40-F/A

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 40-F/A

Amendment No. 1

[     ] REGISTRATION STATEMENT PURSUANT TO SECTION 12 OF THE SECURITIES EXCHANGE ACT OF 1934

OR

[ X ] ANNUAL REPORT PURSUANT TO SECTION 13(a) OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2011 Commission File Number 000-29338

CARDIOME PHARMA CORP.

(Exact name of Registrant as specified in its charter)

Canada

(Province or other jurisdiction of incorporation or organization)

2834

(Primary Standard Industrial Classification Code Number (if applicable))

Not Applicable

(I.R.S. Employer Identification Number (if applicable))

6th Floor, 6190 Agronomy Road

Vancouver, British Columbia, Canada V6T 1Z3

(604) 677-6905

(Address and telephone number of Registrant's principal executive offices)

CT Corporation

111 Eighth Avenue

New York, New York 10011

(212) 894-8940

(Name, address (including zip code) and telephone number (including area code)

of agent for service in the United States)

Securities registered or to be registered pursuant to Section 12(b) of the Act:

Title of each class	Name of each exchange on which registered
Common Shares, no par value	Nasdaq Stock Market

Securities registered or to be registered pursuant to Section 12(g) of the Act:

None

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:

None

For annual reports, indicate by check mark the information filed with this Form:

[ X ] Annual Information Form [ X ] Audited Annual Financial Statements

Indicate the number of outstanding shares of each of the issuer's classes of capital or common stock as of the close of the period covered by the annual report:

The Registrant had 61,129,091 Common Shares outstanding as at December 31, 2011.

Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.

Yes  [  X  ]        No [       ]

Indicate by check mark whether registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit and post such files).

Yes  [  X  ]        No [       ]

EXPLANATORY NOTE

Cardiome Pharma Corp. (the "Registrant") is filing this Form 40-F/A to the Registrant's Annual Report on Form 40-F, dated March 28, 2012 (the "Form 40-F"), for the sole purpose of submitting Exhibit 101 to the Form 40-F as required by General Instruction B.(15)(a)(i) of Form 40-F and Rule 405 of Regulation S-T.  Exhibit 101 was omitted from the Registrant's timely filed Form 40-F in accordance with the 30-day grace period provided in Preliminary Note 3(a)(2)(ii) to Rule 405 of Regulation S-T.

No other changes have been made to the Form 40-F.  This Form 40-F/A speaks as of the original time of filing the Form 40-F, does not reflect events that may have occurred subsequent to such filing, and does not modify or update in any way disclosures made in the Form 40-F.

SIGNATURES

Pursuant to the requirements of the Exchange Act, the Registrant certifies that it meets all of the requirements for filing on Form 40-F and has duly caused this annual report to be signed on its behalf by the undersigned, thereto duly authorized.

        Date:  April 25, 2012 CARDIOME PHARMA CORP.     By: /s/ DOUGLAS JANZEN Name:   Douglas Janzen Title:     President and Chief Executive Officer

EXHIBIT INDEX

Exhibit No.	Description
1.1*	Annual Information Form for the fiscal year ended December 31, 2011.
1.2*	Audited Consolidated Financial Statements for the fiscal year ended December 31, 2011.
1.3*	Management's Discussion and Analysis of Financial Condition and Results of Operations for the fiscal year ended December 31, 2011.
23.1*	Consent of KPMG LLP.
31.1*	Certifications of Chief Executive Officer (Principal Executive Officer) and Chief Financial Officer (Principal Financial Officer) pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1*	Certification of Chief Executive Officer (Principal Executive Officer) and Chief Financial Officer (Principal Financial Officer) pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101	Interactive Data File.

* Previously filed with the Commission.

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Note 19 - Segmented information:

12 Months Ended

Dec. 31, 2011

Segment Reporting Disclosure [Text Block]

19.   Segmented information

The Company operates primarily in one business segment with substantially all of its consolidated assets located in Canada and operations located in Canada, the United States, Switzerland and the United Kingdom. During the years ended December 31, 2011 and 2010, 100% of total revenue was derived from two collaborators (note 15).

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Note 3 - Changes in significant accounting policies:

12 Months Ended

Dec. 31, 2011

New Accounting Pronouncement or Change in Accounting Principle, Description

3.     Changes in significant accounting policies

(a)  Multiple-Deliverable Revenue Arrangements:

On January 1, 2011, the Company prospectively adopted amendments issued by the Financial Accounting Standards Board (“FASB”) associated with multiple-deliverable revenue arrangements. These amendments (a) provide principles and application guidance on whether multiple deliverables exist, how the arrangement should be separated, and the consideration allocated; (b) require an entity to allocate revenue in an arrangement using estimated selling prices of deliverables if a vendor does not have vendor-specific objective evidence or third-party evidence of selling price; (c) eliminate the use of the residual method and require an entity to allocate the revenue using the relative selling price method; and (d) significantly expand related disclosure requirements. The adoption of the amendments did not have a material impact on the Company’s consolidated financial position, results of operations or cash flows for the periods presented.

 (b)  Milestone method of revenue recognition:

On January 1, 2011, the Company prospectively adopted guidance issued by the FASB on the milestone method of revenue recognition for research and development transactions. This method relates to consideration that is contingent upon achievement of a milestone such as the payments provided for under the Company’s collaboration and license agreements. The Company determines the revenue recognition of contingent milestones at the inception of a collaboration and license agreement.  Payments are recognized in their entirety in the period earned for substantive milestones for which the consideration (a) is commensurate with the Company’s performance to achieve the milestone or enhance the value of the delivered item, (b) relates to past performance and (c) is reasonable relative to the deliverables and payment terms within the agreement. The Company has determined all milestones under current collaboration and license agreements to be substantive. There have been no milestones recognized since adoption. The adoption of the guidance did not have a material impact on the timing or pattern of revenue recognition relative to the Company’s collaboration and license agreements nor is expected to in future periods.

