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 of

The Securities Exchange Act of 1934

For the month of March, 2015

COMMISSION FILE NO. 000-29338

CARDIOME PHARMA CORP.

(formerly NORTRAN PHARMACEUTICALS INC.)

____________________________________________

(Translation of Registrant’s name into English)

1441 Creekside Drive, 6th floor

Vancouver, British Columbia, V6J 4S7, 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 * Form 40-F T

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

Yes * No T

This Form 6-K is hereby filed and incorporated by reference in the registrant’s Registration Statements on Form F-10 (File No. 333-137935), Form F-3 (File No. 333-131912), Form S-8 (333-136696) and Form S-8 (333-125860).

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.
Date: March 13, 2015	/s/ JENNIFER ARCHIBALD
	Jennifer Archibald
	Chief Financial Officer

 EXHIBIT INDEX

EXHIBIT	DESCRIPTION OF EXHIBIT
99.1	Management’s Discussion and Analysis of Financial Condition and Results of Operations
99.2	Cardiome Pharma Corp. Consolidated Financial Statements For the years ended December 31, 2014 and 2013

EX-99.1

Exhibit 99.1

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS

This management discussion and analysis (“MD&A”) of Cardiome Pharma Corp. (“Cardiome”, “we”, “us” or “our”) for the year ended December 31, 2014 is as of March 12, 2015. We have prepared this MD&A with reference to National Instrument 51-102 “Continuous Disclosure Obligations” of the Canadian Securities Administrators. Under the U.S./Canada Multijurisdictional Disclosure System, Cardiome is permitted to prepare this MD&A in accordance with the disclosure requirements of Canada, which are different from those of the United States. This MD&A should be read in conjunction with our audited consolidated financial statements for the year ended December 31, 2014 and the related notes thereto. Our consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”). All amounts are expressed in U.S. dollars unless otherwise indicated.

This MD&A contains forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act and applicable Canadian securities laws regarding expectations of our future performance, liquidity and capital resources, as well as marketing plans, future revenues from sales of BRINAVESS™ and AGGRASTAT^®, our intention to continue discussions with the U.S. Food and Drug Administration regarding potential development plans for the vernakalant programs in the United States, and other non-historical statements, which are based on our current expectations and beliefs, including certain factors and assumptions, as described in our most recent Annual Information Form, but are also subject to numerous risks and uncertainties, as described in the “Risk Factors” section of our Annual Information Form. As a result of these risks and uncertainties, or other unknown risks and uncertainties, our actual results may differ materially from those contained in any forward-looking statements. The words “believe”, “may”, “plan”, “will”, “estimate”, “continue”, “anticipate”, “intend”, “expect” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. We undertake no obligation to update forward-looking statements, except as required by law. Additional information relating to Cardiome, including our most recent Annual Report on Form 40-F, and our most recent Annual Information Form, is available by accessing the Canadian Securities Administrators’ System for Electronic Document Analysis and Retrieval (“SEDAR”) website at www.sedar.com or the U.S. Securities and Exchange Commission’s (“SEC”) Electronic Document Gathering and Retrieval System (“EDGAR”) website at www.sec.gov/edgar.

OVERVIEW

We are a specialty pharmaceutical company dedicated to the development and commercialization of cardiovascular therapies that will improve the quality of life and health of patients suffering from heart disease. We strive to find innovative, differentiated medicines that provide therapeutic and economic value to patients, physicians and healthcare systems. We currently have two marketed, in-hospital, cardiology products, BRINAVESS™ and AGGRASTAT^®, which are commercially available in markets outside of the United States.

BRINAVESS™ [vernakalant (IV)], was approved in the European Union in September 2010 and is currently registered and approved in approximately 50 countries for the rapid conversion of recent onset atrial fibrillation to sinus rhythm in adults (for non-surgery patients with atrial fibrillation of seven days or less) and for use in post-cardiac surgery patients with atrial fibrillation of three days or less. BRINAVESS™ is mentioned as a first-line therapy in the European Society of Cardiology atrial fibrillation guidelines for the cardioversion of recent-onset atrial fibrillation in patients with no, or minimal/moderate, structural heart disease.

