we have not yet identified a maximum tolerated dose or MTD in hemogram studies.

As the multi-kinase inhibitor CG’806 does affect other targets that could be contributing to its potency, in fact in AML cell lines the cell killing capacity of CG’806 is better than the published data from other FLT3 inhibitors. However, the impact of CG’806 on these other targets thus far has not led to any observable toxicity in animals.

The rationale beyond BTK and FLT3 ITD inhibition in AML has been documented in the literature. And as far as we know, we have the only program to inhibit both of these key oncogenic targets. As a non-covalent inhibitor CG’806 does not require the S16 41 residue of BTK that the other covalent BTK inhibitors need in order to bind the pocket.

And hence when S16 is muted CG’806 retains potency. In fact, the IC50 for CG’806 against the C41S BTK mutant is approximately two to three nanomolar.

In the triton landscape of CLO and mantle cell lymphoma, we would expect that more privileged even with ibrutinib or potentially acalabrutinib will lead to increasing patients with the C4Ais mutation potentially making those patients ineligible for other covalent BTK inhibitors in development.

Therefore, our initial analysis has revealed several patient populations that could hold promise for CG’806. These include, with FLT3 ITD positive AML, relapse refractory CLO and mantle cell lymphoma, and finally patients with T-cell ALL or acute lymphoblastic leukemia resistant to Imatinib or Glivec that possess the T315I mutation.

With regards to that latter opportunity in ALL in vitro studies have revealed that CG’806 could be one of the most potent agents in development against the ABL kinase with the T315I mutation, and as some of you are aware patients with ABL T315I do not respond well to the existing landscape of dual BCR ABL, SRC inhibitors.

We’re just getting underway with all the studies for CG’806 and we expect have additional insights into other opportunities as we move along. Aptose anticipates a filing of the IND for CG’806 in the middle of 2017 with the Phase 1 trial to start surely thereafter.

The full agreement for the transaction with CrystalGenomics has been filed with the SEC and a brief summary of the key financial terms are as follows. Aptose made a $1 million payment, U.S. dollars upfront as part of the option grant fee, if the option is exercised prior to IND submission Aptose will make a $2 million payment in either cash or stock.

Total payments through commercial approval for the first indication, totaled $63 million. Commercial-based milestones along with approvals and other indications brings the total deal value to $303 million. CrystalGenomics will earn a 4% royalty on sales in Aptose’s territories.

Secondly, let me turn to our early pre-clinical program, the dual Bromodomain 4 or BRD4 and JAK2 inhibitor. As a reminder, Aptose executed an agreement in late-2015 with Moffitt Cancer Center brining some intellectual property around duel inhibitors of the Bromodomain family members and other kinases.

Aptose and our partners at Laxai Avanti Life Sciences or LALS have moved that program forward, this program is another first in class program for oncology that attempts to move away from the pan-Bromodomain inhibitors in the landscape and coupled with targeting JAK2 selectively over JAK1 and JAK3.

We hope to present data on various of these novel structures that we’ve identified in an abstract at the upcoming American Society Hematology or ASH Conference in December. Both Aptose and Laxai are continuing to optimize the family of compounds in the hope of selecting a lead candidate by late this year.

We anticipate the synergies documented between BRD4 and JAK2 will hold opportunity across a range of blood cancers and neoplasms. With that, let me turn it over to Gregory Chow to review the financials from the quarter..

Thank you, Avanish and good afternoon everyone. At June 30, 2016 we had $12.6 million in cash and cash equivalents compared to $15 million at March 31, 2016.

During the quarter, we utilized approximately 4.6 million of cash in our operating activities and raised net proceeds of 2.2 million through the issuance of 641,734 shares via the Company’s at the market program. We had no revenues during the quarter.

Research and development expenses were 3.3 million for the quarter compared to 1.3 million for the quarter ended June 30, 2015. This increase was due to cost associated with the Laxai market collaboration with Avanti’s discussed earlier.

Increased research and clinical outpatient headcount increased formulation and manufacturing costs associated with 253 and the root cause analyses and finally the option fee payment of 1.3 million Canadian to CrystalGenomics or $1 million U.S. dollars.

General and administrative expenses for the quarter were 2.3 million versus 2.5 million for the quarter ended June 30, 2015. This slight decrease compared to the quarter ended June 30, 2015 was primarily due to lower legal and patent costs as well as lower regulatory and filing fees related to transactions completed in the prior year.

For the reasons mentioned above, our net loss for the quarter increased to 5.6 million or $0.46 per share compared to 2.4 million or $0.28 per share for the quarter ended June 30, 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. Operator, if you could please introduce the first question..

Thank you. [Operator Instructions] And our first question comes from Adnan Butt with RBC Capital Markets. Your line is open..

Yes, good afternoon. This is Arshad Haider on for Adnan.

In terms of 806 what type of IND enabling work still needs to be completed before Phase 1 can be underway?.

Hi this is Bill Rice. I will start on the 806 and then I may ask Avanish to jump in also. So we just recently brought in the molecule we’ve evaluated in some of the key studies that helped us to make the decision to bring the molecule and purchase of sets and subs understanding the core kinase panel as well as stressing into Bromodomain.

So we’ve both done thus far you would profile the molecule accurately, but now we have to begin the full GLP studies, they have been enabling GLP studies, as to the toxicity studies and the PK studies.

We expect those studies would take approximately six to eight months to complete and so right now we’re just beginning to enter into the preclinical studies and as soon as we have sufficient material to begin GLP material to begin those studies we will do so.

But right now we’re on track to submit the IND in mid of 2016, Avanish did you want to add anything to that?.

No, I think that covers it nothing for me to add there..

Thank you. [Operator Instructions] And our next question comes from John Newman with Canaccord. Your line is open. Please check your mute button. Mr. Newman, please check your mute button..

Hi. Thanks for taking my question. So Bill I just wondered if you could talk a little bit. Hello.

Can you hear me?.

Yes..

Hi guys. So I just, I wondered if you could talk a little bit I apologize if question has already been asked. But if you could talk a bit about your expectations regarding whether or not you would have to restart the dose titration for 253 where you left off, or whether you would have to start from the beginning? Thanks..

Well, hi John thanks for the call. Well, of course ultimately that would be FDA’s call. Our expectation is that we will be able to start where we left off at the 100 mgs per meter square they might ask us to step down one base.

But my perspective on this would be now very often we get asked should we, would we need to start over the 20 mgs per meter square and go up to 20, 40, 66 and 100. Argument to that would be -- it would be unethical because we already know the exposure levels received by the patients at those dose levels for the expected exposure levels.

Those levels were not expected though to be efficacious and they were not. So it would be unethical to put the patient back on those dose levels in our perspective provided the molecule, the new formulation gives us this equivalent exposure in PK studies that we present to the FDA.

And so we hope, we expect that we will be to start at or near, the 100 mgs per meter square and go from there but ultimately that is the FDA’s decision..

Thank you. I’m currently showing no further question. I’d now like to turn the call back over to Dr. Rice for any closing remarks..

Well, thank you everyone for taking the time to join us today. We appreciate your support to name it and especially through work to get 253 trials restarted and drive CG’806 towards the clinic. We look forward to reporting further progress on both 253 clinical development and our pipeline strategy and programs.

Please note our recent webcast and presentations can be found on our Web site at www.aptose.com. Thank you again, and have a wonderful evening..

Thank you, ladies and gentlemen. That concludes today’s conference. You may all disconnect and everyone have a great day..