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Note 2 - Significant accounting policies:

12 Months Ended

Dec. 31, 2011

Basis of Presentation and Significant Accounting Policies [Text Block]

2.     Significant accounting policies

These consolidated financial statements have been prepared in accordance with U.S. GAAP and are presented in United States dollars. The following is a summary of significant accounting policies used in the preparation of these consolidated financial statements:

(a)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 the United States), Cardiome Development AG (a company continued under the laws of Switzerland), and Cardiome UK Limited (incorporated in the United Kingdom). Intercompany accounts and transactions have been eliminated on consolidation.

(b)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 and amortization period of intangible assets, accrual of clinical trial and research expenses, reporting of revenue recognition, and accounting for stock-based compensation expense. 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.

(c)Foreign currency translation:

The Company and its subsidiaries translate monetary assets and liabilities denominated in foreign currency into U.S. dollars using exchange rates in effect at the balance sheet date.  Non-monetary assets and liabilities are translated at historical exchange rates. Revenues and expenses are translated at average exchange rates during the period. Foreign exchange gains and losses related to available-for-sale financial assets are recognized as part of other comprehensive income (loss) until realized. All other foreign exchange gains and losses are included in the determination of net income.

(d)Financial instruments:

Fair value measurements of financial instruments are determined by using a fair value hierarchy that prioritizes the inputs to valuation techniques into three levels according to the relative reliability of the inputs used to estimate the fair values.

The three levels of inputs used to measure fair value are as follows:

Level 1 – Unadjusted quoted prices in active markets for identical financial instruments;

Level 2 – Inputs other than quoted prices that are observable for the financial instrument either directly or indirectly; and

Level 3 – Inputs that are not based on observable market data.

In determining fair value measurements, we use the most observable inputs when available. The fair value hierarchy level at which a financial instrument is categorized is determined on the basis of the lowest level input that is significant to the fair value measurement.

 (e)Cash and cash equivalents:

The Company considers all highly liquid investments with an original maturity of 90 days or less, when acquired, to be cash equivalents, which are carried at fair value and are designated as held for trading.

 (f)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 determined to be either held for trading or available-for-sale at the time of purchase and are carried at fair value. Subsequent to initial measurement, changes in fair value of held for trading financial instruments are included in the determination of net income and changes in fair value of available-for-sale financial instruments are recognized as other comprehensive income or loss.

(g)Property and equipment:

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

Asset	Rate
Laboratory equipment	5 years
Computer equipment	3 years
Office equipment	5 years

Leasehold improvements are amortized on a straight-line basis over the lesser of their estimated useful life or the initial lease term.

 (h)Intangible assets:

Intangible assets are comprised of patent costs which are associated with the preparation, filing, and obtaining of patents. Maintenance costs of patents are expensed as incurred. Patents are capitalized and amortized on a straight-line basis over the useful lives of the underlying technologies and patents, usually for a period not exceeding 10 years.

The Company evaluates the recoverability of patents 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. The amounts shown for 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.

 (i)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 to the Company 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.

 (j)Deferred leasehold inducements:

Deferred leasehold inducements represent tenant improvement allowances and rent-free periods. These inducements, with the exception of the repayable tenant improvement allowances, are amortized on a straight-line basis over the terms of the leases as a reduction of rent expense.

 (k)Revenue recognition:

The Company earns revenue from collaboration arrangements that provide for non-refundable payments as follows:

·   upfront fees at the commencement of the arrangement;

·   milestone payments upon meeting certain milestones as contained in the related collaboration arrangements; and

·   fees based on the number of full time research staff assigned to related research activities and the recovery of related research and development costs.

The Company also earns royalty revenue from a collaboration and license agreement from the commercial sale of an approved product.

Collaboration arrangements entered into by the Company may be revenue arrangements with multiple deliverables. The Company reviews multiple deliverable arrangements and treats elements as separate units of accounting if the following criteria are met:

·   delivered item(s) has standalone value; and

·   if a general right of return exists relative to the delivered item, delivery or performance of the undelivered item(s) is considered probable and substantially in control of the vendor

Revenue is allocated among the separate units at inception based on their relative selling price. If vendor-specific objective evidence or third-party evidence of selling price does not exist then revenue is allocated using estimated selling prices of deliverables. Revenue from a multiple deliverable arrangement is recognized as a single unit of accounting when the elements in the arrangement do not meet the criteria for separation.

Revenue recognized as a single unit of accounting during the period of ongoing involvement is deferred and amortized on a straight-line basis over the period of ongoing involvement. To the extent that the Company is entitled to upfront, milestone or other lump-sum payments during the period of ongoing involvement, the payments are deferred and amortized on a straight-line basis over the remaining period of ongoing involvement. During this period, the Company will recognize revenue prospectively from the time milestone payments are achieved, services are performed or delivery criteria are met. Changes in estimates are recognized prospectively when changes to the expected term are determined.

Subsequent to the period of ongoing involvement of the Company, milestone payments and fees based on the number of full time research staff are recognized as detailed below:

i)   Milestone payments are recognized as revenue when they are achieved and are collectible.

ii)Fees based on the number of full time research staff assigned to related research activities and the recovery of related research and development costs are recognized in income as

research and collaborative fees to the extent the services are performed, are collectible, and represent the fair value of those services.

