6-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 6-K

REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16 OR 15d-16
UNDER THE SECURITIES EXCHANGE ACT OF 1934

For January 1, 2006 – March 31, 2006

Commission File Number: 0-29338

CARDIOME PHARMA CORP.
(Translation of registrant's name into English)

6190 Agronomy Road, 6th Floor
Vancouver, British Columbia, V6T 1Z3, Canada
(Address of principal executive offices)

Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.

¨ Form 20-F   x Form 40-F

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): ¨

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): ¨

Indicate by check mark whether by furnishing the information contained in this Form, the registrant is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.

Yes ¨ No x

If "Yes" is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82- _________

CARDIOME PHARMA CORP.
(formerly NORTRAN PHARMACEUTICALS INC.)

TABLE OF CONTENTS

Exhibits

99.1	Press Release – March 8, 2006 (Cardiome Announces Promotion of Doug Janzen to President and Chief Business Officer)
99.2	Material Change Report - Cardiome Announces Promotion of Doug Janzen to President and Chief Business Officer
99.3	Annual audited financial statement for the year ended December 31, 2005
99.4	Management Discussion and Analysis of Financial Condition and Results of Operations for the year ended December 31, 2005
99.5	Certificate of Annual Filings – CFO
99.6	Certificate of Annual Filings - CEO

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	Cardiome Pharma Corp.
	(Registrant)
Date: March 31, 2006	By:	/s/ Christina Yip
		Christina Yip
		Vice President, Finance and Admin

EX-99.1

	6190 Agronomy Rd. 6th Floor Vancouver, BC V6T 1Z3 CANADA		Tel: 604-677-6905 Fax: 604-677-6915 Website: www.cardiome.com

FOR IMMEDIATE RELEASE      NASDAQ: CRME      TSX: COM

CARDIOME ANNOUNCES PROMOTION OF DOUG JANZEN
TO PRESIDENT AND CHIEF BUSINESS OFFICER

Vancouver, Canada, March 8, 2006 -- Cardiome Pharma Corp. (NASDAQ: CRME / TSX: COM) today announced the promotion of Doug Janzen to the position of President and Chief Business Officer. Mr. Janzen for three years prior to this appointment has been Cardiome’s Chief Financial Officer. Bob Rieder will continue in his role as Chief Executive Officer and has been appointed Vice-Chairman of the board of directors. Dr. Mark Rogers will continue as Chairman.

In this new role, Mr. Janzen will lead management of all of Cardiome’s business activities, including capital markets, commercial development, partnering, licensing and strategic transactions. Mr. Janzen will also temporarily retain his current responsibilities as Chief Financial Officer. Mr. Rieder will continue to lead the company’s strategic planning and direction.

“We are very pleased to see Doug take on an expanded role within Cardiome as we continue our evolution and growth.” stated Mr. Rieder. “Doug’s deep background in the capital markets coupled with his strong deal-making capabilities make him the ideal executive to capitalize on the strategic opportunities in front of Cardiome at this time.”

Mr. Janzen joined Cardiome in January of 2003, and has extensive experience in corporate banking and financing within the biotech sector. Prior to joining Cardiome, Mr. Janzen served as Managing Director, Health Sciences and Partner at Sprott Securities, Inc., a Toronto-based investment bank.

About Cardiome Pharma Corp.
Cardiome Pharma Corp. is a product-focused cardiovascular drug development company with two clinical drug programs focused on atrial arrhythmia (intravenous and oral dosing), and a pre-clinical program directed at congestive heart failure.

RSD1235 IV is the intravenous formulation of an investigational drug being evaluated for the acute treatment of recent-onset atrial fibrillation (AF). Positive top-line results from two Phase 3 trials for RSD1235 IV, called ACT 1 and ACT 3, were released in December 2004 and September 2005. The ACT 2 study, evaluating patients with post-operative atrial arrhythmia, is ongoing. RSD1235 is also being investigated as a chronic-use oral drug for the maintenance of normal heart rhythm following termination of atrial fibrillation.

Cardiome recently completed the acquisition of Artesian Therapeutics Inc., a privately held U.S. biopharmaceutical company developing bi-functional small-molecule drugs for the treatment of cardiovascular disease.

Cardiome is traded on the NASDAQ National Market (CRME) and the Toronto Stock Exchange (COM). Further information about Cardiome can be found at www.cardiome.com.

For Further Information:
Don Graham	Peter K. Hofman
Director of Corporate Communication	Director of Investor Relations
(604) 676-6963 or Toll Free: 1-800-330-9928	(604) 676-6993 or Toll Free: 1-800-330-9928
Email: dgraham@cardiome.com	Email: phofman@cardiome.com

Forward-Looking Statement Disclaimer
Statements contained in this news release relating to future results, events and expectation are forward-looking statements within the meaning of the United States Private Securities Litigation Reform Act of 1995. These forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievement of the company, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such statements. Such factors include, among others, those described in the Company's annual report on Form 40-F. The Toronto Stock Exchange has not reviewed and does not accept responsibility for the adequacy or accuracy of this release.

EX-99.2

FORM 53-901F

SECURITIES ACT

MATERIAL CHANGE REPORT UNDER
SECTION 85(1) OF THE SECURITIES ACT (BRITISH COLUMBIA)
AND EQUIVALENT LEGISLATION OF OTHER JURISDICTIONS

Item 1.	REPORTING ISSUER
	Cardiome Pharma Corp.
	6190 Agronomy Road, 6th Floor
	Vancouver, BC V6T 1Z3
Item 2.	DATE OF MATERIAL CHANGE
	March 8, 2006
Item 3.	PRESS RELEASE
	March 8, 2006 - Vancouver, British Columbia
Item 4.	SUMMARY OF MATERIAL CHANGE
	Cardiome Pharma Corp. announces promotion of Doug Janzen to President and Chief Business Officer.
Item 5.	FULL DESCRIPTION OF MATERIAL CHANGE
	See attached press release.
Item 6.	RELIANCE ON SECTION 85(2) OF THE SECURITIES ACT (BRITISH COLUMBIA) AND EQUIVALENT LEGISLATION OF OTHER JURISDICTIONS
	Not Applicable.
Item 7.	OMITTED INFORMATION
	Not Applicable.
Item 8.	SENIOR OFFICER
	Name:                      Christina Yip
	Title:                        Vice President, Finance and Administration
	Phone No.:              604-677-6905
Item 9.	STATEMENT OF SENIOR OFFICER
	The foregoing accurately discloses the material change referred to herein.

Dated at Vancouver, British Columbia, this 8th day of March, 2006.

CARDIOME PHARMA CORP.
Per:	“Christina Yip”
	Christina Yip,
	Vice President, Finance and Administration

IT IS AN OFFENCE FOR A PERSON TO MAKE A STATEMENT IN A DOCUMENT REQUIRED TO BE FILED OR FURNISHED UNDER THE ACT OR THIS REGULATION THAT, AT THE TIME AND IN THE LIGHT OF THE CIRCUMSTANCES UNDER WHICH IT IS MADE, IS A MISREPRESENTATION.

EX-99.3

Consolidated Financial Statements

Cardiome Pharma Corp.
(Expressed in Canadian dollars)
December 31, 2005

REPORT OF INDEPENDENT AUDITOR

To the Shareholders of
Cardiome Pharma Corp.

We have audited the consolidated balance sheets of Cardiome Pharma Corp. as at December 31, 2005 and December 31, 2004 and the consolidated statements of loss and deficit and cash flows for the years ended December 31, 2005 and 2004 and for the thirteen months ended December 31, 2003. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with Canadian generally accepted auditing standards and the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform an audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Company’s internal control over financial reporting. An audit includes 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 financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, these consolidated financial statements present fairly, in all material respects, the financial position of the Company as at December 31, 2005 and December 31, 2004 and the results of its operations and its cash flows for the years ended December 31, 2005 and 2004 and for the thirteen months ended December 31, 2003, in conformity with Canadian generally accepted accounting principles.

Vancouver, Canada,
February 10, 2006 (except as to Note 19
which is as of March 13, 2006).	Chartered Accountants

Cardiome Pharma Corp.
Continued under the laws of Canada

CONSOLIDATED BALANCE SHEETS

(expressed in Canadian dollars)

	December 31,		December 31,
	2005		2004
	$		$
ASSETS
Current
Cash and cash equivalents [note 5]	9,304,620		7,319,853
Short-term investments [notes 5 and 9]	64,651,005		17,047,358
Amounts receivable [note 4]	7,121,712		14,289,307
Prepaid expenses	1,549,590		1,131,591
Total current assets	82,626,927		39,788,109
Property and equipment [note 6]	4,357,123		2,687,290
Intangible assets [note 7]	2,815,189		25,851,072
	89,799,239		68,326,471
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current
Accounts payable and accrued liabilities [note 14]	8,652,197		5,833,974
Deferred revenue [note 12]	4,190,011		4,868,817
Future income tax liability	-		2,164,000
Current portion of capital lease obligations	-		7,061
Current portion of deferred leasehold inducement [note 8]	170,018		95,108
Total current liabilities	13,012,226		12,968,960
Deferred revenue [note 12]	-		4,015,106
Deferred leasehold inducement [note 8]	1,291,232		859,984
Future income tax liability [note 13]	289,000		4,918,000
Total liabilities	14,592,458		22,762,050
Commitments and contingencies [notes 11 and 15]
Shareholders’ equity
Share capital [note 10[b]]	201,185,518		131,427,488
Special Warrants [note10[c]]	8,440,075		-
Contributed surplus	11,014,489		6,195,605
Deficit	(145,433,301	)	(92,058,672	)
Total shareholders’ equity	75,206,781		45,564,421
	89,799,239		68,326,471

See accompanying notes

On behalf of the Board:

/s/ Mark C. Rogers	/s/ Peter Roberts
Director	Director

Cardiome Pharma Corp.

CONSOLIDATED STATEMENTS OF LOSS AND DEFICIT

(expressed in Canadian dollars)

					Thirteen
	Year ended		Year ended		months ended
	December 31,		December 31,		December 31,
	2005		2004		2003
	$		$		$
REVENUE
Licensing fees [note 12]	4,693,912		12,563,649		1,350,366
Research collaborative fees [note 12]	11,425,966		13,839,595		4,696,827
	16,119,878		26,403,244		6,047,193
EXPENSES
Research and development	41,470,234		38,666,892		16,928,018
General and administration	9,258,712		7,296,911		5,631,050
Amortization	2,700,729		5,062,158		6,028,230
Write-down of intangible assets [note 7]	23,319,638		11,521,176		—
	76,749,313		62,547,137		28,587,298
Loss before the undernoted	(60,629,435	)	(36,143,893	)	(22,540,105	)
OTHER INCOME (EXPENSES)
Interest and other income	1,957,356		679,171		611,075
Foreign exchange gain (losses)	(1,923,550	)	(1,080,321	)	(46,783	)
	33,806		(401,150	)	564,292
Loss before income taxes	(60,595,629	)	(36,545,043	)	(21,975,813	)
Future income tax recovery [note 13]	7,221,000		8,778,000		2,110,000
Net loss for the period	(53,374,629	)	(27,767,043	)	(19,865,813	)
Deficit, beginning of period	(92,058,672	)	(64,291,629	)	(44,425,816	)
Deficit, end of period	(145,433,301	)	(92,058,672	)	(64,291,629	)
Basic and diluted loss per common share [note 10[g]]	(1.09	)	(0.71	)	(0.63	)
Weighted average number of
common shares outstanding [note 10[g]]	49,015,462		39,231,791		31,470,279

See accompanying notes

Cardiome Pharma Corp.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(expressed in Canadian dollars)

					Thirteen
	Year ended		Year ended		months ended
	December 31,		December 31,		December 31,
	2005		2004		2003
	$		$		$
OPERATING ACTIVITIES
Loss for the period	(53,374,629	)	(27,767,043	)	(19,865,813	)
Add items not affecting cash:
Amortization	2,700,729		5,062,158		6,028,230
Stock-based compensation	5,762,236		3,067,802		2,059,053
Deferred leasehold inducement	(143,942	)	(75,288	)	—
Write-off of capital assets	7,057		—		—
Write-down of intangible assets	23,319,638		11,521,176		—
Future income tax recovery	(7,221,000	)	(8,778,000	)	(2,110,000	)
	(28,949,911	)	(16,969,195	)	(13,888,530	)
Changes in non-cash working capital items relating to
operations:
Amounts receivable	7,841,043		(9,928,930	)	(3,847,710	)
Prepaid expenses	(292,183	)	(333,587	)	(726,805	)
Accounts payable and accrued liabilities	2,183,067		1,806,524		948,087
Deferred revenue	(4,693,912	)	(4,313,645	)	11,742,635
Cash used in operating activities	(23,911,896	)	(29,738,833	)	(5,772,323	)
FINANCING ACTIVITIES
Issuance of common shares, net of share issuance costs	68,814,678		11,574,114		31,063,759
Issuance of special warrants	8,864,004		—		—
Repayment of capital lease obligations	(7,061	)	(27,024	)	(27,395	)
Cash provided by financing activities	77,671,621		11,547,090		31,036,364
INVESTING ACTIVITIES
Acquisition of Artesian Therapeutics, Inc. [note 3]	(1,359,888	)	—		—
Purchase of property and equipment	(2,331,497	)	(2,695,034	)	(336,050	)
Leasehold inducements	—		1,030,380		—
Patent costs capitalized	(479,926	)	(359,303	)	(81,457	)
Purchase of short-term investments	(114,352,254	)	(39,690,848	)	(44,725,469	)
Sale of short-term investments	66,748,607		59,425,051		26,255,128
Cash provided by (used in) investing activities	(51,774,958	)	17,710,246		(18,887,848	)
Increase (decrease) in cash and cash equivalents
during the period	1,984,767		(481,497	)	6,376,193
Cash and cash equivalents, beginning of period	7,319,853		7,801,350		1,425,157
Cash and cash equivalents, end of period	9,304,620		7,319,853		7,801,350
Supplemental cash flow information:
Interest paid	21,936		20,788		3,439

See accompanying notes

Cardiome Pharma Corp.

NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS

December 31, 2005 (expressed in Canadian dollars)

1. NATURE OF OPERATIONS

Cardiome Pharma Corp. (the “Company”) was incorporated under the Company Act (British Columbia) on December 12, 1986 and was continued under the laws of Canada on March 8, 2002. The Company is a life sciences company focused on developing proprietary drugs to treat or prevent cardiovascular diseases.

The Company has financed its cash requirements primarily from share issuances, payments from research collaborators and licensing fees. The Company’s ability to realize the carrying value of its assets is dependent on successfully bringing its technologies to market and achieving future profitable operations, the outcome of which cannot be predicted at this time. It may be necessary for the Company to raise additional funds for the continuing development of its technologies.

The Company changed its fiscal year end from November 30 to December 31, effective December 31, 2003. Accordingly, for the 2003 fiscal period, the Company has reported its annual consolidated financial statements for the thirteen month period ended December 31, 2003.

2. SIGNIFICANT ACCOUNTING POLICIES

The Company prepares its accounts in accordance with Canadian generally accepted accounting principles. A reconciliation of amounts presented in accordance with United States generally accepted accounting principles is detailed in note 16. The following is a summary of significant accounting policies used in the preparation of these consolidated financial statements:

Principles of consolidation

These consolidated financial statements include the accounts of Cardiome Pharma Corp. and its wholly-owned subsidiaries, Rhythm-Search Developments Ltd. (incorporated in Canada), Cardiome, Inc. (incorporated in the United States), Artesian Therapeutics, Inc. (incorporated in United States), and Cardiome Research and Development (Barbados), Inc. (incorporated in Barbados). Intercompany accounts and transactions have been eliminated on consolidation.

1

Cardiome Pharma Corp.

NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS

December 31, 2005 (expressed in Canadian dollars)

2. SIGNIFICANT ACCOUNTING POLICIES (cont’d.)

Use of estimates

The preparation of the consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts recorded in the consolidated financial statements. Significant areas requiring the use of estimates relate to the assessment of net recoverable value of technology licenses and patents, accrual of clinical trial expenses, reporting of revenue recognition and stock-based compensation. The reported amounts and note disclosure are determined using management’s best estimates based on assumptions that reflect the most probable set of economic conditions and planned course of action. Actual results could differ from those estimates.

Foreign currency translation

The Company follows the temporal method of accounting for the translation of foreign currency amounts, including those of its integrated foreign subsidiaries, into Canadian dollars. Under this method, monetary assets and liabilities denominated in foreign currencies are translated into Canadian dollars using exchange rates in effect at the balance sheet date. All other assets and liabilities are translated at the exchange rates prevailing at the date the assets were acquired or the liabilities incurred. Revenue and expense items are translated at the monthly average exchange rate during the period. Foreign exchange gains and losses, both realized and unrealized, are included in the determination of the loss for the period.

Cash equivalents

The Company considers all highly liquid investments with an original maturity of 90 days or less to be cash equivalents, which are carried at the lower of amortized cost or fair market value.

Short-term investments

The Company considers all highly liquid financial instruments with an original maturity greater than 90 days and less than one year to be short-term investments. Short-term investments are considered available-for-sale and are carried at the lower of amortized cost and fair market value.

2

Cardiome Pharma Corp.

NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS

December 31, 2005 (expressed in Canadian dollars)

2. SIGNIFICANT ACCOUNTING POLICIES (cont’d.)

Property and Equipment

Property and equipment is recorded at cost less accumulated amortization. Amortization is provided using the straight-line method over the following terms:

Laboratory equipment	5 years
Computer equipment	3 years
Office equipment	5 years
Leasehold improvements	Term of lease
Web-site development costs	3 years

Technology licenses and patent costs

Technology licenses, which include licenses and rights to technologies, are initially recorded at fair value based on consideration paid and amortized on a straight-line basis over the estimated useful life of the underlying technologies of five to ten years.

Patent costs associated with the preparation, filing, and obtaining of patents are capitalized and amortized on a straight-line basis over the estimated useful lives of the patents of ten years.

Management evaluates the recoverability of technology licenses and patents on a quarterly basis based on the expected utilization of the underlying technologies. If the estimated net recoverable value, calculated based on undiscounted estimated future cash flows, is less than the carrying value of the underlying technology, then the carrying value is written down to its fair value, based on the related estimated discounted future cash flows. The amounts shown for technology licenses and patent costs do not necessarily reflect present or future values and the ultimate amount recoverable will be dependent upon the successful development and commercialization of products based on these rights.

Leases

Leases have been classified as either capital or operating leases. Leases which transfer substantially all the benefits and risks incidental to the ownership of assets are accounted for as if there was an acquisition of an asset and incurrence of an obligation at the inception of the lease. All other leases are accounted for as operating leases wherein rental payments are expensed as incurred.

3

Cardiome Pharma Corp.

NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS

December 31, 2005 (expressed in Canadian dollars)

2. SIGNIFICANT ACCOUNTING POLICIES (cont’d.)

Deferred leasehold inducements

Deferred leasehold inducements representing tenant improvement allowances are being amortized on a straight-line basis over the initial term of the lease as a reduction of rent expense.

Government grants

Government grants are recorded as a reduction of the related expenditure when there is reasonable assurance that the Company has complied with all conditions necessary to receive the grants, collectibility is reasonably assured, and the amounts are non-refundable. During the year ended December 31, 2005, the Company recorded government grants of $29,240 [year ended December 31, 2004 - $48,463; thirteen months ended December 31, 2003 - $76,000] as a reduction of research and development expenditures.

Revenue recognition

Research collaborative fees, which are non-refundable, are recorded as revenue as the related research expenses are incurred pursuant to the terms of the agreement and provided collectibility is reasonably assured.

Licensing fees comprise initial fees and milestone payments derived from collaborative licensing arrangements. Non-refundable milestone payments are recognized upon the achievement of the specified milestones when the milestone is substantive in nature, the achievement of the milestone was not reasonably assured at the inception of the agreement, and the Company has no further significant involvement or obligation to perform under the arrangement. Otherwise, non-refundable milestone payments and initial fees are deferred and amortized into revenue on a straight-line basis over the estimated period of the ongoing involvement of the Company.

Research and development costs

Research costs are expensed in the period incurred. Development costs are expensed in the period incurred unless the Company believes a development project meets generally accepted accounting criteria for deferral and amortization. At December 31, 2005 and December 31, 2004, no development costs have been deferred.

4

Cardiome Pharma Corp.

NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS

December 31, 2005 (expressed in Canadian dollars)

2. SIGNIFICANT ACCOUNTING POLICIES (cont’d.)

Stock-based compensation and other stock-based payments

The Company grants stock options to executive officers and directors, employees, consultants and clinical advisory board members pursuant to its stock option plan. The Company uses the fair value method of accounting for all stock-based awards granted, modified or settled during the period.

Future income taxes

The Company accounts for income taxes using the liability method of tax allocation. Future income taxes are recognized for the future income tax consequences attributable to differences between the carrying values of assets and liabilities and their respective income tax bases. Future income tax assets and liabilities are measured using substantively enacted income tax rates expected to apply to taxable income in the years in which temporary differences are expected to be recovered or settled. The effect on future income tax assets and liabilities of a change in rates is included in earnings in the period that includes the enactment date. Future income tax assets are recorded in the financial statements if realization is considered more likely than not.

Loss per common share

Loss per common share is computed by dividing the net loss for the period by the weighted average number of common shares outstanding during the period, excluding contingently issuable common shares. Diluted loss per common share is equivalent to basic loss per share as the outstanding options and warrants are anti-dilutive.

5

Cardiome Pharma Corp.

NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS

December 31, 2005 (expressed in Canadian dollars)

3. ACQUISITION

On October 21, 2005, the Company acquired all of the outstanding shares of Artesian Therapeutics, Inc. (“Artesian”). Artesian is a privately held U.S. biopharmaceutical development stage company focused on research and development. Under the terms of the acquisition, except for the nominal initial payment of US$1,000, payments to Artesian shareholders are contingent upon the achievement of certain predefined clinical milestones. The milestone payments will equal, in the aggregate, US$32 million for each of the first two drug candidates from the Artesian programs that reach NDA approval. The first such milestone is due upon initiation of the clinical development of an Artesian drug candidate. Any milestone payments that become due will be recorded as additional consideration and allocated to the licensed technology. The Company has the option to settle the milestone payments in the form of cash, Special Warrants or combination of cash and Special Warrants. The Special Warrants will be exercisable into the number of common shares of the Company based on the market price of the common shares of the Company as of the date of the achievement of the milestone event. The Company has an obligation to advance the development of at least one drug candidate within two years and subsequently continue its development. Otherwise, the Company will be required to transfer ownership to or license the acquired intellectual property to the former shareholders of Artesian. The acquisition provides the Company with two advanced small molecule discovery programs in the cardiovascular area.

Concurrent with the closing of the acquisition of Artesian, the Company has closed, by way of private placement, a 1,036,098 Special Warrant financing at a price of US$7.24 per Special Warrant. The Special Warrants were issued to major shareholders of Artesian, for proceeds of $8,902,503 (US$7.5 million) (see note 10[c]). The subscription price for the Special Warrants represents a 5% premium over the market price calculated based on a five-day average closing price of the common shares of Cardiome on the NASDAQ Stock Market prior to the execution of the letter of intent of the Company’s acquisition of Artesian in August 2005. The premium over the market price of the Company’s common shares has been recorded as a reduction of the purchase price.

The acquisition has been accounted for using the purchase method of accounting and accordingly the results of operations have been included in the consolidated statement of loss and deficit from October 21, 2005, the date of acquisition.

6

Cardiome Pharma Corp.

NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS

December 31, 2005 (expressed in Canadian dollars)

3. ACQUISITION (cont’d.)

Artesian was a development stage company with nominal assets and operations at the date of acquisition and accordingly the majority of the purchase price has been allocated to the acquired intangible assets. The purchase price has been allocated to the identifiable net assets and liabilities as follows:

	$
Net Assets acquired:
Cash	15,470
Other assets	149,164
License technology	1,939,594
Total assets acquired	2,104,228
Less liabilities:
Accounts payable and accrued liabilities	(1,004,964	)
Future income tax liability	(517,000	)
Net assets acquired	582,264
Consideration given:
Cash paid at closing	1,188
Assumption of financial commitments	534,127
Acquisition costs	470,878
Total consideration given	1,006,193
Less: premium received on subscription of Special Warrants	(423,929	)
Net consideration	582,264

The fair value of the financial commitments assumed, represented by lease termination costs, was determined using a current interest rate to arrive at the expected present value as of the date of acquisition. The financial commitments also include severance and related costs arising from the acquisition. For the period from October 22, 2005 to December 31, 2005, approximately $104,000 of these amounts have been paid.

The license technology represents in-process research and development which the Company plans to further develop. The technology is being amortized on a straight-line basis over five years.

7

Cardiome Pharma Corp.

NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS

December 31, 2005 (expressed in Canadian dollars)

4. FINANCIAL INSTRUMENTS AND RISK

For certain of the Company’s financial instruments, including cash equivalents, short-term investments, amounts receivable, and accounts payable, the carrying amounts approximate fair value due to their short-term nature.