AGGRASTAT^® (tirofiban HCL) is a reversible GP IIb/IIIa inhibitor (an intravenous anti-platelet drug) for use in Acute Coronary Syndrome (“ACS”) patients. AGGRASTAT^® has been approved in numerous countries worldwide. We acquired the ex-U.S. marketing rights to AGGRASTAT^® as part of the transaction in which we also acquired Correvio LLC (“Correvio”), a privately held pharmaceutical company headquartered in Geneva, Switzerland, in November 2013.

1

Both BRINAVESS™ and AGGRASTAT^® are available commercially outside of the United States either directly through our own sales force in Europe or via our global distributor and partner network.

BRINAVESS™ (Vernakalant (IV))

We have exclusive, global marketing rights to BRINAVESS™, the intravenous formulation of vernakalant, and are responsible for all future development and commercialization of the product, subject to ongoing transfer of certain rights from Merck Sharp & Dohme Corp. (“Merck”) and its affiliates. Transfers have been delayed in certain jurisdictions due to routine regulatory requirements but are expected to be completed in 2015.

North America

In December 2006, our former partner, Astellas Pharma US, Inc. (“Astellas”), filed a New Drug Application (“NDA”) for vernakalant (IV) with the U.S. Food and Drug Administration (“FDA”). In August 2008, Astellas received an action letter from the FDA, informing Astellas that the FDA had completed its review of the NDA for vernakalant (IV) and that the application was approvable. The letter requested additional information associated with the risk of previously identified events experienced by a subset of patients during the clinical trials as well as a safety update from ongoing or completed studies of vernakalant (IV), regardless of indication, dosage form or dose level. The action letter further indicated that if the response to their requests was not satisfactory, additional clinical studies may be required.

In August 2009, we, together with our former partner Astellas, announced that Astellas would undertake a single confirmatory additional Phase 3 clinical trial (“ACT 5") under a Special Protocol Assessment. The decision to conduct another trial was reached following extended discussions between Astellas and the FDA to define the best regulatory path forward for vernakalant (IV). ACT 5 began enrolment of recent onset atrial fibrillation patients without a history of heart failure in October 2009.

In October 2010, a clinical hold was placed on the ACT 5 study of vernakalant (IV) following a single unexpected serious adverse event of cardiogenic shock experienced by a patient with atrial fibrillation who received vernakalant (IV).

In July 2011, Merck acquired the rights for the development and commercialization of vernakalant (IV) in North America. All terms, responsibilities and payments that Astellas committed to under the North American Vernakalant (IV) Agreement were assumed by Merck without change. Merck and the FDA agreed to terminate the ACT 5 study. Merck began discussions with the FDA to determine the next steps for the development of vernakalant (IV) in the United States.

In September 2012, Merck gave notice to us of its termination of the North American Vernakalant (IV) Agreement. In May 2013, we completed the transfer of sponsorship of the U.S. Investigational New Drugs (“INDs”) for vernakalant (IV) and vernakalant (oral) and the transfer of the NDA for vernakalant (IV) from Merck to us. We have initiated discussions with the FDA regarding potential development paths for vernakalant (IV) in the United States.

Rest of World (Outside North America)

In April 2009, we entered into two collaboration and license agreements (“the Collaboration Agreements”) with Merck for the development and commercialization of vernakalant. The Collaboration Agreements provided an affiliate of Merck with exclusive rights outside of North America to vernakalant (IV).

2

Under the terms of the Collaboration Agreements, Merck paid us an initial fee of $60.0 million. In addition, we were eligible to receive up to an additional $200.0 million in payments, of which we received $45.0 million (described below), based on the achievement of certain milestones associated with the development and approval of vernakalant products. We were also eligible to receive up to $100.0 million for milestones associated with approvals in other subsequent indications of both the intravenous and oral formulations. Also, we were eligible to receive tiered royalty payments on sales of any approved products and had the potential to receive up to $340.0 million in additional milestone payments based on achievement of significant sales thresholds. Merck was responsible for all costs associated with the development, manufacturing and commercialization of these product candidates.

In July 2009, our former partner, Merck, submitted a Marketing Authorization Application (“MAA”) to the European Medicines Agency (“EMA”) seeking marketing approval for vernakalant (IV) in the European Union, and as a result of the submission we received a $15.0 million milestone payment from Merck.