Royalty revenue is recognized on an accrual basis when earned in accordance with the agreement terms and when royalties from the collaborative partner are determinable and collectibility is reasonably assured, such as upon the receipt of a royalty statement from the collaborative partner.

(l)Research and development costs:

Research and development costs are expensed in the period incurred.

(m)Clinical trial expenses:

Clinical trial expenses are a component of research and development costs and include fees paid to contract research organizations, investigators and other vendors who conduct certain product development activities on our behalf.  The amount of clinical trial expenses recognized in a period related to service agreements are based on estimates of the work performed using an accrual basis of accounting.  These estimates are based on patient enrollment, services provided and goods delivered, contractual terms and experience with similar contracts.  The Company monitors these factors to the extent possible and adjusts our estimates accordingly.  Prepaid expenses or accrued liabilities are adjusted if payments to service providers differ from estimates of the amount of service completed in a given period.

 (n)Stock-based compensation and other stock-based payments:

The Company grants stock options to executive officers and directors, and employees 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. Compensation expense is recorded based on the fair value of the award at the grant date, amortized over the vesting period.

(o)Deferred income taxes:

The Company accounts for income taxes using the liability method of tax allocation. Deferred income taxes are recognized for the deferred income tax consequences attributable to differences between the carrying values of assets and liabilities and their respective income tax bases. Deferred income tax assets and liabilities are measured using 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 deferred income tax assets and liabilities of a change in tax rates is included in income when a change in tax rates is enacted.  Deferred income tax assets are evaluated periodically and if realization is not considered more likely than not, a valuation allowance is provided.

(p)Basic and diluted income per share:

Basic income per share is calculated using the weighted average number of common shares outstanding during the period.

Diluted income per share is calculated using the weighted average number of common shares outstanding during the period, adjusted to include the number of incremental common shares that would have been outstanding if all dilutive potential common shares had been issued. The incremental common shares related to stock options are calculated using the treasury stock method, whereby the potential proceeds from the exercise of dilutive stock options are used to purchase the Company’s common shares at the average market price during the period.

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Consolidated Balance Sheets (USD $) In Thousands, unless otherwise specified	Dec. 31, 2011	Dec. 31, 2010
Current assets:
Cash and cash equivalents (note 6)	$ 48,644	$ 76,888
Accounts receivable	1,248	732
Prepaid expenses and other assets	628	1,000
	50,520	78,620
Property and equipment (note 7)	1,967	2,069
Intangible assets (note 8)	1,548	1,635
	54,035	82,324
Current liabilities:
Accounts payable and accrued liabilities (note 9)	3,188	5,705
Current portion of deferred leasehold inducement (note 10)	116	216
	3,304	5,921
Deferred leasehold inducement (note 10)	445	486
Long-term debt (note 11)	25,000	25,000
	28,749	31,407
Stockholders’ equity:
Common stock (note 12) Authorized - unlimited number with no par value Issued and outstanding – 61,129,091 (2010 – 61,052,362)	262,097	261,554
Additional paid-in capital	32,208	30,462
Deficit	(287,204)	(259,284)
Accumulated other comprehensive income	18,185	18,185
	25,286	50,917
	$ 54,035	$ 82,324

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Consolidated Statements of Cash Flows (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2011	Dec. 31, 2010
Cash flows from operating activities:
Net income (loss) for the year	$ (27,920)	$ 35,499
Items not affecting cash:
Amortization	1,095	1,154
Stock-based compensation	1,931	3,277
Deferred leasehold inducement	(123)	(193)
Unrealized foreign exchange gain	(61)	(180)
Loss on write-down of intangible assets	95	25
Changes in operating assets and liabilities:
Accounts receivable	(506)	711
Prepaid expenses and other assets	372	(505)
Accounts payable and accrued liabilities	(2,492)	(1,914)
Deferred revenue		(35,197)
Net cash provided by (used in) operating activities	(27,609)	2,677
Cash flows from investing activities:
Purchase of property and equipment	(676)	(274)
Purchase of intangible assets	(343)	(310)
Net cash used in investing activities	(1,019)	(584)
Cash flows from financing activities:
Issuance of common stock upon exercise of stock options	358	2,359
Proceeds from draws of long-term debt (note 11)		25,000
Net cash provided by financing activities	358	27,359
Effect of foreign exchange rate changes on cash and cash equivalents	26	166
Increase (decrease) in cash and cash equivalents during the year	(28,244)	29,618
Cash and cash equivalents, beginning of year	76,888	47,270
Cash and cash equivalents, end of year	48,644	76,888
Supplemental cash flow information:
Interest paid	2,241	1,991
Interest received	$ 22	$ 16

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Note 16 - Income taxes:

12 Months Ended

Dec. 31, 2011

Income Tax Disclosure [Text Block]

16.   Income taxes

The amount of liability for unrecognized tax benefits under U.S. GAAP as of December 31, 2011 is nil.  

The Company recognizes interest and penalties related to income taxes in interest and other income. To date, the Company has not incurred any significant interest and penalties.

The Company is subject to taxes in Canada, the United States, United Kingdom and Switzerland.  The tax years which remain subject to examination as of December 31, 2011 for Canada and Switzerland include 2003 to present, and 2008 to present, respectively.  

At December 31, 2011, the Company has investment tax credits of $16,994 (2010 - $15,657) available to reduce deferred income taxes otherwise payable. The Company also has loss carryforwards of $223,538 (2010 - $163,567) available to offset future taxable income in Canada ($154,660), the United States ($44,471), Switzerland ($24,349), and United Kingdom ($58).