Financial risk is the risk to the Company’s results of operations that arises from fluctuations in interest rates and foreign exchange rates and the degree of volatility of these rates. Interest rate risk arises as the Company’s investments bear fixed interest rates. Foreign exchange risk arises as the Company’s investments which finance operations are substantially denominated in Canadian dollars and a significant portion of the Company’s expenses are denominated in United States dollars and Euros.

As at December 31, 2005, the Company had foreign amounts receivable of $5,621,475 (US$4,833,598) [December 31, 2004 - $13,847,269 (US$11,520,191)] and accounts payable of $4,289,343 (US$3,688,171) [December 31, 2004 - $3,485,327 (US$2,899,606)].

As of December 31, 2005, included in amounts receivable of $7,121,712 was an amount of $5,406,850 (US$4,649,054) due from one collaborator [December 21, 2004 - $13,847,269 (US$11,520,191)].

5. CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS

Cash equivalents include approximately $3,529,000 [December 31, 2004 - $6,207,000] of commercial paper, bankers’ acceptances and term deposits with an average interest rate of 3.02% at December 31, 2005 [December 31, 2004 - 2.17%] including $Nil [December 31, 2004 - $2,687,365 (US$2,235,745)] denominated in U.S. dollars.

Short-term investments mainly comprise treasury bills, commercial papers, bankers’ acceptances and money market funds with an average interest rate of 3.76% at December 31, 2005 [December 31, 2004 - 2.28%] and maturities to October 2006 [December 31, 2004 – April 2005] including $57,378,024 (US$49,336,220) [December 31, 2004 - $5,498,283 (US$4,574,279)] denominated in U.S. dollars.

At December 31, 2005, the fair value of the short-term investments was approximately $64,651,000 [December 31, 2004 - $17,047,000], based on quoted market prices.

8

Cardiome Pharma Corp.

NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS

December 31, 2005 (expressed in Canadian dollars)

6. PROPERTY AND EQUIPMENT

		Accumulated	Net book
	Cost	amortization	value
	$	$	$
December 31, 2005
Laboratory equipment	1,913,231	1,076,613	836,618
Computer equipment	1,258,920	829,436	429,484
Office equipment	630,275	243,891	386,384
Leasehold improvements	3,102,299	397,662	2,704,637
Web-site development costs	13,640	13,640	—
	6,918,365	2,561,242	4,357,123
December 31, 2004
Laboratory equipment	970,027	622,519	347,508
Computer equipment	744,843	413,344	331,499
Office equipment	372,721	135,467	237,254
Laboratory equipment under capital lease	77,418	70,966	6,452
Leasehold improvements	1,960,037	195,460	1,764,577
Web-site development costs	13,640	13,640	—
	4,138,686	1,451,396	2,687,290

Amortization expense for the year ended December 31, 2005 amounted to $710,523 [2004 - $497,735].

9

Cardiome Pharma Corp.

NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS

December 31, 2005 (expressed in Canadian dollars)

7. INTANGIBLE ASSETS

		Accumulated	Net book
	Cost	amortization	Value
	$	$	$
December 31, 2005
Technology licenses	1,955,803	166,687	1,789,116
Patents	1,833,428	807,355	1,026,073
Total	3,789,231	974,042	2,815,189
December 31, 2004
Technology licenses	38,300,346	13,263,862	25,036,484
Patents	1,514,650	700,062	814,588
Total	39,814,997	13,963,924	25,851,072

During the year ended December 31, 2005, the Company discontinued its efforts to pursue the Oxypurinol program for the treatment of congestive heart failure (“CHF”) and wrote off $23,319,638 of the intangible assets ($14,259,638 net of future tax recovery) related to the Oxypurinol CHF project. The net write-down includes the write off of intangible assets, which arose from the acquisition of Cardiome, Inc. (formerly Paralex, Inc.) by issuance of our common shares in March 2002 of $22,872,071 and a write-down of the carrying value of patents by $447,562.

During the year ended December 31, 2004, the Company discontinued its efforts to pursue the allo-intolerant gout indication for Oxypurinol and wrote down $11,521,176 of the intangible assets ($7,054,176 net of future tax recovery) related to the Oxypurinol gout project. The net write-down includes the write-down of the net book value of intangible assets, which arose from the Company’s acquisition of Cardiome, Inc. by issuance of common shares of the Company in March 2002 of $11,266,623 and a write-down of the carrying value of a license (cash payment in May 2002) by $254,553.

Amortization expense for the year ended December 31, 2005 amounted to $1,990,206 [2004 - $4,564,423].

10

Cardiome Pharma Corp.

NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS

December 31, 2005 (expressed in Canadian dollars)

8. DEFERRED LEASEHOLD INDUCEMENT

Pursuant to a lease agreement, the Company received a cash tenant improvement allowance amounting to $1,030,380 from the landlord for leasehold improvements during the year ended December 31, 2004. $792,600 of the tenant improvement allowance (“Original Allowance”) is being amortized on a straight-line basis over the initial term of the lease. The remaining $237,780 (the “Repayable Allowance”) represents a repayable allowance, collateralized with a letter of credit [note 9], which is being repaid over 10 years with interest at 10% per annum at approximately $38,000 per annum. The Company is obligated to refund the unpaid portion of the Additional Allowance upon early termination of the lease.

During the year ended December 31, 2005, the Company signed an amendment to its lease agreement to expand its facilities. Pursuant to this amendment agreement, the Company is entitled to an additional cash tenant improvement allowance of $650,100 for leasehold improvements in the expansion space (“Additional Allowance”). The Additional Allowance is being amortized on a straight-line basis over the remaining initial term of the lease.

9. CREDIT FACILITY

At December 31, 2005, the Company had available a corporate credit card facility. Cashable certificates totalling $387,780 [December 31, 2004 - $387,780] included in short-term investments are pledged as collateral for the corporate credit card facility and the Additional Allowance [note 8].

11

Cardiome Pharma Corp.

NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS

December 31, 2005 (expressed in Canadian dollars)

10. SHARE CAPITAL

[a] Authorized

The authorized share capital of the Company consists of an unlimited number of common shares without par value and an unlimited number of preferred shares without par value issuable in series, of which none are currently issued and outstanding.

[b] Issued and Outstanding

	Number of
Common shares	shares	Amount
	#	$
Balance, November 30, 2002	28,308,098	88,582,098
Share issuance cost related to a prior share offering	—	(34,100	)
Issued upon conversion of special warrants [iv]	3,810,000	7,133,752
Issued for cash upon public offering and exercise of over-
allotment option [iii]	4,381,500	21,389,367
Issued for cash upon exercise of options	196,026	600,569
Issued for cash upon exercise of warrants	594,484	1,974,171
Issued pursuant to exercise of warrants on cashless
basis	25,601	—
Balance, December 31, 2003	37,315,709	119,645,857
Issued for cash upon equity investment from Astellas [ii]	646,712	4,080,753
Issued for cash upon exercise of options	534,925	1,809,645
Issued for cash upon exercise of warrants	1,991,010	5,683,717
Issued pursuant to exercise of warrants on cashless basis	104,478	—
Reallocation of contributed surplus arising from stock-
based compensation related to the exercise of options	—	207,516
Balance, December 31, 2004	40,592,834	131,427,488
Issued for cash upon public offering and exercise of over-
allotment option [i]	9,775,000	64,526,656
Issued for cash upon exercise of options	1,167,091	4,288,022
Issued pursuant to exercise of warrants on cashless basis	21,250	—
Reallocation of contributed surplus arising from stock-
based compensation related to the exercise of options	—	943,352
Balance, December 31, 2005	51,556,175	201,185,518

12

Cardiome Pharma Corp.

NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS

December 31, 2005 (expressed in Canadian dollars)

10. SHARE CAPITAL (cont’d.)

[i]	On March 23, 2005, the Company closed a public offering of common shares pursuant to which 8,500,000 common shares were issued at a price of $7.21 (US$6.00) per share, for gross proceeds of $61,285,000 (US$51,000,000). In addition, the Company granted the underwriters an over-allotment option to purchase 1,275,000 common shares at the offering price, exercisable during the period ending 30 days from March 18, 2005. On March 30, 2005, the over-allotment option was exercised in full and the Company issued 1,275,000 common shares at a price of $7.21 (US$6.00) per share for gross proceeds of $9,192,750. In connection with the public offering, including the exercise of the over-allotment option, the Company paid a cash commission of $4,581,054 and incurred total legal and professional fees of $1,370,040.
[ii]	On October 28, 2004, the Company issued 646,712 common shares to Astellas Pharma US, Inc. (“Astellas”, formerly Fujisawa Healthcare, Inc.), following the exercise of an option by the Company requiring Astellas to acquire US$4 million of its common shares at a 25% premium to the average closing price of its common shares on the TSX over a 30-calendar day period, for a total deemed price per share of Cdn$7.89.
	The total proceeds received have been allocated to share capital based on the quoted market price of the Company’s common shares on the TSX on the option exercise date and the balance has been recorded as deferred licensing revenue [note 12 [a]].
[iii]	On September 23, 2003, the Company closed a public offering of common shares pursuant to which the Company issued 3,810,000 common shares at a price of $5.25 per common share, resulting in gross proceeds of $20,002,500. In addition, the Company granted the underwriters an over-allotment option to purchase up to 571,500 common shares at $5.25 per share, exercisable not later than 30 days after the closing of the offering. On October 23, 2003, the full over-allotment option was exercised and the Company issued 571,500 common shares at a price of $5.25 per share for gross proceeds of $3,000,375. In connection with the public offering, including the exercise of the over- allotment option, the Company paid a cash commission of $1,265,158 and incurred total legal and professional fees of $348,350.

13

Cardiome Pharma Corp.

NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS

December 31, 2005 (expressed in Canadian dollars)

10. SHARE CAPITAL (cont’d.)

[iv] On April 10, 2003, the Company completed a private placement of 3,810,000 special warrants for total gross proceeds of $8,010,600, of which 3,762,000 were issued at a price of $2.10 per special warrant and 48,000 were issued at a price of $2.30 per special warrant. Each special warrant entitled the holder to acquire, upon exercise, one common share of the Company and one half of one share purchase warrant, for no additional consideration. Pursuant to a receipt for a final prospectus qualifying the common shares and share purchase warrants on June 5, 2003, the Company issued 3,810,000 common shares and 1,905,000 share purchase warrants upon the automatic exercise of the special warrants. Each whole share purchase warrant entitled the holder to acquire one common share at $2.75 expiring April 10, 2004. In connection with the private placement, the Company paid a cash commission of $480,636 and incurred total legal and professional fees of $396,212.

[c]	Special Warrants
	On October 21, 2005, concurrent with the acquisition of Artesian, the Company closed a private placement of 1,036,098 Special Warrants at a price of approximately US$7.24 per Special Warrant for total gross proceeds of $8,902,503 (US$7.5 million). The Special Warrants were issued to major shareholders of Artesian. Each Special Warrant entitles the holder to receive, without payment of any additional consideration, one common share of the Company. The subscription price for the Special Warrants represents a 5% premium over the market price calculated based on a five-day average closing price of the common shares of the Company on the NASDAQ Stock Market prior to the execution of the letter of intent of the Company’s acquisition of Artesian in August 2005. In connection with the private placement, the Company incurred total legal and professional fees of $38,499 to December 31, 2005.
	The total proceeds from the issuance of Special Warrants have been allocated to share capital based on the quoted market price and the balance, equivalent to the premium portion, has been recorded as a reduction to the consideration for the acquisition of Artesian.
[d]	Common share purchase warrants

Details of the share purchase warrants for the year ended December 31, 2005 are summarized as follows:

	Number of
	warrants
Balance, December 31, 2004	176,500
Warrants exercised on a cashless basis	(31,333	)
Balance, December 31, 2005	145,167

14

Cardiome Pharma Corp.

NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS

December 31, 2005 (expressed in Canadian dollars)

10. SHARE CAPITAL (cont’d.)

[d] Common share purchase warrants

During the year ended December 31, 2005, the Company issued 21,250 common shares for 31,333 warrants exercised on a cashless basis. As at December 31, 2005, common shares issuable upon exercise of common share purchase warrants are as follows:

	Exercise	Number of
Date of expiry	price	warrants
February 9, 2007	US $2.40	70,462
February 9, 2007	US $4.80	37,209
February 9, 2007	US $8.00	37,496
Balance, December 31, 2005		145,167

The above common share purchase warrants may be exercised on a cashless basis on a formula described in the warrant agreement.