In June 2010, the Committee for Medicinal Products for Human Use of the EMA recommended marketing approval of vernakalant (IV) for the conversion of recent onset atrial fibrillation to sinus rhythm in adults and in September 2010, vernakalant (IV) received marketing approval under the trade name BRINAVESS™ in the European Union, Iceland and Norway. This milestone triggered a $30.0 million milestone payment from Merck. After receipt of marketing approval, Merck began its commercial launch of BRINAVESS™ in a number of European countries.

In September 2012, Merck gave notice to us of its termination of the Collaboration Agreements. On April 25, 2013, we entered into a Transition Agreement with Merck (the “Transition Agreement”) to amend and supplement the provisions of the Collaboration Agreements governing their rights and responsibilities in connection with the termination of the Collaboration Agreements and transfer of rights to, and responsibilities for, vernakalant to us. Pursuant to the Transition Agreement, we took responsibility for worldwide sales, marketing, and promotion of vernakalant (IV) on April 25, 2013. On September 21, 2013, Merck and Cardiome entered into an Agreement regarding the rights and responsibilities of each party for the continued transfer of marketing authorizations. On a per country basis, regulatory and product distribution responsibilities have been transferred to us upon agencies’ approvals of marketing authorization transfers. As a result of routine regulatory requirements, the transfer has been delayed in certain jurisdictions. All applications for transfers are expected to be completed in 2015.

In June 2013, we announced the decision by the European Commission to allow the transfer of the centrally-approved marketing authorisation for BRINAVESS™ from Merck to us. We are now the marketing authorization holder for BRINAVESS™ in the member states of the European Union. As a result, royalties on sales and the promotional services fee we previously received from Merck ceased on July 1, 2013 and we began benefiting from all sales of BRINAVESS™ throughout the world.

On September 16, 2013, we announced the completion of the transfer from Merck to us of commercialization responsibility for BRINAVESS™ in the European Union and the responsibility to complete the post-marketing study for BRINAVESS™. Since that date, we have been supplying BRINAVESS™ under our own trade dress in the European Union.

During 2014, we continued to seek new partners to distribute BRINAVESS™. We entered into commercialization agreements with Tamro AB, Nomeco A/S, Logista Pharma S.A., VIANEX S.A., UDG Healthcare PLC, Eurolab Especialidades Medicinales de Eurofar S.R.L. and Pharmacare Limited, which trades as Aspen Pharmacare and is a part of the Aspen Group, to distribute BRINAVESS™ in Sweden, Denmark, Spain, Greece, Ireland, Argentina and South Africa, respectively. In addition, we announced that our partner, AOP Orphan Pharmaceuticals AG, headquartered in Vienna, Austria, is now making BRINAVESS™ available to physicians and patients in Switzerland, the Czech Republic, Poland, Slovenia, Slovakia, Hungary, Latvia and Romania.

3

In November 2014, we announced results from a Phase 3 clinical study conducted with BRINAVESS™ in the Asia-Pacific (“A-P”) region. The study originally planned to recruit 615 patients; however, the study was completed after randomising 123 patients. The study remained sufficiently powered and it achieved the primary endpoint, showing that of the 111 treated patients with recent-onset atrial fibrillation (AF) lasting 3 hours to 7 days, 53% of those receiving an IV dose of BRINAVESS™ converted to normal heart rhythm within 90 minutes, compared to 12% of placebo patients (95% CI; 23%, 58%, p<0.001).

In December 2014, we entered into an agreement with Eddingpharm (Asia) Macao Commercial Offshore Limited (“Eddingpharm”) to develop and commercialize BRINAVESS™ in China, Taiwan, and Macau and to re-launch BRINAVESS™ in Hong Kong. Eddingpharm will be responsible for any clinical trials and regulatory approvals required to commercialize BRINAVESS™ in the countries covered by the agreement. Under the terms of the agreement, Eddingpharm has agreed to an upfront payment of $1.0 million and specific annual commercial goals for BRINAVESS™. Cardiome is also eligible to receive regulatory milestone payments of up to $3.0 million.