The investment tax credits and non-capital losses for income tax purposes expire as follows:

	Investment		Non-capital
	tax credits		losses
2012	$	54	$	-
2013		254		-
2014		90		-
2015		359		12,369
2016		1,064		8,048
Thereafter		15,173		203,121
	$	16,994	$	223,538

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

	2011			2010
Deferred tax assets:
Tax loss carryforwards	$	55,699		$	42,615
Research and development deductions and credits		13,413			12,538
Tax values of depreciable assets in excess of accounting values		4,619			10,352
Other		158			533
Total deferred tax assets		73,889			66,038
Valuation allowance		(73,889	)		(66,038	)
Total deferred tax assets		-			-
Deferred tax liabilities		-			-
Net tax asset	$	-		$	-

The reconciliation of income tax computed at statutory tax rates to income tax expense (recovery), using a 26.50% (2010 – 28.5%) statutory tax rate, is:

		2011			2010
Tax recovery at statutory income tax rates	$	(7,399	)	$	10,117
Change in valuation allowance		7,852			(8,540	)
Foreign exchange		-			(4,227	)
Permanent differences and other		(580	)		1,280
Tax rate differences		127			1,370
Deferred income tax recovery	$	-		$	-

The Company is subject to assessments by various taxation authorities which may interpret tax legislations and tax filing positions differently from the Company.  The Company provides for such differences when it is likely that a taxation authority will not sustain the Company’s filing position and the amount of the tax exposure can be reasonably estimated.  As at December 31, 2011 and 2010, no provisions have been made in the financial statements for any estimated tax liability.

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Note 18 - Contingencies:

12 Months Ended

Dec. 31, 2011

Contingencies Disclosure [Text Block]

18.   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.

(c)The Company has entered into license and research agreements with third parties that include indemnification provisions that are customary in the industry. These indemnification provisions 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.

(d) The Company is party to a proceeding related to its use of certain intellectual property, however, management believes that the possibility of a material loss arising from this matter is not likely.

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Note 1 - Nature of operations:

12 Months Ended

Dec. 31, 2011

Nature of Operations [Text Block]

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 research-based biopharmaceutical company focused on the discovery, development and commercialization of new therapies that will improve the life and health of patients.

The Company has financed its cash requirements primarily from share issuances, payments from research collaborators, licensing fees, and draws from a credit facility available under a collaborative agreement. 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. These funds may come from sources which include accessing the credit facility available under the Company’s collaborative agreement (note 15(b)), entering into strategic collaboration arrangements, issuance of shares, or alternative sources of financing. However, there can be no assurance that the Company will successfully raise sufficient funds to continue the development of all its technologies.

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Consolidated Balance Sheets (Parentheticals) (USD $)	Dec. 31, 2011	Dec. 31, 2010
Common stock, Issued	61,129,091	61,052,362
Common stock, outstanding	61,129,091	61,052,362
Common stock no par value (in Dollars per share)	$ 0	$ 0

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Note 11 - Long term debt:

12 Months Ended

Dec. 31, 2011

Debt Disclosure [Text Block]

11.  Long term debt

Pursuant to a collaboration and license agreement with Merck & Co., Inc. (Merck), Merck has granted the Company an interest-bearing credit facility of up to $100 million, secured by a first priority interest to the Company’s patents and all associated proceeds. This credit facility can be accessed in amounts of up to $25 million annually, subject to certain minimums, from January 1, 2010 to December 31, 2013, with each advance to be fully repaid on December 31st, six years after the year in which the Company provides Merck written notice to extend the credit under the credit facility. Interest accrues at LIBOR, which resets annually, plus 8% per annum and is payable at the end of each calendar quarter. At December 31, 2011, the interest rate was 8.8% (December 31, 2010 – 8.9%).

The Company borrowed $25 million under this facility during the year ended December 31, 2010. The Company may at its option, repay all or a portion of the advance from time to time without premium or penalty. This advance must be repaid in full by December 31, 2016.

As at December 31, 2011, the carrying value of the Company’s long-term debt approximates its fair value based on current market borrowing rates. The long-term debt is classified as Level 2 of the fair value hierarchy.

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Document And Entity Information	12 Months Ended
	Dec. 31, 2011
Document and Entity Information [Abstract]
Entity Registrant Name	CARDIOME PHARMA CORP
Document Type	40-F
Current Fiscal Year End Date	--12-31
Entity Common Stock, Shares Outstanding	61,129,091
Amendment Flag	false
Entity Central Index Key	0001036141
Entity Current Reporting Status	Yes
Document Period End Date	Dec. 31, 2011
Document Fiscal Year Focus	2011
Document Fiscal Period Focus	FY

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Note 12 - Stockholders' equity:

12 Months Ended

Dec. 31, 2011

Shareholders' Equity and Share-based Payments [Text Block]

12.  Stockholders’ equity

(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.

 (b)Issued and outstanding:

	Number
Common stock	of shares
Balance, December 31, 2009		60,513,911
Issued for cash upon exercise of options		442,694
Issued upon exercise of options in cashless transactions (note 12(c))		95,757
Balance, December 31, 2010		61,052,362
Issued for cash upon exercise of options		73,152
Issued upon exercise of options in cashless transactions (note 12(c))		3,577
Balance, December 31, 2011		61,129,091

(c)Stock options:

The Company’s 2001 amended stock option plan (2001 Amended Plan) provides for the granting of options to executive officers and directors, employees, and consultants of the Company. The 2001 Amended Plan, as approved by the shareholders, permits the maximum aggregate number of common shares issuable to be 7,000,000 common shares. The shares available for issuance generally vest over periods of up to four years with a maximum term of five years. The 2001 Amended plan restricts the maximum number of stock options issuable to insiders to 10% of the issued and outstanding common shares of the Company.