[e] Stock options

In May 2001, the shareholders approved a stock option plan (“2001 Plan”) providing for the granting of options to executive officers and directors, employees, consultants and clinical advisory board members of the Company. The shares available for issuance under the 2001 Plan generally vest over periods up to 5 years with a term of six years. In May 2004, the shareholders approved an amendment to the 2001 Incentive Stock Option Plan to (i) increase the maximum aggregate number of Common Shares issuable under the 2001 Incentive Stock Option Plan from 5,500,000 Common Shares to 6,000,000 Common Shares and (ii) to change the period during which optionees may exercise options after ceasing to be an eligible person. In June 2005, the shareholders approved a further amendment to the 2001 Incentive Stock Option Plan to (i) decrease the maximum aggregate number of Common Shares issuable under the 2001 Incentive Stock Option Plan from 6,000,000 Common Shares to 5,750,000 Common Shares; (ii) to eliminate the default vesting schedule applicable if no other vesting schedule is prescribed by the Board of Directors at the time of grant and specify that the Board of Directors may determine such vesting terms at its discretion; (iii) to restrict the maximum number of stock options issuable to insiders to 10% of the issued and outstanding Common Shares of the Company.

15

Cardiome Pharma Corp.

NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS

December 31, 2005 (expressed in Canadian dollars)

10. SHARE CAPITAL (cont’d.)

[e] Stock options

At December 31, 2005, the Company had 4,914,902 stock options outstanding granted to executive officers and directors, employees, consultants and clinical advisory board members , of which 3,205,021 are exercisable, at a weighted average exercise price of $5.70 per common share and expiring at various dates from March 17, 2006 to October 28, 2012:

		Options outstanding		Options exercisable
		December 31, 2005		December 31, 2005
		Weighted
		average	Weighted	Number of	Weighted
Range of	Number of	remaining	average	common	average
exercise price	common	contractual life	exercise price	shares	exercise price
$	shares	(years)	$	issuable	$
	issuable
$2.80-$3.68	1,933,243	2.92	3.28	1,766,993	3.28
$5.05-$5.96	756,950	2.48	5.29	756,950	5.29
$6.29-$8.95	1,972,209	4.93	7.67	641,078	7.12
$9.54-$10.53	252,500	6.15	10.17	40,000	10.08
	4,914,902	3.82	5.70	3,205,021	4.60

Stock option activities are summarized as follows:

	Number of Stock	Weighted average
	Options Outstanding	Exercise price
Balance, November 30, 2002	3,609,438	$3.53
Options granted	1,650,750	$4.28
Options exercised	(196,026)	$3.06
Options forfeited	(355,578)	$4.10
Options expired	(150,000)	$5.96
Balance, December 31, 2003	4,558,584	$3.70
Options granted	893,250	$6.35
Options exercised	(534,925)	$3.38
Options forfeited	(215,000)	$3.95
Balance, December 31, 2004	4,701,909	$4.23
Options granted	1,512,209	$8.67
Options exercised	(1,167,091)	$3.67
Options forfeited	(118,375)	$4.93
Options expired	(13,750)	$7.24
Balance, December 31, 2005	4,914,902	$5.70

16

Cardiome Pharma Corp.

NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS

December 31, 2005 (expressed in Canadian dollars)

10. SHARE CAPITAL (cont’d.)

[f] Stock-based compensation

The estimated fair value of options granted from December 1, 2002 to officers, directors, employees, clinical advisory board members and consultants is amortized over the vesting period. Compensation expense is allocated between research and development expenses and general and administration expenses on the same basis as cash compensation as follows:

	For the years ended December 31		For the thirteen months ended
	2005	2004	December 31, 2003
	$	$	$
Research and development	4,364,343	1,231,626	646,405
General and administration	1,397,893	1,836,176	1,412,648
Total	5,762,236	3,067,802	2,059,053

The weighted average fair value of stock options granted during the years ended December 31, 2005 and December 31, 2004 and the thirteen months ended December 31, 2003 was $6.58, $4.30 and $2.65 per share respectively. The estimated fair value of the stock options granted was determined using the Black-Scholes option pricing model with the following weighted-average assumptions:

	For the years ended		For the thirteen months ended
Assumption	December 31, 2005	December 31, 2004	December 31, 2003
Dividend yield	0%	0%	0%
Expected volatility	73.8%	75.2%	85.0%
Risk-free interest rate	3.50%	3.69%	3.95%
Expected average life of the options	6 years	6 years	6 years

[g] Loss per common share

	Year ended		Year ended		Thirteen months
	December 31,		December 31,		ended December 31,
	2005		2004		2003
	$		$		$
Numerator
Loss for the period	(53,374,629	)	(27,767,043	)	(19,865,813	)
Denominator
Weighted average number of common shares
outstanding	49,015,462		39,231,791		31,470,279
Basic and diluted loss per common share	(1.09	)	(0.71	)	(0.63	)

17

Cardiome Pharma Corp.

NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS

December 31, 2005 (expressed in Canadian dollars)

11. COMMITMENTS

[a] Operating leases

The Company has entered into a lease agreement for office and laboratory space for a term of 10 years expiring through March 2014, with an option to extend for three additional two-year periods (the “Original Lease Agreement”). The Company has signed an amendment to this agreement for additional office and laboratory space, effective as of May 1, 2005. The term for the additional space is 8 years and 10 months expiring through the same date and carrying the same extension options as in the Original Lease Agreement.

Effective October 21, 2005, the Company assumed a lease commitment for the premises previously occupied by its wholly-owned subsidiary, Artesian Therapeutics, Inc. This lease agreement expires in August 2007. The Company subsequently entered into a sublease agreement with a third party. The term of the sublease commences in December 2005 and expires in August 2007.

Future minimum annual lease payments under the lease are as follows:

	$
2006	787,708
2007	743,275
2008	634,740
2009	703,433
2010	713,340
Thereafter	2,288,632
	5,871,128

Rent expense for the year ended December 31, 2005 amounted to $456,747 [year ended December 31, 2004 - $322,518; thirteen months ended December 31, 2003 - $374,510].

[b] Clinical research agreements

The Company has entered into various clinical research and development agreements requiring it to fund research and development expenditures of approximately $9.8 million for fiscal 2006.

18

Cardiome Pharma Corp.

NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS

December 31, 2005 (expressed in Canadian dollars)

11. COMMITMENTS (cont’d.)

[c] License agreements

[i]	Pursuant to a license agreement, the Company is responsible for payment of royalties based on a percentage of revenue, subject to certain minimum annual royalties, of the licensed technology. The Company is no longer developing this licensed technology. As at December 31, 2005, no royalties were payable. The license agreement may be terminated by the licensor if certain development milestones are not met. Unless otherwise terminated, the agreement expires on the expiry date of the last issued patent relating to certain technology.
[ii]	Pursuant to a service agreement, the Company is responsible for payment of $500,000 upon commencement of Phase III clinical trials and a further $2,000,000 upon filing a New Drug Application in the United States or Canada for the licensed technology. The Company also has an obligation to pay royalties based on future net sales. The Company is no longer developing this licensed technology. As at December 31, 2005, no amounts were payable. The agreement expires on the expiry date of the last patent relating to certain technology.
[iii]	Pursuant to a license agreement, the Company is responsible for the payment of royalties based on a percentage of revenue and subject to certain minimum annual royalties commencing at US$5,000 and increasing over a five year period to US$100,000 per annum. The Company also has an obligation to develop and introduce certain licensed products into commercial markets within a certain timeline. During the year ended December 31, 2005, the Company decided to discontinue its efforts to develop this licensed technology. The license agreement may be terminated if either party fails to perform or breaches any of its obligations under the agreement. Furthermore, the Company may terminate the agreement for any reason upon giving 60 days’ written notice. Unless otherwise terminated, the agreement expires upon the expiration of the last issued patent relating to certain technology.
[iv]	Pursuant to a license and option agreement, the Company is responsible for milestone payments of up to US$3 million based on the successful completion of first phase II clinical trials and the U.S. Food and Drug Administration (“the FDA”) approval of the first new drug application and FDA approval for marketing and commercialization of the product in a cardiovascular indication. The Company is also responsible for milestone payments of up to US$6 million based on FDA approval for marketing and commercialization of the product in a hyperuricemic (gout) indication of the product and achievement of certain net sales of the product. The Company also has an obligation to pay royalties based on future net sales. During the year ended December 31, 2005 and 2004, the Company decided to discontinue its efforts to pursue this licensed technology in the cardiovascular indication and gout indication, respectively. At December 31, 2005, no amounts were payable. Unless otherwise terminated, the license agreement will terminate upon the expiration of the licensor’s obligation to pay royalties under its original license agreement with a third party.

19

Cardiome Pharma Corp.

NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS

December 31, 2005 (expressed in Canadian dollars)

12. COLLABORATIVE AGREEMENTS

[a]	On October 16, 2003, the Company entered into a collaboration and license agreement with Astellas Pharma US, Inc. (“Astellas”, formerly Astellas Healthcare, Inc.) for the co-development and commercialization of RSD1235 as an intravenous formulation for the treatment of atrial fibrillation and atrial flutter. Pursuant to this agreement, effective October 28, 2003, the Company granted Astellas an exclusive license to RSD1235 and its related technology to develop, make and sell intravenous drugs in Canada, the United States, and Mexico (“North America”), including a right to sublicense to third parties. The Company retains the rights to the intravenous formulation of RSD1235 for markets outside North America and worldwide rights to the oral formulation of RSD1235 for chronic atrial fibrillation. Under the terms of the agreement, the Company received an up-front payment of $13.09 million (US$10 million) and will be entitled to milestone payments of up to $71 million (US$54 million) based on achievement of specified development and commercialization milestones, of which $7,228,200 (US $6,000,000) was earned during the year ended December 31, 2004, as well as royalties based on future net sales and sublicense revenue. Astellas has also agreed to make further milestone payments with respect to any subsequent drugs developed under the agreement.
	Under the terms of the agreement, Astellas is responsible for 75% and the Company is responsible for 25% of eligible costs associated with the development of intravenous formulation of RSD1235. Astellas is also responsible for 100% of the marketing costs for the intravenous application of RSD1235 in North America.
	In addition, the Company had the right to require Astellas to acquire $5.2 million (US$4 million) of its common shares at a 25% premium to the average closing price of its common shares on the TSX over a 30 calendar day period at any time within the twelve-month period after the Effective Date. The Company exercised its right on September 28, 2004 and completed this transaction with the issuance of 646,712 of its common shares to Astellas at a price of $7.89 per share [see note 10[b][ii]].
	This agreement can be terminated entirely, or on a country by country basis, by either party if certain development or commercialization milestones are not met. Unless the agreement is otherwise terminated, the royalty payment period for each country will expire on the later of the expiration of the last valid claim of the patent rights or the date upon which sales by other parties exceed a certain percentage of the market in the country for a certain period of time.
	The initial upfront payment is recorded as licensing revenue on a straight-line basis over the estimated development period. . During the year ended December 31, 2005, the Company charged Astellas $3,180,415 (US$2,631,233) [year ended December 31, 2004 - $1,923,296 (US$1,482,505); thirteen months ended December 31, 2003 - $647,400 (US$482,774)] for project management and $8,245,551 (US$6,788,356) [year ended December 31, 2004 - $11,728,751 (US$8,993,729); thirteen months ended December 31, 2003 - $3,126,542 (US$2,361,534)] for research and development cost recoveries, which were included in research collaborative fees. In addition, during the year ended December 31, 2004, a development milestone was achieved and accordingly, $7,228,200 (US$6,000,000) was included in licensing fees [note 4].

20

Cardiome Pharma Corp.

NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS

December 31, 2005 (expressed in Canadian dollars)

13. INCOME TAXES

At December 31, 2005, the Company has investment tax credits of $8,458,000 [December 31, 2004 - $6,098,000] available to reduce future income taxes otherwise payable. The Company also has loss carryforwards of $71,976,000 [December 31, 2004 - $23,538,000] available to offset future taxable income in Canada ($1,000), the United States ($49,736,000) and Barbados ($22,239,000). The investment tax credits and non-capital losses for income tax purposes expire as follows:

	Investment	Non-capital
	tax credits	losses
	$	$
2006	111,000	—
2007	261,000	—
2008	520,000	—
2009	402,000	—
2010	559,000	—
2011	786,000	1,000
2012	845,000	—
2013	1,087,000	—
2014	1,465,000	22,239,000
2015	1,803,000	—
2021	—	312,000
2022	115,000	6,384,000
2023	208,000	11,838,000
2024	296,000	17,972,000
2025	—	13,230,000
	8,458,000	71,976,000

21

Cardiome Pharma Corp.

NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS

December 31, 2005 (expressed in Canadian dollars)

13. INCOME TAXES (cont’d.)

Significant components of the Company’s future tax assets and liabilities are shown below:

	December 31,		December 31,
	2005		2004
	$		$
Future tax assets:
Tax loss carryforwards	20,648,000		9,323,000
Research and development deductions and credits	15,050,000		12,555,000
Tax values of depreciable assets in excess of accounting values	864,000		781,000
Revenue unearned for accounting purposes	1,931,000		3,504,000
Share issue costs	2,351,000		1,003,000
Other items	—		3,000
Total future tax assets	40,844,000		27,169,000
Valuation allowance	(40,635,000	)	(22,290,000	)
Total future tax assets	209,000		4,879,000
Future tax liabilities:
Accounting value of technology in excess of tax value	(498,000	)	(9,797,000	)
Revenue unearned for tax purposes	—		(2,164,000	)
Total future tax liabilities	(498,000	)	(11,961,000	)
Net future tax liabilities	(289,000	)	(7,082,000	)
Less current portion	—		(2,164,000	)
Net long-term portion	(289,000	)	(4,918,000	)

The potential income tax benefits relating to certain future tax assets have not been recognized in the accounts as their realization did not meet the requirements of “more likely than not” under the liability method of tax allocation.

22

Cardiome Pharma Corp.

NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS

December 31, 2005 (expressed in Canadian dollars)

13. INCOME TAXES (cont’d.)

The reconciliation of income tax computed at statutory tax rates to income tax expense (recovery), using a 34.90% [2004 – 35.62%; 2003 – 37.75%] statutory tax rate, is:

					Thirteen
	Year ended		Year ended		Months ended
	December 31,		December 31,		December 31,
	2005		2004		2003
	$		$		$
Tax recovery at statutory income tax rates	(21,142,000	)	(13,017,000	)	(8,296,000	)
Change in valuation allowance	18,345,000		(1,418,000	)	6,300,000
Valuation allowance change not recorded in
the statement of loss and deficit	(14,806,000	)	—		—
Expenses not deductible for tax purposes	6,781,000		3,171,000		973,000
Income recognized for tax purposes but not for
accounting purposes	—		5,125,000		—
Foreign tax rate differences	7,568,000		(1,174,000	)
Investment tax credits earned	(1,803,000	)	(1,465,000	)	(1,087,000	)
Reversal of tax reserve	(2,164,000	)	—		-
Future income tax recovery	(7,221,000	)	(8,778,000	)	(2,110,000	)

23

Cardiome Pharma Corp.

NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS

December 31, 2005 (expressed in Canadian dollars)

14. RELATED PARTY TRANSACTIONS

The Company has incurred expenses for services provided by related parties as follows:

			Thirteen
	Year ended	Year ended	months ended
	December 31,	December 31,	December 31,
	2005	2004	2003
	$	$	$
Directors for research consulting services	—	78,000	—
Law firm in which an officer is a partner for legal services	1,239,580	194,000	—

The amounts charged are recorded at their exchange amounts and are subject to normal trade terms. Of the total amount of legal fees incurred during the year ended December 31, 2005, $568,495 was in connection with the public offering completed in March 2005 and $358,914 was related to the acquisition of Artesian. Included in accounts payable and accrued liabilities at December 31, 2005 is $32,818 [December 31, 2004 - $54,688] owing to the legal firm.

15. CONTINGENCIES

[a]

The Company may, from time to time, be subject to claims and legal proceedings brought against it in the normal course of business. Such matters are subject to many uncertainties. Management believes that adequate provisions have been made in the accounts where required and the ultimate resolution of such contingencies will not have a material adverse effect on the consolidated financial position of the Company.

[b]

The Company entered into indemnification agreements with all officers and directors. The maximum potential amount of future payments required under these indemnification agreements is unlimited. However, the Company maintains appropriate liability insurance that limits the exposure and enables the Company to recover any future amounts paid, less any deductible amounts pursuant to the terms of the respective policies, the amounts of which are not considered material.

24

Cardiome Pharma Corp.

NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS

December 31, 2005 (expressed in Canadian dollars)

15. CONTINGENCIES (cont’d.)

[c] The Company has entered into license and research agreements with third parties that include indemnification provisions that are customary in the industry. These guarantees generally require the Company to compensate the other party for certain damages and costs incurred as a result of third party claims or damages arising from these transactions. In some cases, the maximum potential amount of future payments that could be required under these indemnification provisions is unlimited. These indemnification provisions may survive termination of the underlying agreement. The nature of the indemnification obligations prevents the Company from making a reasonable estimate of the maximum potential amount it could be required to pay. Historically, the Company has not made any indemnification payments under such agreements and no amount has been accrued in the accompanying consolidated financial statements with respect to these indemnification obligations.

16. RECONCILIATION OF GENERALLY ACCEPTED ACCOUNTING PRINCIPLES

The Company prepares the consolidated financial statements in accordance with Canadian generally accepted accounting principles (“Canadian GAAP”) which as applied in these consolidated financial statements conform in all material respects to United States generally accepted accounting principles (“U.S. GAAP”), except as follows:

[a]	In 2001, the Company adopted the liability method of accounting for income taxes. As a result of differences in the transition rules between the recommendations of the CICA with respect to accounting for income taxes and of Statement of Financial Accounting Standard (“SFAS”) 109, Accounting for Income Taxes, there is a $nil difference in technology and deficit under U.S. GAAP for the year ended December 31, 2005 [December 31, 2004 - $8,560; December 31, 2003 - $111,280].
[b]	Under U.S. GAAP, short-term investments are classified as available-for-sale and carried at market values with unrealized gains or losses reflected as a component of accumulated other comprehensive income.
[c]	Under U.S. GAAP, the Company’s acquired technology would be classified as in-process research and development and written off immediately as it has no alternative use.

25

Cardiome Pharma Corp.

NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS

December 31, 2005 (expressed in Canadian dollars)

16. RECONCILIATION OF GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (cont’d.)

The effect of the above on the Company’s consolidated financial statements is set out below:

Consolidated statements of loss and deficit

					Thirteen
	Year ended		Year ended		months ended
	December 31,		December 31,		December 31,
	2005		2004		2003
	$		$		$
Loss for the period, Canadian GAAP	(53,374,629	)	(27,767,043	)	(19,865,813	)
Amortization of other assets [note 16[a]]	(8,560	)	(102,720	)	(111,280	)
In-process research and development [note 16[c]]	(1,778,594	)	—		—
Future income taxes [note 16[c]]	289,000		—		—
Loss for the period, U.S. GAAP	(54,872,783	)	(27,869,763	)	(19,977,093	)
Reclassification adjustment for unrealized gains on
short-term investments	—		(19,973	)	(72,509	)
Unrealized gains on investments [note 16[b]]	—		—		19,973
Comprehensive loss for the period, U.S. GAAP	(54,872,783	)	(27,889,736	)	(20,029,629	)
Weighted average number of common shares
outstanding, U.S. GAAP	49,015,462		39,231,791		31,470,279
Basic and diluted loss per common share, U.S. GAAP	(1.12	)	(0.71	)	(0.63	)

26

Cardiome Pharma Corp.

NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS

December 31, 2005 (expressed in Canadian dollars)

16. RECONCILIATION OF GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (cont’d.)

Balance sheets

Material variations in selected balance sheet accounts under U.S. GAAP are as follows:

	December 31,		December 31,
	2005		2004
	$		$
Intangible assets [notes 16[a] and [c]]	1,036,595		25,859,632
Future income taxes [note 16 [c]]	—		7,082,000
Contributed surplus / other accumulated comprehensive
income [note 16[b]]	11,935,538		7,116,654
Deficit	(147,843,944	)	(92,971,161	)

[d] Accounts payable and accrued liabilities comprise:

	December 31,	December 31,
	2005	2004
	$	$
Trade accounts payable	2,169,509	2,966,237
Accrued contract research	4,173,338	2,005,022
Employee-related accruals	1,074,585	605,000
Other accrued liabilities	1,234,765	257,715
	8,652,197	5,833,974

27

Cardiome Pharma Corp.

NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS

December 31, 2005 (expressed in Canadian dollars)

16. RECONCILIATION OF GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (cont’d.)

[e] Pro forma information - Stock-based compensation

The following pro forma financial information presents the loss for the period and basic and diluted loss per common share had the Company recognized stock based compensation for stock options granted to employees and directors using a fair value based method for all stock based transactions prior to December 1, 2002. For stock options granted in 2001, the fair value for these options was estimated at the date of grant using a Black-Scholes option pricing model with the following weighted-average assumptions: dividend yield - 0%; expected volatility - 88.1%; risk-free interest rate - 3.0%; and expected average life of the options - 6 years. For stock options granted in 2005 and 2004, see note 10[f].

Applying the above, supplemental disclosure of pro forma net loss and loss per share is as follows:

	Year ended		Year ended		Thirteen months
	December 31,		December 31,		ended December 31,
	2005		2004		2003
	$		$		$
Loss for the period -- U.S. GAAP	(54,872,783	)	(27,869,763	)	(19,977,093	)
Deduct: Stock based employee compensation
expense included in reported loss above	5,762,236		3,067,802		2,059,053
Add: Total stock based employee compensation
expense using fair value based method for all awards	(5,836,236	)	(3,373,002	)	(3,128,778	)
Pro forma loss for the period	(54,946,783	)	(28,174,963	)	(21,046,818	)
Basic and diluted loss per common share
As reported	(1.12	)	(0.71	)	(0.63	)
Pro forma	(1.12	)	(0.72	)	(0.67	)

[f] Recent pronouncements

In December 2004, the Financial Accounting Standards Board issued SFAS 123(R) “Share-Based Payment”, a revision to SFAS 123 “Accounting for Stock Based Compensation”. SFAS 123(R) requires all share-based payments to be recognized in the financial statements based on their fair values using either a modified-prospective or modified-retrospective transition method. The standard no longer permits pro forma disclosure or the prospective recognition adopted by the Company in fiscal 2003. Accordingly, from the date of adoption of the revised standard, the Company will be required to recognize compensation expense for all share-based payments based on grant-date fair value, including those granted, modified or settled prior to December 1, 2002. However, had the Company adopted SFAS 123(R) in prior periods, the impact of the standard would have approximated the impact of SFAS 123 as described in the disclosure of pro forma loss for the period and loss per common share in the table above.

28

Cardiome Pharma Corp.

NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS

December 31, 2005 (expressed in Canadian dollars)

17. SEGMENTED INFORMATION

The Company operates primarily in one business segment with all of its consolidated assets and operations located in Canada (2004 – net book value of intellectual property of approximately $25,000,000 located in the U.S.). During the year ended December 31, 2005, 100% of total revenue is derived from one collaborator in the United States [year ended December 31, 2004 – 4% and 96% from two collaborators in Switzerland and the United States, respectively; thirteen months ended December 31, 2003 - 25% and 75% from one collaborator in Switzerland and two collaborators in the United States, respectively].

18. COMPARATIVE FIGURES

Certain of the comparative figures have been reclassified to conform with presentation adopted in the current year.

19. SUBSEQUENT EVENT

On March 13, 2006, pursuant to a registration statement qualifying the sale of the underlying common shares to the shareholders of Artesian, the outstanding Special Warrants as of December 31, 2005 (see Note 3 and Note 10 (c)) were converted to 1,036,098 common shares.

29

EX-99.4

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

This management discussion and analysis is as of March 13, 2006 and should be read in conjunction with our audited consolidated financial statements for the year ended December 31, 2005 and the related notes included thereto. Our consolidated financial statements are prepared in accordance with Canadian generally accepted accounting principles (“Canadian GAAP”). These principles differ in certain respects from United States generally accepted accounting principles (“US GAAP”). The differences as they affect the annual consolidated financial statements are described in Note 16 to the consolidated financial statements. All amounts are expressed in Canadian dollars unless otherwise indicated.

The forward-looking statements in this discussion regarding our expectations regarding our future performance, liquidity and capital resources and other non-historical statements in this discussion include numerous risks and uncertainties, as described in the “Risk Factors” section of our Annual Information Form. The words “anticipates”, “believes”, “estimates”, “expects”, “intends”, “may”, “plans”, “projects”, “will”, “would” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. Our actual results may differ materially from those contained in any forward-looking statements. Additional information relating to our company is available by accessing the SEDAR website at www.sedar.com or the EDGAR website at www.sec.gov/edgar.

OVERVIEW

We are a life sciences company focused on developing drugs to treat or prevent cardiovascular diseases. Our current efforts are focused on the treatment of atrial arrhythmias. We also have a pre-clinical program directed at improving cardiovascular function.

Atrial fibrillation (AF) is an arrhythmia, or abnormal rhythm, of the upper chambers of the heart. In December 2004 and September 2005, we announced positive top-line results for two pivotal Phase 3 atrial fibrillation trials, ACT 1 and ACT 3, respectively, for the intravenous formulation of RSD1235, (RSD1235 (iv)), our lead product candidate for the acute conversion of atrial fibrillation. In addition, we are currently conducting an additional Phase 3 trial and an open-label safety study in conjunction with our collaborative partner Astellas Pharma US, Inc. (“Astellas”, formerly Fujisawa Healthcare, Inc., renamed after the merger of Fujisawa Pharmaceutical Co., Ltd. and Yamanouchi Pharmaceutical Co., Ltd.). We are also developing an oral formulation of RSD1235 (RSD1235 (oral)), as maintenance therapy for the long-term treatment of atrial fibrillation, and initiated a Phase 2a clinical trial in December 2005.