Vernakalant (oral)

Vernakalant (oral) is being developed as an oral maintenance therapy for the long-term prevention of atrial fibrillation recurrence. In July and September 2006, we announced positive top line results for the sequential 300 mg and 600 mg dosing groups, respectively, from the Phase 2a pilot study of vernakalant (oral). In July 2008, we announced positive clinical results from the Phase 2b clinical study of vernakalant (oral) to further evaluate the safety and tolerability, pharmacokinetics and efficacy of vernakalant (oral).

In April 2009, we entered into the Collaboration Agreements with Merck for the development and commercialization of vernakalant. The agreement provided an affiliate of Merck with exclusive global rights to vernakalant (oral).

In November 2011, Merck completed an additional multiple rising-dose Phase I study to explore the safety, tolerability, pharmacokinetics and pharmacodynamics of higher doses of vernakalant (oral) than previously studied in healthy subjects and that in this study, vernakalant (oral) was well-tolerated at increased exposures. We also announced that Merck had scheduled, to start in late 2011, an additional Phase I trial assessing the safety and tolerability of vernakalant (oral) when dosed for a more extended period of time at higher exposures.

In March 2012, Merck informed us of its decision to discontinue further development of vernakalant (oral). In September 2012, we announced that Merck would return the global marketing and development rights for vernakalant (oral) to us in connection with Merck’s termination of the Collaboration Agreements. In May 2013, we completed the transfer of sponsorship of the IND for vernakalant (oral) from Merck to us. We are continuing to assess the appropriate development plan for vernakalant (oral).

4

AGGRASTAT® for Acute Coronary Syndrome

AGGRASTAT^® contains tirofiban hydrochloride, which is a reversible GP IIb/IIIa inhibitor for use in indicated Acute Coronary Syndrome patients. AGGRASTAT^® is used to help assist the blood flow to the heart and to prevent chest pain and/or heart attacks (both STEMI – ST-elevation myocardial infarction, and NONSTEMI – non-ST-elevation myocardial infarction). It works by preventing platelets, cells found in the blood, from forming into blood clots within the coronary arteries and obstructing blood flow to the heart muscle which can result in a heart attack. The medicine may also be used in patients whose heart vessels are dilated with a balloon (percutaneous coronary intervention or PCI, a procedure used to open up blocked or obstructed arteries in the heart in order to improve the blood flow to the heart muscle (myocardium) with or without the placement of a coronary stent. AGGRASTAT^® is administered intravenously, and has been on the market for many years with an excellent safety and efficacy profile.

In May 2014, we entered into an agreement with AOP Orphan Pharmaceuticals AG to commercialize AGGRASTAT^® in selected European markets. Key AOP Orphan countries for AGGRASTAT^® include Austria, Hungary, Switzerland, and other Eastern European states.

Pre-clinical

We continue to support pre-clinical research and development work externally through academic research collaborations. The focus of the technology is on modulating cellular proteins (ion channels) that gate the movement of ions across the cell membrane to control a variety of essential functions ranging from the contraction of muscles, to the secretion from glands, to responses to foreign bodies and inflammation. The wide variety of such proteins provides a broad area for the development of therapeutics useful in a large number of human disorders.

The following table summarizes the current status of our programs:

Program	Stage of Development	Current Status
Vernakalant (IV)	FDA New Drug Application (NDA)	Approvable letter received in 2008
	European Marketing Authorisation Application (MAA)	Marketing approval received in September 2010 under trade name BRINAVESS™
	European Comparator (AVRO) Study	Final results released in Q2-2010
	Phase 3 Asia Pacific study	Results released November 2014
	Phase 3 ACT 5 study	Study terminated
	Post approval study	SPECTRUM (post approval safety study) initiated in Q4-2011 Study continuing

5

Program	Stage of Development	Current Status
Vernakalant (oral)	Phase 2b Clinical Trial	Final results released in Q3-2008
	Pharmacokinetic/ pharmacodynamics studies	Phase 1 PK/PD studies completed

CORPORATE UPDATE

Senior secured term loan facility

On July 18, 2014, we announced the closing of a senior, secured term loan facility with MidCap Financial, LLC for up to $22.0 million in two tranches bearing interest at a rate of LIBOR plus 8%. The first tranche of $12.0 million is available for working capital and general corporate purposes. The second tranche of up to $10.0 million is available to support a product or company acquisition. The loan carries a term of 48 months and is secured by substantially all of our assets. As at December 31, 2014, $12.0 million of the first tranche has been drawn, and no amounts have been drawn under the second tranche.