On May 26, 2010, the shareholders approved amendments to the 2001 Stock Option Plan. These amendments (i) permit the cashless exercise of options without payment of cash consideration, where the option holder receives the intrinsic value of the exercised options in the form of common shares issued from treasury, and (ii) provide option holders, at the discretion of the Board of Directors or Chief Executive Officer, with a cash surrender right which entitles the holder to surrender options and receive the intrinsic value of the surrendered options in cash.      

Details of the stock option transactions for the years ended December 31, 2011 and 2010 are summarized as follows:

	Number			Weighted average exercise price (CAD$)		Weighted average remaining contractual life (years)		Aggregate intrinsic value (CAD$)
Outstanding as at December 31, 2009		6,339,031			7.45
Options granted		379,000			7.28
Options exercised(1)		(772,483	)		5.85
Options forfeited		(183,832	)		7.89
Options expired		(52,667	)		6.99
Outstanding as at December 31, 2010		5,709,049			7.65		2.24		4,525
Options granted		559,000			4.28
Options exercised(2)		(85,051	)		4.84
Options forfeited		(258,482	)		7.82
Options expired		(1,039,553	)		8.81
Outstanding as at December 31, 2011		4,884,963			7.05		1.99	Nil
Exercisable as at December 31, 2011		3,712,248			7.74		1.70	Nil
Vested and expected to vest as at December 31, 2011		4,752,105			7.11		1.94	Nil

(1)   During the year ended December 31, 2010, the Company issued 95,757 shares in exchange for 329,089 stock options in cashless exercise transactions.

(2)   During the year ended December 31, 2011, the Company issued 3,577 shares in exchange for 11,899 stock options in cashless exercise transactions.

The outstanding options expire at various dates from March 5, 2012 to September 25, 2016.

At December 31, 2011, stock options to executive officers and directors, employees and consultants were outstanding as follows:

		Options outstanding						Options exercisable
				Weighted
				average		Weighted				Weighted
				remaining		average				average
Range of				contractual		exercise				exercise
exercise prices		Number		life (years)		price		Number		price
						(CAD$)				(CAD$)
$	3.65 to $4.15		290,000		4.68		3.66		135,125		3.65
$	4.65 to $6.24		2,823,117		2.27		4.76		1,867,777		4.72
$	7.89 to $8.64		192,000		3.39		8.43		129,500		8.40
$	8.98 to $13.93		1,579,846		0.81		11.61		1,579,846		11.61
			4,884,963		1.99		7.05		3,712,248		7.74

A summary of the Company’s non-vested stock option activity and related information for the year ended December 31, 2011 is as follows:

	Number			Weighted average
	of			grant-date fair value
Non-vested options	options			(U.S.$)
Non-vested at December 31, 2010		1,695,607			2.53
Granted		559,000			2.20
Vested		(983,590	)		2.37
Forfeited		(98,302	)		2.40
Non-vested at December 31, 2011		1,172,715			2.51

                As of December 31, 2011, there was $814 of total unrecognized compensation cost related to non-vested stock options. That cost is expected to be recognized over a weighted average period of 1.3 years.

The aggregate intrinsic value of stock options exercised during the year ended December 31, 2011 was $140 (2010 - $1,974).

The aggregate fair value of vested options during the year ended December 31, 2011 was $2,334 (2010 - $3,973).

Cash received during the year ended December 31, 2011 related to the exercise of stock options was $358.

(d)Stock-based compensation:

The estimated fair value of options granted from December 1, 2002 to executive officers and directors, and employees is amortized over the vesting period. Compensation expense is recorded in research and development expenses and general and administration expenses as follows:

	2011		2010
Research and development	$	749	$	1,138
General and administration		1,182		2,139
Total	$	1,931	$	3,277

The weighted average fair value of stock options granted during the years ended December 31, 2011 and December 31, 2010 was $2.20 and $3.50 per option 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:

		2011			2010
Dividend yield		0	%		0	%
Expected volatility		63.8	%		62.2	%
Risk-free interest rate		1.8	%		2.3	%
Expected average life of the options	4.2 years			4.1 years

The Company estimates forfeitures for unvested options as a percentage of stock-based compensation. For the period ended December 31, 2011, the Company applied an estimated percentage of 11.4%, which management considered to be a reasonable estimate of actual forfeitures.

There is no dividend yield as the Company has not paid, and does not plan to pay, dividends on its common shares. The expected volatility is based on the historical share price volatility of the Company’s daily share closing prices over a period equal to the expected life of each option grant. The risk-free interest rate is based on yields from Canadian government bond yields with a term equal to the expected term of the options being valued. The expected life of options represents the period of time that the options are expected to be outstanding based on the contractual term of the options and on historical data of option holder exercise and post-vesting employment termination behaviour.

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Consolidated Statements of Operations and Comprehensive Income (Loss) (USD $) In Thousands, except Share data, unless otherwise specified	12 Months Ended
	Dec. 31, 2011	Dec. 31, 2010
Revenue:
Licensing and other fees (note 15)	$ 453	$ 65,234
Research collaborative fees (note 15)	1,052	830
	1,505	66,064
Expenses:
Research and development	15,224	15,339
General and administration	11,549	12,875
Amortization	1,095	1,154
Loss on write-down of intangible assets	95	25
	27,963	29,393
Operating income (loss)	(26,458)	36,671
Other expenses (income):
Interest expense	2,218	1,975
Other income	(756)	(803)
	1,462	1,172
Net income (loss) and comprehensive income (loss)	$ (27,920)	$ 35,499
Income (loss) per share (note 13)
Basic and Diluted (in Dollars per share)	$ (0.46)	$ 0.58
Weighted average common shares outstanding
Basic (in Shares)	61,125,804	60,813,604
Diluted (in Shares)	61,125,804	61,321,263

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Note 6 - Cash and cash equivalents:

12 Months Ended

Dec. 31, 2011

Cash and Cash Equivalents Disclosure [Text Block]

6.     Cash and cash equivalents

At December 31, 2011, cash equivalents include approximately $420 (2010 - $427) of term deposits with an average interest rate of 0.21% (2010 – 0.10%), which are pledged as collateral for the corporate credit card facility and the repayable allowance (note 10).