In October 2005, we completed the acquisition of Artesian Therapeutics, Inc., a privately-held biopharmaceutical company which currently has two advanced small molecule discovery programs in the cardiovascular area.

The following table summarizes current clinical studies of each of our research and development programs:

Project	Stage of Development	Current Status
RSD1235 (iv)	Phase 3 Clinical Trial (ACT 1)	Trial completed and top-line results released in December 2004 and February 2005. Full trial results presented in May 2005.

	Phase 3 Clinical Trial (ACT 2)	Trial initiated in March 2004.
	Phase 3 Clinical Trial (ACT 3)	Top-line results released in September 2005.
	Open-Label Safety Study (ACT 4)	Trial initiated in October 2005.
	New drug application (NDA)	Preparation of NDA in progress for filing in early 2006
RSD1235 (oral)	Phase 1 – Formulation Evaluation Study	Interim results released in November 2004 and controlled release formulation selected.
	Phase 1 – Food Effect Study	Trial completed in April 2005.
	Phase 1 – 7 day Repeat Dosing Study	Trial completed in August 2005.
	Phase 2a – Pilot Study	Trial initiated in December 2005.
Artesian Projects	Pre-Clinical Stage	Animal studies underway.

CORPORATE DEVELOPMENT

We accomplished several significant milestones during fiscal 2005:

• In March 2005, we completed a public offering of 9,775,000 common shares at a price of $7.21 (US$6.00) per share for total gross proceeds of $70,477,750 (US$58,650,000).

• In May 2005, we were selected to become a member of the NASDAQ Biotechnology Index(R).

• In August 2005, we announced the successful completion of the Phase 1 studies required to advance RSD1235 (oral) into a Phase 2a pilot study. At the same time, we reported positive results from a Phase 1 study evaluating the pharmacokinetics, safety and tolerability of orally-administered RSD1235 over 7 days of repeat dosing within an escalating dose regimen.

• In September 2005, together with our co-development partner Astellas, we announced results from our 276-patient second pivotal Phase 3 clinical study for RSD1235 (iv), called ACT 3. The study achieved its primary endpoint, showing that of the 170 patients with recent-onset atrial fibrillation (AF), 51% of those receiving RSD1235 (iv) converted to normal heart rhythm, as compared to 4% of placebo patients (p<0.0001). These percentages are consistent with those reported in the first pivotal Phase 3 study, ACT 1.

• In October 2005, together with our co-development partner Astellas, we announced the initiation of an open-label safety study of RSD1235 (iv), called ACT 4, for the acute treatment of atrial fibrillation.

• Also in October 2005, we completed the acquisition of Artesian Therapeutics, Inc. (“Artesian”), a privately held U.S. biopharmaceutical company. Under the terms of the acquisition, payments to Artesian shareholders are contingent on the achievement of certain pre-defined clinical milestones. The milestone payments will equal, in the aggregate, US$32 million for each of the first two drug candidates from the Artesian programs that reach NDA approval. The first such milestone is due upon initiation of the clinical development of an Artesian drug candidate.

Concurrent with the closing of the acquisition of Artesian, we completed, by way of private placement, a 1,036,098 Special Warrant financing at a price of US$7.24 per Special Warrant for proceeds of $8,902,503 (approximately US$7.5 million) to Oxford Bioscience Partners, Artesian’s largest shareholder. The subscription price for the Special Warrants represented a 5% premium over the five day average closing price of the common shares of Cardiome on the NASDAQ Stock Market prior to the execution of the letter of intent to acquire Artesian.


• In December 2005, we announced the initiation of a Phase 2a pilot study of RSD1235 (oral) for the prevention of recurrence of atrial fibrillation.

DISCLOSURE CONTROLS AND PROCEDURES

Management, including the Chief Executive Officer and Chief Financial Officer, has established and maintained disclosure controls and procedures in order for us to provide reasonable assurance that material information relating to our company is made known to us in a timely manner, particularly during the period in which the annual filings were being prepared. Management has evaluated the effectiveness of the Company’s disclosure controls and procedures as of the date of this report, and believes them to be effective in providing such reasonable assurance.

CRITICAL ACCOUNTING POLICIES AND SIGNIFICANT ESTIMATES

Our audited consolidated financial statements are prepared in accordance with Canadian GAAP. These accounting principles require us to make certain estimates and assumptions. We believe that the estimates and assumptions upon which we rely are reasonable based upon information available at the time that these estimates and assumptions are made. Actual results could differ from these estimates. Areas requiring significant estimates include the assessment of net recoverable value and amortization period of technology licenses and patents, determination of accrued liabilities with respect to clinical trials, recognition of revenue, recognition of future income tax assets and stock-based compensation.

The significant accounting policies that we believe are the most critical in fully understanding and evaluating the reported financial results include the following:

• intangible assets;

• accrued liabilities and clinical trial expenses;

• revenue recognition;

• research and development costs;

• stock-based compensation; and

• income taxes

Intangible Assets

Intangible assets are comprised of purchased technology licenses and patent costs. Technology licenses, including those acquired in exchange for the issuance of equity instruments by us, are amortized on a straight-line basis over the estimated useful life of the underlying technologies. We determine the estimated useful lives for intangible assets based on a number of factors: legal, regulatory or contractual limitations; known technological advances; anticipated demand; and the existence or absence of competition. A significant change in any of the above factors may require a revision of the expected useful life of the intangible asset, resulting in accelerated amortization or an impairment charge, which could have a material impact on our results of operations. We evaluate the recoverability of the net book value of our intangible assets on a quarterly basis based on the expected utilization of the underlying technologies. If the carrying value of the underlying technology exceeds the estimated net recoverable value, calculated based on undiscounted estimated future cash flows, then the carrying value is written down to its fair value, based on the related estimated discounted cash flows. The amounts shown for technology licenses and patent costs do not necessarily reflect present or future values and the ultimate amount recoverable will be dependent upon the successful development and commercialization of products based on these rights. Patent costs associated with the preparation, filing, and obtaining of patents are capitalized and amortized on a straight-line basis over the estimated useful lives of the patents.

Accrued Liabilities and Clinical Trial Expenses

We have entered into service agreements with various contract research organizations, investigators and other vendors that provide resources, services and expertise that complement our efforts in developing our drug candidates. These agreements may be in force over a number of fiscal years or accounting periods. Since payments under these agreements may not coincide with the period in which the services are rendered, judgment is required in estimating the amount of clinical trial expense to be recorded in each accounting period. Judgment and estimates are also involved in determining the amount of expenditures that are contractually committed under the various agreements. We consider the following factors in estimating the amount of clinical trial expense for an accounting period: the level of patient enrollment; the level of services provided and goods delivered; and the proportion of the overall contracted time that elapsed during the accounting period. In making these assessments, we monitor patient enrollment levels and related activities at a given point in time through internal reviews, correspondence and discussions with contractors and review of contractual terms. We may sometimes rely on the information provided by our contractors. A significant change in the above factors and the accuracy of information provided by our contractors may alter our estimate of our clinical trial expenditure for the accounting period and prepaid expenses or accrued liabilities as of the end of the accounting period. This could have a material impact on our results of operations and liabilities.

Revenue Recognition

Revenue to date has primarily been derived from research collaborative fees and licensing fees, which are comprised of initial fees and milestone payments from collaborative licensing arrangements and related reimbursement of expenses. Non-refundable research collaborative fees are recorded as revenue as the related research expenses are incurred pursuant to the terms of the agreement, provided collectibility is reasonably assured. Non-refundable milestone payments are

fully recognized upon the achievement of the milestone event when (i) the milestone is substantive in nature, (ii) the achievement was not reasonably assured at the inception of the agreement and (iii) we have no further involvement or obligation to perform under the arrangement. Initial fees and milestone payments which require our ongoing involvement are deferred and amortized into income over the estimated period of our ongoing involvement. A significant change in estimating the period of our on-going involvement could have a material impact on results of operations.

Research and Development Costs

Research and development costs consist of direct and indirect expenditures related to our research and development programs. Research and development costs are expensed as incurred unless they meet generally accepted accounting criteria for deferral and amortization. We assess whether these costs have met the relevant criteria for deferral and amortization at each reporting date. No development costs have been deferred.

Stock-based Compensation and other Stock-based Payments

Effective December 1, 2002, we elected to prospectively adopt the recommendations of the Canadian Institute of Chartered Accountants, or CICA, in new section 3870 of the CICA Handbook, with respect to stock-based compensation and other stock-based payments. This standard requires that all share-based awards be measured and recognized as an expense using a fair value based method.

The fair value of stock options is estimated at the date of grant using the Black-Scholes option pricing model with the subjective assumptions of the expected life of the option, the expected volatility at the time the options are granted, and risk-free interest rate. Changes in these assumptions can materially affect the measure of the estimated fair value of our employee stock options, hence our results of operations. We amortize the fair value of stock options over the vesting terms of the options which are generally four to five years from grant.

Included with the statements of loss were the following charges for stock-based compensation for stock options granted after December 1, 2002:

(in million of dollars)	For the Year Ended		For the Thirteen Months Ended
Expenses	December 31, 2005	December 31, 2004	December 31, 2003
Research and development	$4.4	$1.2	$0.6
General and administration	$1.4	$1.9	$1.5
Total stock based compensation	$5.8	$3.1	$2.1

Future Income Taxes

Income taxes are accounted for using the liability method of tax allocation. Future income taxes are recognized for the future income tax consequences attributable to differences between the carrying values of assets and liabilities and their respective income tax bases. Future income tax assets and liabilities are measured using substantively enacted income tax rates expected to apply

to taxable income in the years in which temporary differences are expected to be recovered or settled. The effect on future income tax assets and liabilities of a change in rates is included in net loss in the period that includes the enactment date. Future income tax assets are recorded in the financial statements if realization is considered more likely than not.

RESULTS OF OPERATIONS

For the year ended December 31, 2005 (“fiscal 2005”), we recorded a net loss of $53.4 million ($1.09 per common share), compared to a net loss of $27.8 million ($0.71 per common share) and $19.9 million ($0.63 per common share) for the year ended December 31, 2004 (“fiscal 2004”) and for the thirteen months ended December 31, 2003 (“fiscal 2003”), respectively. Since our formation in 1986, we have incurred a cumulative deficit of $145.4 million. The increase in net loss for fiscal 2005, compared to fiscal 2004, was largely due to the expanded clinical development activities and the write-down of intangible assets associated with the Oxypurinol CHF project during fiscal 2005. Additionally, the decrease in licensing fees and research collaborative fees as described below also contributed to the increase in net loss. The results of operations were in line with management’s expectations.

We expect losses to continue for at least two fiscal years as we advance RSD1235 (iv) into the regulatory approval process and RSD1235 (oral) into later stage development, in addition to our efforts to develop the Artesian compounds. As such, we expect operating expenses for these product candidates to be higher than the potential licensing and research collaborative fees or royalty revenue from RSD1235 (iv), should we successfully meet our collaborative milestones or obtain commercialization approval for RSD1235 (iv) within this period.

Revenues

Total revenue decreased to $16.1 million in fiscal 2005 from $26.4 million in fiscal 2004. The total revenue in fiscal 2005 was comprised of $4.7 million in licensing fees (fiscal 2004 - $12.6 million) and $11.4 million in research collaborative fees (fiscal 2004 - $13.8 million).

Licensing fees represent the amortization of deferred revenue related to upfront payments and milestone payments from our collaborative partners. The decrease in licensing fees in fiscal 2005, compared to those in fiscal 2004, was mainly due to the milestone payment for the successful completion of the first Phase 3 clinical trial of $7.2 million (US$6 million), and the recognition of the remaining $0.9 million of unamortized deferred revenue related to the upfront payment from our collaborative partner, UCB Farchim S.A. (“UCB”) in fiscal 2004. This decrease in licensing fees was partly offset by increased amortization of deferred revenue, related to the upfront payment and the premium on equity investment from Astellas, of $4.7 million (fiscal 2004 - $4.5 million).

The decrease in research collaborative fees in fiscal 2005, compared to those in fiscal 2004, was mainly attributable to the decreased research and development cost recovery of $8.2 million (fiscal 2004 - $11.7 million) with more development cost associated with RSD1235 (iv) directly incurred by our collaborative partner, Astellas. This decrease was offset by the increased project management fees of $3.2 million (fiscal 2004 - $2.1 million).