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Note 5 - Financial instruments:

12 Months Ended

Dec. 31, 2011

Financial Instruments Disclosure [Text Block]

5.     Financial instruments

The Company’s financial instruments consist of cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities and long-term debt. The fair values of cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities approximate carrying values because of their short-term nature. The fair value of long-term debt is described in note 11.  

The Company’s financial instruments are exposed to certain financial risks, including credit risk and market risk.

(a)Credit risk:

Credit risk is the risk of financial loss to the Company if a partner or counterparty to a financial instrument fails to meet its contractual obligations and arises principally from the Company’s cash and cash equivalents and accounts receivable. The carrying amount of the financial assets represents the maximum credit exposure.

The Company limits its exposure to credit risk on cash and cash equivalents by placing these financial instruments with high-credit quality financial institutions and only investing in liquid, investment grade securities.

The Company is subject to a concentration of credit risk related to its accounts receivable as they primarily are amounts owing from two collaborators. At December 31, 2011 and 2010, the outstanding accounts receivable were within normal payment terms and the Company had recorded no allowance for doubtful accounts.

(b) Market risk:

Market risk is the risk that changes in market prices, such as foreign currency exchange rates and interest rates will affect the Company’s income or the value of the financial instruments held.

(i)   Foreign currency risk:

Foreign currency risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. The Company is exposed to foreign currency risks as a portion of the Company’s cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities, revenue, and operating expenses are denominated in other than U.S. dollars. The Company manages foreign currency risk by holding cash and cash equivalents in foreign currencies to support foreign currency forecasted cash outflows. The Company has not entered into any forward foreign exchange contracts.

(ii)   Interest rate risk:

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. Financial instruments that potentially subject the Company to interest rate risk include cash and cash equivalents, and long-term debt.

The Company is exposed to interest rate cash flow risk on its cash and cash equivalents as these instruments bear interest based on current market rates.  

The Company is also exposed to interest rate risk on its long-term debt (note 11) bearing fixed and variable interest rates. The interest rate on the long-term debt is reset annually to a 12-month LIBOR plus 8%.

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Note 17 - Related party transactions:

12 Months Ended

Dec. 31, 2011

Related Party Transactions Disclosure [Text Block]

17.   Related party transactions

The Company has incurred expenses for services provided by a law firm in which an officer of the Company is a partner. The amounts charged are recorded at their exchange amounts and are subject to normal trade terms. For the year ended December 31, 2011, the Company has incurred legal fees of $642 (December 31, 2010 - $574) for services provided by the law firm relating to general corporate matters. Included in accounts payable and accrued liabilities at December 31, 2011 is an amount of $59 (December 31, 2010 - $146) owing to the legal firm.

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Note 13 - Basic and diluted income (loss) per share:

12 Months Ended

Dec. 31, 2011

Earnings Per Share [Text Block]

13.   Basic and diluted income (loss) per share

As the Company incurred a loss for the year ended December 31, 2011, all stock options were anti-dilutive and were excluded from the diluted weighted average shares outstanding (December 31, 2010 – 3,592,842).

Reconciliations of the income and weighted average number of common shares used in the calculations are set forth below:

	2011			2010
Net income (loss)	$	(27,920	)	$	35,499
Weighted average number of common shares for basic income per share		61,125,804			60,813,604
Dilutive effect of options		-			507,659
Diluted weighted average number of common shares for diluted income per share		61,125,804			61,321,263
Basic and diluted income (loss) per share	$	(0.46	)	$	0.58

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Note 9 - Accounts payable and accrued liabilities:

12 Months Ended

Dec. 31, 2011

Accounts Payable, Accrued Liabilities, and Other Liabilities Disclosure, Current [Text Block]

9.     Accounts payable and accrued liabilities

Accounts payable and accrued liabilities comprise of:

	2011		2010
Trade accounts payable	$	351	$	603
Accrued contract research		1,066		2,693
Employee-related accruals		746		1,051
Other accrued liabilities (1)		1,025		1,358
	$	3,188	$	5,705

(1)   Included in other accrued liabilities at December 31, 2011 is an amount of $59 (December 31, 2010 - $146) owing to a related party (note 17).

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Note 7 - Property and equipment:

12 Months Ended

Dec. 31, 2011

Property, Plant and Equipment Disclosure [Text Block]

7.     Property and equipment

2011	Cost		Accumulated amortization		Net book value
Laboratory equipment	$	3,645	$	3,228	$	417
Computer equipment		915		635		280
Office equipment		659		609		50
Leasehold improvements		3,185		1,965		1,220
	$	8,404	$	6,437	$	1,967
2010	Cost		Accumulated amortization		Net book value
Laboratory equipment	$	3,480	$	3,125	$	355
Computer equipment		1,196		1,009		187
Office equipment		698		609		89
Leasehold improvements		3,135		1,697		1,438
	$	8,509	$	6,440	$	2,069
Amortization expense for the year ended December 31, 2011 amounted to $760 (2010 - $838).

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Note 8 - Intangible assets:

12 Months Ended

Dec. 31, 2011

Intangible Assets Disclosure [Text Block]

8 - Intangible assets

2011	Cost		Accumulated amortization		Net book value
Patents (1)	$	3,739	$	2,191	$	1,548
2010	Cost		Accumulated amortization		Net book value
Patents (1)	$	3,510	$	1,875	$	1,635

(1) Loss on write-down of patents for the year ended December 31, 2011 amounted to $95 (2010 - $25) relating to certain technologies no longer being pursued by the Company.

Amortization expense for the year ended December 31, 2011 amounted to $335 (2010 - $316).

The estimated aggregate amortization expense for intangible assets held at December 31, 2011, for each of the five succeeding years is expected as follows:

2012	$	316
2013		297
2014		263
2015		222
2016		135
	$	1,233

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Note 10 - Deferred leasehold inducement:

12 Months Ended

Dec. 31, 2011

Other Liabilities Disclosure [Text Block]

10.     Deferred leasehold inducement

2011	Cost		Accumulated Amortization		Net book value
Deferred leasehold inducement	$	1,840	$	1,279	$	561
Less: current portion						116
					$	445

2010	Cost		Accumulated Amortization		Net book value
Deferred leasehold inducement	$	1,840	$	1,138	$	702
Less: current portion						216
					$	486

At the inception of the Company’s leases, the Company received cash tenant improvement allowances and rent-free periods amounting to $1,840 from the landlord which are being amortized on a straight-line basis over the terms of the leases. Included in the leasehold inducement balance is $226 which represents a repayable allowance collateralized with a letter of credit (note 6), and is repaid over 10 years with interest at 10% per annum on the declining balance at approximately $37 per annum.

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Note 15 - Collaborative agreements:

12 Months Ended

Dec. 31, 2011

Collaborative Arrangement Disclosure [Text Block]

15.   Collaborative agreements

	2011		2010
Licensing and other fees:
Astellas US LLC (note a)	$	-	$	10
Merck & Co. Inc. (notes a & b)		453		65,224
Total	$	453	$	65,234
Research collaborative fees:
Astellas US LLC (note a)	$	368	$	564
Merck & Co. Inc. (notes a & b)		684		266
Total	$	1,052	$	830

 (a) Vernakalant (iv) in North America:

On October 16, 2003, the Company entered into a collaboration and license agreement with Astellas US LLC (Astellas), formerly Astellas Healthcare, Inc., for the co-development and commercialization of vernakalant as an intravenous formulation (vernakalant (iv)) 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 vernakalant and its related technology to develop, make and sell intravenous drugs in Canada, the United States, and Mexico (collectively, North America), including a right to sublicense to third parties. The Company retained the rights to vernakalant (iv) for markets outside North America and worldwide rights to the oral formulation of vernakalant for chronic atrial fibrillation.

On July 26, 2011, the Company granted consent for the transfer of rights for the development and commercialization of vernakalant (iv) in North America from Astellas to Merck & Co., Inc. (“Merck”).  Merck now holds exclusive global rights to vernakalant (iv) for the rapid conversion of recent onset atrial fibrillation to sinus rhythm in adults. All terms, responsibilities and payments that Astellas committed to under the original collaboration and license agreement are now assumed by Merck without change.

Under the terms of the agreement, the Company has received upfront and milestone payments of $26 million and is still entitled to subsequent milestone payments of up to $38 million based on achievement of specified development and commercialization milestones, as well as royalties based on future net sales and sublicense revenue. The Company is also entitled to further milestone payments with respect to any subsequent drugs developed under the agreement.

Under the terms of the agreement, Merck is responsible for 75% and the Company is responsible for 25% of eligible costs associated with the development of vernakalant (iv) in North America. Merck is also responsible for all future commercialization costs for vernakalant (iv) in North America.  

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.

(b) Vernakalant (iv) outside of North America and vernakalant (oral) globally:

On April 8, 2009, the Company entered into a collaboration and license agreement with Merck for the development and commercialization of vernakalant.  Pursuant to this agreement, effective May 19, 2009, the Company granted Merck exclusive global rights to vernakalant (oral), and granted a Merck affiliate, Merck Sharp & Dohme (Switzerland) GmbH, exclusive rights outside of North America to vernakalant (iv).

Under the terms of the agreement, the Company received an upfront payment of $60 million and will be entitled to milestone payments of up to $200 million based on achievement of certain development and approval milestones associated with vernakalant products, and up to $100 million for milestones associated with approvals in subsequent indications of both the intravenous and oral formulations. In addition, the Company will receive tiered royalty payments on sales of any approved products and have the potential to receive milestone payments of up to $340 million based on achievement of significant sales thresholds. Merck has also granted the Company a secured, interest-bearing credit facility of up to $100 million that can be accessed in tranches over several years commencing in 2010 (note 11). The Company has also retained an option to co-promote vernakalant (oral) with Merck through a hospital-based sales force in the United States.  Merck will be responsible for all future costs associated with the development, manufacturing and commercialization of these candidates.

Merck may also request the Company to perform additional development work for which the Company will receive additional payments.

In July 2009, the Company achieved a milestone of $15 million relating to the submission for regulatory approval in Europe of vernakalant (iv). During the year ended December 31 2009, the Company shipped $7.0 million of clinical supplies to Merck under the agreement.

The collaboration and license agreement with Merck is a revenue arrangement with multiple deliverables recognized as a single unit of accounting during the period of ongoing involvement. The initial upfront payment, $15 million milestone payment and proceeds from shipment of clinical supplies were deferred and recognized as licensing and other revenue on a straight-line basis over the period of ongoing involvement of the Company with Merck. During this period, the Company recognized revenue prospectively from the time milestone payments were achieved, services were performed or delivery criteria were met until the end of the amortization period.