For the next two fiscal years, we expect to continue recognizing as revenue the amortization of deferred revenue related to the upfront payment and the premium on equity investment from Astellas. We will continue to receive project management fees and development cost reimbursements and expect a milestone payment from Astellas. We may also earn additional milestone payments from Astellas or revenue from new licensing and collaborative research and development agreements with other pharmaceutical companies. However, there can be no assurance that we will maintain our existing agreements or enter into a new licensing or collaborative research and development agreements.

Research and Development Expenditures

Research and development expenditures were $41.5 million for fiscal 2005, compared to $38.7 million and $16.9 million for fiscal 2004 and fiscal 2003, respectively.

Project	For the Year Ended		For the Thirteen Months Ended
	December 31, 2005	December 31, 2004	December 31, 2003
RSD1235 (iv)	$18.4	$21.3	$7.5
RSD1235 (oral)	$12.9	$5.1	$0.4
Artesian projects	$0.7	-	-
Oxypurinol CHF	$9.0	$8.6	$3.3
Oxypurinol Gout and other projects	$0.5	$3.7	$5.7
Total research and development expenses	$41.5	$38.7	$16.9

Research and development expenditures for fiscal 2005 were comparable to the amount recorded for fiscal 2004. The increase of $2.8 million in research and development expenditures was primarily due to the expanded clinical development activities in fiscal 2005 to advance RSD1235 (iv) from Phase 3 testing to NDA preparation stage, and RSD1235 (oral) from Phase 1 to Phase 2 testing. In addition to these advancements, we also started research development work on our newly acquired Artesian projects and maintained our compassionate use program of Oxypurinol Gout. Stock-based compensation of $4.4 million in 2005 (fiscal 2004 - $1.2 million) also contributed to the increased research and development costs.

The following provides a description of major clinical trials and research and development expenditures for each of our projects during fiscal 2005:

RSD1235 (iv)

During fiscal 2005, we completed the second pivotal Phase 3 trial, ACT 3, continued our clinical work on ACT 2, initiated an open-label safety study, ACT 4, and started preparing for a new drug application (“NDA”) for RSD1235 (iv).

The ACT 1 Study

The study looked at three sub-groups of patients, including 237 patients with recent-onset atrial fibrillation (more than three hours but less than seven days), 119 patients with longer-term atrial

fibrillation (more than seven days but less than 45 days) and 60 patients with atrial flutter. The primary endpoint in ACT 1 was conversion of recent-onset atrial fibrillation to normal heart rhythm for a period of at least one minute post-dosing within 90 minutes of the start of dosing. The study was carried out in 45 centers in the U.S., Canada and Scandinavia. We completed enrollment in ACT 1 in October 2004 and announced that the study achieved its primary end points in December 2004. Additional clinical results of this study were released in February 2005 and a full trial report was presented in May 2005 at the Late Breaking Clinical Results section of the Heart Rhythm Society Meeting in New Orleans.

The ACT 2 Study

The ACT 2 study, initiated in March 2004, will enroll up to 210 patients and will evaluate the efficacy and safety of RSD1235 (iv) in the treatment of patients who have developed atrial fibrillation following cardiac surgery. The primary endpoint in this ongoing study is acute conversion of atrial fibrillation to normal heart rhythm.

The ACT 3 Study

Our collaborative partner, Astellas, initiated the ACT 3 study in July 2004 and completed patient recruitment for this study in July 2005. ACT 3 enrolled 276 patients. The primary efficacy endpoint of the ACT 3 trial was the conversion of atrial fibrillation to normal heart rhythm in recent-onset atrial fibrillation patients. The study also included analysis of patients with longer-term atrial fibrillation and patients with atrial flutter. Safety observations focused on sensory and cardiovascular effects of the drug, with particular emphasis on the lack of side-effect arrhythmias. We announced that the study achieved its primary endpoint in September 2005.

The ACT 4 Study

In October 2005, our collaborative partner Astellas initiated an open-label safety study, called ACT 4. This ongoing study will evaluate the safety of RSD1235 (iv) in approximately 120 recent-onset atrial fibrillation patients.

In addition to incurring the cost associated with the above clinical studies, we also incurred costs associated with the manufacturing of stability batches of RSD1235 and clinical drug supplies in fiscal 2005. These stability batches will generate manufacturing data required for our potential NDA in early 2006. Total research and development expenditures for this project were $18.4 million for fiscal 2005, compared to $21.3 million and $7.5 million for fiscal 2004 and fiscal 2003, respectively. In accordance with our collaboration and license agreement with Astellas, we recovered from Astellas a portion of the development costs associated with the operational activities managed by us. These expense recoveries, which were recorded as research collaborative fees, amounted to $11.4 million for fiscal 2005, compared to $13.8 million and $3.9 million for fiscal 2004 and fiscal 2003, respectively.

We expect our research and development expenditures for this project to be lower for the year ending December 31, 2006 (“fiscal 2006”) than those incurred in fiscal 2005. The anticipated cost will relate to the ongoing ACT 2 and ACT 4 studies and the preparation of the NDA.

RSD1235 (oral)

During fiscal 2005, we completed the Phase 1 and pre-clinical toxicology studies required for initiation of our Phase 2a pilot study of RSD1235 (oral) in December 2005.

In September 2004, we initiated dosing of RSD1235 (oral) in healthy volunteers in a Phase 1 formulation evaluation study in Europe. This study was an open-label, cross-over evaluation of two sustained release formulations of RSD1235 (oral) in comparison to an immediate release formulation of RSD1235 (oral). Based on the successful completion of the study in November 2004, we selected a controlled release formulation for further clinical development.

In November 2004, we initiated a food effect study. The objective of the study was to further evaluate the effect of food on the absorption of our controlled release formulation of RSD1235 in patients under both fed and fasted conditions. Based on the successful completion of the study in April 2005, the results confirmed that RSD1235 absorption is not significantly affected by food, suggesting that dosing need not be restricted according to meal time.

In April 2005, we initiated a 7-day repeat dosing study. The objective of the study was to evaluate the pharmacokinetics (PK), safety and tolerability of orally-administered RSD1235 over 7 days of repeat dosing within an escalating dose regimen. Based on the successful completion of the study in August 2005, the results confirmed that RSD1235 appears to be safe and well-tolerated across all dose levels.

In December 2005, we initiated a Phase 2a pilot study of RSD1235 (oral) for the prevention or delay of recurrence of atrial fibrillation. The double-blind, placebo-controlled, randomized, dose-ranging study will measure the safety and efficacy of RSD1235 (oral) over 28 days of oral dosing in patients at risk of recurrent atrial fibrillation. It is expected that the majority of patients enrolled will have experienced atrial fibrillation for greater than 30 days and less than 180 days in duration. The study will enroll up to 180 patients across 75 centres in Canada, U.S. and Europe.

Total research and development expenditures for this project were $12.9 million for fiscal 2005, compared to $5.1 million and $0.4 for fiscal 2004 and fiscal 2003, respectively. The increase was the result of the increased operational activities associated with the completion of the series of Phase I clinical trials, manufacture of drug supplies, pre-clinical toxicology testing work, and initiation of a Phase 2a Pilot Study.

We expect our research and development expenditures for this project to be higher in fiscal 2006, compared to those incurred in fiscal 2005. The expected cost will relate to the ongoing Phase 2a Pilot Study, additional pre-clinical toxicology testing, proof of concept studies and a Phase 2b Study we plan to conduct in fiscal 2006.

Oxypurinol for Congestive Heart Failure Project

During fiscal 2005, we completed the OPT-CHF study, the EXOTIC-EF Study and The LaPlata Study.

The OPT-CHF Study

OPT-CHF was initiated in March 2003 and patient recruitment was completed in December 2004. The placebo-controlled study investigated the impact of 24 weeks of daily oral dosing of

Oxypurinol (600 mg/day) on the clinical outcomes of an expected 405 moderate to severe symptomatic heart failure patients.

The primary end point of the study was a composite that assigned all patients to one of three categories: improved, unchanged or worsened. Improvement consisted of improvement in New York Heart Association class or improvement in patient global heart failure assessment. Worsening included death, re-hospitalization or emergency clinic visit, requirement for acute change in medication, and other factors. We announced that the study failed to achieve its primary endpoint in August 2005. We completed our detailed analysis of the study results and decided to suspend development of Oxypurinol for the treatment of congestive heart failure in September 2005.

Total research and development expenditures for this project were $9.0 million for fiscal 2005, compared to $8.6 million and $3.3 for fiscal 2004 and fiscal 2003, respectively. In addition, in September 2005 we wrote off $23.3 million of intangible assets, ($14.3 million net of future income tax recovery), related to this program. The non-cash write-offs include a write-down of the remaining intangible assets, which arose from our acquisition of Cardiome, Inc. (formerly Paralex, Inc.) by issuance of our common shares in March 2002, of $22.9 million. Also included is the write-down of the carrying value of patents by $0.5 million.

Other Projects

We started research and development work on Artesian projects and accumulated a total cost of $0.7 million in fiscal 2005 since our acquisition of these projects in October 2005.

Following our decision to stop pursuing the allopurinol intolerant gout indication for Oxypurinol in 2004, research and development expenditures for the Oxypurinol gout project decreased substantially to $0.4 million for fiscal 2005, compared to $3.2 million and $4.4 million for fiscal 2004 and fiscal 2003, respectively. The expenditures incurred for fiscal 2005 were associated with our Compassionate Use Program for allopurinol intolerant gout patients. We also conducted certain pre-clinical studies to support various intellectual property protection and business development activities. These expenditures amounted to $0.1 million in fiscal 2005, compared to $0.5 million and $1.3 million for fiscal 2004 and fiscal 2003, respectively.

General and Administration Expenditures

General and administration expenditures for fiscal 2005 were $9.3 million compared to $7.3 million and $5.6 million for fiscal 2004 and fiscal 2003, respectively.

The increase of $2.0 million in general and administration expenditures in fiscal 2005, compared to those incurred in fiscal 2004, was primarily due to the increase of $1.3 million in wages and benefits (including stock-based compensation for administrative and executive personnel) with the addition of personnel, the increase of $0.5 million in non-labour related overhead associated with business development activities, and $0.2 million in other expenditures to support our expanded operational activities.

We expect the general and administration expenditures for fiscal 2006 to be comparable for those incurred in fiscal 2005.

Amortization

Amortization was $2.7 million for fiscal 2005, compared to $5.1 million and $6.0 million for fiscal 2004 and fiscal 2003, respectively. The decrease in amortization for fiscal 2005, compared to that recorded in fiscal 2004, was attributable to the reduced net book value of our intangible and other assets after the write-down of intangible assets associated with the Oxypurinol CHF project in September 2005.

Write-down of Intangible Assets

We recorded a total write-down of intangible assets of $23.3 million, $11.5 million and $Nil in fiscal 2005, fiscal 2004, and fiscal 2003, respectively. The write-downs were a result of our decisions on the Oxypurinol CHF program in September 2005 and on the Oxypurinol Gout project in September 2004, as described earlier.

Other Income (Expenses)

Interest and other income was $2.0 million for fiscal 2005, compared to $0.7 million and $0.6 million for fiscal 2004 and fiscal 2003, respectively. The increases for both fiscal 2005 and fiscal 2004 were due to higher average balances of cash and short-term investments.

A net foreign exchange loss of $1.9 million was recorded for fiscal 2005, compared to a net foreign exchange loss of $1.1 million and $46,783 for fiscal 2004 and fiscal 2003, respectively. The net foreign exchange loss for fiscal 2005 and fiscal 2004, compared to previous fiscal year, was mainly the result of the strengthening Canadian dollar in comparison to the U.S. dollar on our U.S. dollar denominated investment portfolio, foreign currency receivables and foreign currency payables. We are exposed to market risk related to currency exchange rates in the United States and Europe because the majority of our clinical development expenditures are incurred in United States dollars and Euros. Some of these risks are offset by the reimbursements from Astellas in United States dollars.

Future income tax recovery

Future income tax recovery was $7.2 million for fiscal 2005, compared to $8.8 million and $2.1 million for fiscal 2004 and 2003, respectively. The future income tax recoveries fluctuated based on the amortization and write-down of intangible assets to which they relate as well as the level of losses incurred in our U.S. subsidiary.

SUMMARY OF QUARTERLY AND FOURTH QUARTER RESULTS

Set forth below is the selected unaudited consolidated financial data for each of the last eight quarters:

(In thousands of dollars except		4th Quarter		3rd Quarter		2nd Quarter		1st Quarter
per share amounts)		ended		ended		ended		ended
2005		December 31		September 30		June 30		March 31
Total revenue	$	3,041	$	4,662	$	3,807	$	4,610
Research and development		8,909		9,112		11,940		11,509

General and administration	3,228		1,915		2,192		1,924
Net income (loss) for the period	(8,636	)	(29,472	)	(7,658	)	(7,608	)
Basic and diluted net income
(loss) per common share	(0.17	)	(0.58	)	(0.15	)	(0.18	)

		4th Quarter		3rd Quarter			2nd Quarter			1st Quarter
		ended		ended			ended			ended
2004		December 31		September 30			June 30			March 31
Total revenue	$	11,640	$	4,505		$	5,269		$	4,989
Research and development		8,914		9,744			12,432			7,577
General and administration		2,154		1,414			2,182			1,547
Net income (loss) for the period		1,787		(14,986	)		(9,841	)		(4,727	)
Basic net income (loss) per
common share		0.05		(0.38	)		(0.25	)		(0.13	)
Diluted net income (loss) per
common share		0.04		(0.38	)		(0.25	)		(0.13	)

Summary of Quarterly Results

The primary factors affecting the magnitude of our losses in the various quarters were licensing revenues, write-downs in intangible assets, research and development costs associated with the clinical development programs we pursued and the development stages of these clinical programs; as well as the adoption of our accounting policy with respect to recognizing as an expense the fair value of stock option since December 1, 2002.

The significant increase in revenue for the 4^th Quarter of 2004, when compared with the other quarters, was due to the milestone payment of $7.2 million (US$6 million) earned for the successful completion of the 1^st Phase 3 clinical trial, ACT 1. In addition, the substantial increase in losses for the 3^rd quarters in 2005 and 2004, when compared with the other quarters, were due to the write-down of technology and licenses following our decision to discontinue our Oxypurinol CHF project and Oxypurinol Gout project, respectively. The increase in research and development expenditures since the 2^nd Quarter in 2004, compared with the 1^st Quarter in 2004, was due to the expanded research and development activities primarily related to our RSD1235 (iv) project. Research and development cost for other quarters were comparable since we maintained similar levels of operational activities with the advancement of RSD1235 (oral) after winding up our development of Oxypurinol for treatment of CHF and gout. The increase in general and administration cost for the 4^th quarter in 2005 was due to the addition of personnel and expanded in-licensing activities.

Summary of Fourth Quarter Results

We recorded a net loss $8.6 million in the quarter ended December 31, 2005, compared to a net loss of $29.5 million in the preceding quarter. The primary factor for the decrease in net loss was due to the write-down of technology and licenses related to Oxypurinol CHF project in the preceding quarter. Total revenue was $3.0 million, compared to $4.7 million in the preceding quarter. The decrease in revenue was primarily due the lower research collaborative fees from Astellas with more development activities associated with RSD1235 (iv) being managed by Astellas. This is offset by an increase in general and administration costs. General and administration costs were $3.2 million in the fourth quarter, compared to $1.9 million in the

preceding quarter. The increase in general and administration costs were due to the addition of personnel and expanded in-licensing activities.

SELECTED CONSOLIDATED FINANCIAL INFORMATION

The following table sets forth consolidated financial data for our last three fiscal periods:

	Fiscal Periods Ended
	December 31, 2005		December 31, 2004		December 31, 2003(1)
	$		$		$
	(in thousands of dollars, except earnings per share)
Revenues	16,120		26,403		6,047
Net loss	(53,374	)	(27,767	)	(19,866	)
Per share loss
- Basic	(1.09	)	(0.71	)	(0.63	)
- Fully diluted	(1.09	)	(0.71	)	(0.63	)
Total assets	89,799		68,326		92,124
Long-term obligation (2)	210		245		34

(1)	On December 31, 2003, we changed our fiscal year end from November 30 to December 31. As such, the data in this column reflects a 13 month period. In addition, we elected to prospectively adopt the recommendations of the C.I.C.A. new Handbook section 3870, Stock-based Compensation and other Stock-based Payments, effective December 1, 2002. This standard requires that all stock-based awards be measured and recognized using a fair value based method. For the thirteen months ended December 31, 2003, we recorded $1,991,865 and $67,188 of stock-based compensation for the stock options granted after December 1, 2002, to employees and non-employees, respectively. The increase in revenues and net loss since November 30, 2002 reflects our expanded clinical development activities and our partnering agreement with Astellas.
(2)	Amounts represent capital lease obligations and repayable tenant inducement advances.
(3)	We have not declared any cash dividends since inception.

LIQUIDITY AND CAPITAL RESOURCES

Sources and Uses of Cash

Our operational activities during fiscal 2005 were financed mainly by our working capital carried forward from the preceding fiscal year, research collaborative fees collected from Astellas, and the net proceeds from equity financing and exercise of stock options by employees.

Cash used in operating activities for fiscal 2005 was $24.0 million, compared to $29.7 million and $5.8 million for fiscal 2004 and fiscal 2003, respectively. Cash used in operating activities was composed of net loss, add-backs or adjustments not involving cash, net change in non-cash working items, and the amortization of deferred revenue. The decrease of $5.7 million in cash used in operating activities in fiscal 2005, compared to fiscal 2004, was primarily due to an increase of cash receipts of $17.7 million from changes in non-cash working capital items. This increase was offset by an increase in net loss after adjusting all non-cash items of $12 million.

Cash provided by financing activities in fiscal 2005 was $77.7 million, compared to $11.5 million and $31.0 million in fiscal 2004 and fiscal 2003, respectively. The main sources of cash in fiscal 2005 were net proceeds from public and private placement financing of $73.4 million [2004 - $Nil and 2003 - $28.5 million], and cash receipts from the issuance of our common shares upon exercise of stock options or warrants of $4.3 million [2004 - $7.4 million and 2003 - $2.5 million]. For fiscal 2004, we also received $4.1 million of cash from Astellas for its investment in our common shares.

Cash used in investing activities in fiscal 2005 was $51.7 million, compared to $17.7 cash provided by investing activities in fiscal 2004, and $18.9 million cash used in investing activities in fiscal 2003. The increase of $69.7 million of cash used in investing activities in fiscal 2005, as compared to fiscal 2004, was due to an increase of net purchase of short-term investments by $67.3 million, an increase of $0.8 million in property, plant and equipment (net of leasehold inducements) and an increase of $1.3 million in costs related to the acquisition of Artesian.

At December 31, 2005, we had working capital of $69.6 million, compared to $26.8 million at December 31, 2004. We had available cash reserves comprised of cash, cash equivalents and short-term investments of $74.0 million at December 31, 2005, compared to $24.4 million at December 31, 2004.

As of December 31, 2005 and in the normal course of business we have obligations to make future payments, representing contracts and other commitments that are known and committed.

	Contractual Obligations
	Payment due by period
(In thousands of dollars)	Total	2006	2007-2008	2009–2010	Thereafter
Other Long-term Obligations	$210	$18	$40	$50	$102
Operating Lease Obligations	5,871	788	1,378	1,417	2,288
Commitments for Clinical Research Agreements (1)	9,800	9,800	Nil	Nil	Nil
Commitments under License Agreements(2)	652	70	233	233	116 per annum
Total	$16,533	$10,676	$1,651	$1,700	$2,506

(1)

The total commitment of $9.8 million reflects $2.0 million of commitments that are non-cancellable and $7.8 million of commitments that are cancellable should we decide to discontinue the related clinical research work.

(2)

As of December 31, 2005, pursuant to four license and service agreements, the Company has various commitments as described in Note 11(c) of our annual consolidated financial statements for the year ended December 31, 2005 (“2005 Annual Financial Statements”) . The majority of these commitments are contingent upon achievement of certain milestones which may or may not actually occur. The amounts disclosed in this table represent minimum annual royalties described in Notes 11(c) (iii) of the 2005 Annual Financial Statements, converted into Canadian Dollars at the closing rate on December 31, 2005 of CAD$1.00=US$0.8598.

Outstanding Share Capital

As of February 28, 2006, there were 51,738,896 common shares issued and outstanding, 71,804 common share purchase warrants at a weighted average exercise price of US$4.87, 4,777,410 stock options outstanding (of which 3,270,529 were exercisable) at a weighted average exercise price of $5.97 and 1,036,098 common shares issuable upon the exercise of Special Warrants without payment of any additional consideration. The Special Warrants were exercised into 1,036,098 common shares on March 13, 2006.

RELATED PARTY TRANSACTIONS

Included in accounts payable and accrued liabilities as of December 31, 2005 was $32,818 (December 31, 2004 - $54,688) owing to a legal firm where the Company’s corporate secretary is a partner. The amounts charged were recorded at their exchange amounts and are subject to normal trade terms. We incurred approximately $1.2 million of legal fees for services provided by this legal firm in fiscal 2005, compared to $0.2 million and $Nil in fiscal 2004 and fiscal 2003, respectively.

OFF-BALANCE SHEET ARRANGMENTS

We have no off-balance sheet arrangements.

FINANCIAL INSTRUMENTS AND RISKS

We are exposed to market risks related to changes in interest rates and foreign currency exchange rates. We invest our cash reserves in fixed rate, highly liquid and highly rated financial instruments such as treasury bills, commercial papers and banker’s acceptances. We have not entered into any forward currency contracts or other financial derivatives to hedge foreign exchange risk. We are subject to foreign exchange rate changes that could have a material effect on future operating results or cash flows.

We believe that our cash position as of December 31, 2005, the anticipated cash inflows from our collaborative partner and interest income should be sufficient to finance our operational and capital needs for at least the next two years. However, our future cash requirements may vary materially from those now expected due to a number of factors, including the costs associated with the completion of the clinical trials, collaborative and license arrangements with third parties, and opportunities to in-license complementary technologies. We will continue to review our financial needs and seek additional financing as required from sources that may include

equity financing, and collaborative and licensing arrangements. However, there can be no assurance that such additional funding will be available or if available, whether acceptable terms will be offered.

MANAGEMENT’S RESPONSIBILITY FOR FINANCIAL REPORTING

The accompanying consolidated financial statements have been prepared by management in accordance with Canadian generally accepted accounting principles and have been approved by the Board of Directors. The integrity and objectivity of these consolidated financial statements are the responsibility of management. In addition, management is responsible for all other information in this report and for ensuring that this information is consistent, where appropriate, with the information contained in the consolidated financial statements.

In support of this responsibility, management maintains a system of internal controls to provide reasonable assurance as to the reliability of financial information and the safeguarding of assets. The consolidated financial statements include amounts that are based on the best estimates and judgements of management.

The Board of Directors is responsible for ensuring that management fulfils its responsibility for financial reporting and internal control. The Board of Directors exercises this responsibility principally through the Audit Committee. The Audit Committee consists of three directors not involved in the daily operations of the Company. The Audit Committee meets with management and the external auditors to satisfy itself that management’s responsibilities are properly discharged and to review the consolidated financial statements prior to their presentation to the Board of Directors for approval.

The external auditors, Ernst & Young LLP, conduct an independent examination, in accordance with Canadian and United States generally accepted auditing standards, and express their opinion on the consolidated financial statements. The external auditors have free and full access to the Audit Committee with respect to their findings concerning the fairness of financial reporting and the adequacy of internal controls.

“Bob Rieder”	“Doug Janzen”
Robert Rieder	Doug Janzen
Chief Executive Officer and Vice-Chairman	Chief Financial Officer

EX-99.5

Form 52-109FT2 – Certification of Annual Filings during Transition Period

I, Douglas G. Janzen, Chief Financial Officer of Cardiome Pharma Corp., certify that:

1.	I have reviewed the annual filings (as this term is defined in Multilateral Instrument 52- 109 Certification of Disclosure in Issuers’ Annual and Interim Filings) of Cardiome Pharma Corp. (the issuer) for the period ending December 31, 2005;
2.	Based on my knowledge, the annual filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made, with respect to the period covered by the annual filings; and
3.	Based on my knowledge, the annual financial statements together with the other financial information included in the annual filings fairly present in all material respects the financial condition, results of operations and cash flows of the issuer, as of the date and for the periods presented in the annual filings.

Date: March 31, 2006

“Doug Janzen”

Douglas G. Janzen

Chief Financial Officer

EX-99.6

Form 52-109FT2 – Certification of Annual Filings during Transition Period

I, Robert W. Rieder, Chief Executive Officer of Cardiome Pharma Corp., certify that:

1.	I have reviewed the annual filings (as this term is defined in Multilateral Instrument 52- 109 Certification of Disclosure in Issuers’ Annual and Interim Filings) of Cardiome Pharma Corp. (the issuer) for the period ending December 31, 2005;
2.	Based on my knowledge, the annual filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made, with respect to the period covered by the annual filings; and
3.	Based on my knowledge, the annual financial statements together with the other financial information included in the annual filings fairly present in all material respects the financial condition, results of operations and cash flows of the issuer, as of the date and for the periods presented in the annual filings.

Date: March 31, 2006

“Bob Rieder”

Robert W. Rieder

Chief Executive Officer