(b) Vernakalant (iv) outside of North America and vernakalant (oral) globally (continued):

On September 2, 2010 the Company achieved a milestone of $30 million relating to the marketing approval in Europe of vernakalant (iv), which was recognized immediately as licensing and other fees. The Company started earning royalty revenue during the year ended December 31, 2010, and continues to earn royalty revenue which is included in licensing and other fees.

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Note 20 - Subsequent events:

12 Months Ended

Dec. 31, 2011

Subsequent Events [Text Block]

20.   Subsequent events

On January 9, 2012, the Company received an advance of $25 million from Merck under a secured, interest-bearing credit facility of up to U.S. $100 million (note 11). The Company may, at its option, repay all or a portion of the advance from time to time without premium or penalty. This advance must be repaid in full by December 31, 2017.

On March 19, 2012, the Company announced it plans to reduce its annual operating expenses to approximately half of its current operating expenses in response to Merck’s decision to discontinue further development of vernakalant (oral).

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Consolidated Statements of Stockholders’ Equity (USD $) In Thousands	Common Stock [Member]	Additional Paid-in Capital [Member]	Retained Earnings [Member]	Accumulated Other Comprehensive Income (Loss) [Member]	Total
Balance at Dec. 31, 2009	$ 256,711	$ 29,669	$ (294,783)	$ 18,185	$ 9,782
Net income			35,499		35,499
Common stock issued upon exercise of options	2,359				2,359
Reallocation of additional paid-in capital arising from stock-based compensation related to exercise of options	2,484	(2,484)
Stock option expense recognized		3,277			3,277
Balance at Dec. 31, 2010	261,554	30,462	(259,284)	18,185	50,917
Net income			(27,920)		(27,920)
Common stock issued upon exercise of options	358				358
Reallocation of additional paid-in capital arising from stock-based compensation related to exercise of options	185	(185)
Stock option expense recognized		1,931			1,931
Balance at Dec. 31, 2011	$ 262,097	$ 32,208	$ (287,204)	$ 18,185	$ 25,286

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Note 4 - Future changes in accounting policies:

12 Months Ended

Dec. 31, 2011

Description of New Accounting Pronouncements Not yet Adopted [Text Block]

4.     Future changes in accounting policies

(a)  Fair Value Measurements:

In May 2011, the FASB provided amendments to achieve common fair value measurement and disclosure requirements in U.S. GAAP and International Financial Reporting Standards (IFRS). The amendments provide clarification and/or additional requirements relating to the following: a) application of the highest and best use and valuation premise concepts, b) measurement of the fair value of instruments classified in an entity’s shareholders’ equity, c) measurement of the fair value of financial instruments that are managed within a portfolio, d) application of premiums and discounts in a fair value measurement, and e) disclosures about fair value measurements. These amendments will be effective prospectively for interim and annual periods beginning after December 15, 2011. We do not expect the adoption of the amendments to have a material impact on the Company’s financial position, results of operations or cash flows.

 (b)  Comprehensive Income:

In June and December 2011, the FASB provided amendments requiring an entity to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements, eliminating the option to present the components of other comprehensive income as part of the statement of changes in stockholders’ equity. These amendments will be effective retrospectively for fiscal years, and interim periods within those years, beginning after December 15, 2011. We do not expect the adoption of the amendments to have a material impact on the Company’s financial position, results of operations or cash flows.

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Note 14 - Commitments:

12 Months Ended

Dec. 31, 2011

Commitments Disclosure [Text Block]

14.   Commitments

(a)Operating leases:

The Company 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 subsequently signed amendments to this agreement for additional office and laboratory space expiring through the same date.

On November 1, 2010, the Company entered into a new lease agreement for a term of 10 years effective March 15, 2011, with customary scheduled rent increases, escalation clauses and renewal options. Future minimum annual lease payments under the leases are as follows:

2012	$	1,687
2013		1,693
2014		1,296
2015		1,221
2016		1,221
Thereafter		5,411
	$	12,529

Rent expense, net of sublease income of $728 (2010 - $722), for the year ended December 31, 2011 amounted to $1,575 (2010 - $1,048).

(b)Research and development and other agreements:

The Company entered into various research and development and other agreements requiring it to fund future expenditures of approximately $591 (2010 - $516).

(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. As at December 31, 2011, no royalties were payable. The license agreement may be terminated by the licensor if the licensor deems that insufficient development efforts are being taken. Unless otherwise terminated, the agreement expires on the expiry date of the last issued patent relating to certain technology.

(ii)   Pursuant to a license and option agreement, the Company is responsible for milestone payments of up to $3 million based on the successful completion of the first Phase II clinical trial and the U.S. Food and Drug Administration’s (the FDA’s) approval of the first new drug application related to this license and option agreement, and the FDA’s approval for marketing and commercialization of the product in a cardiovascular indication. The Company is also responsible for milestone payments of up to $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. The Company is no longer developing this technology. At December 31, 2011, 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.

(iii)   On April 30, 2007, the Company signed an exclusive in-licensing agreement granting the Company exclusive worldwide rights for all indications for a clinical-stage drug candidate.  Under the terms of the agreement, the Company paid an initial upfront payment of $20 million. Additional payments not to exceed $40 million are contingent upon the achievement of certain pre-defined late-stage clinical milestones.  Pursuant to the development and license agreement, the Company is responsible for payment of royalties based on a percentage of revenue if the drug candidate is ultimately commercialized.  The Company is no longer funding the development of this drug candidate. At December 31, 2011, no milestone payments have been paid or are payable.