Restricted share unit plan

On May 9, 2014, the Board of Directors approved a Restricted Share Unit Plan (“RSU Plan”) and certain amendments to Cardiome’s incentive stock option plan (“Stock Option Plan”) to provide long-term incentives to employees and directors. The RSU Plan and the amendments to the Stock Option Plan were approved by the shareholders on June 16, 2014 at the annual general and special meeting of the shareholders.

Common share financing and secondary offering

On March 11, 2014, we completed a prospectus offering of 1,500,000 common shares at CAD $10.00 per common share for net proceeds of $12.4 million.  Additionally, 1,500,000 common shares were sold in a secondary offering from CarCor Investment Holdings LLC (“CarCor”), the shareholder from which we purchased Correvio, at CAD $10.00 per common share. We did not receive any of the proceeds of the sale of common shares by CarCor.

As stated in the prospectus pursuant to which this financing was effected, we intended to use the proceeds from the offering for working capital and general corporate purposes, and the advancement of our business objectives outlined under “Our Strategy” in the short form prospectus, including, without limitation, for (a) regulatory costs of vernakalant (IV) and vernakalant (oral) and (b) expansion of our sales and marketing efforts for BRINAVESS™ and AGGRASTAT^® in Europe and other parts of the world. Since March 11, 2014, the closing date of the financing, the majority of the proceeds we received were used for selling, general and administration expenses.

6

At-the-market sales issuance agreement

On February 18, 2014, we filed a prospectus supplement in each of the provinces of Canada, other than Québec, and the United States to qualify and register the distribution of our common shares having an aggregate offer price of up to $8.9 million in “at-the-market” distributions effected from time to time pursuant to an At-The-Market Sales Issuance Agreement that we entered into on the same day with MLV & Co. LLC, as agent (the “ATM Offering”). No sales in the ATM Offering will be made in Canada. During the year ended December 31, 2014, we issued 30,513 of our common shares in the ATM Offering for gross proceeds of $0.3 million.

As stated in the prospectus supplement pursuant to which the ATM Offering financing is effected, we intend to use the net proceeds from the sale of the common shares offered in the ATM Offering primarily for working capital and general corporate purposes, including to fund expansion of our sales and marketing efforts for BRINAVESS™ and AGGRASTAT^® in Europe and other parts of the world, for funding clinical development and regulatory costs of vernakalant (IV) and vernakalant (oral), and for advancement of our other business objectives outlined under “Our Strategy” in the base shelf prospectus pursuant to which the ATM Offering is affected. The majority of the proceeds we received were used for selling, general and administration expenses.

Acquisition of Correvio

On November 18, 2013, we completed the acquisition of Correvio, a privately held pharmaceutical company headquartered in Geneva, Switzerland, focused on the worldwide marketing, excluding the United States, of AGGRASTAT^®, a branded prescription pharmaceutical. We acquired 100% of Correvio in exchange for 19.9% of our outstanding shares (pro forma ownership of approximately 16.6%) and a deferred consideration of $12.0 million. The deferred consideration will be repaid monthly at an amount equal to 10% of cash receipts from product sales and any applicable interest accrued at 10% compounded annually. The deferred consideration must be repaid in full by December 1, 2019.

Long-term debt settlement

On February 28, 2013, the debt settlement agreement dated December 10, 2012, and amended on December 31, 2012, between us and Merck, was further amended allowing us to pay the balance of the debt settlement amount prior to March 31, 2013. On March 1, 2013, we paid the remaining $13.0 million of the $20.0 million agreed-upon debt settlement payment, extinguishing all outstanding debt obligations to Merck. We recorded a gain on debt settlement of $20.8 million during the first quarter of 2013. With this final payment, Merck released and discharged the collateral security taken in respect of the advances under the line of credit Merck had made available to us.

SELECTED CONSOLIDATED FINANCIAL INFORMATION

The following table sets forth selected consolidated data for the years ended December 31 as follows:

(In thousands of U.S. dollars, except as otherwise stated)	2014			2013
Statement of operations data:
Revenue	$	30,042		$	4,511
Operating loss		(16,585	)		(16,697	)
Net earnings (loss)		(18,227	)		4,773
Basic and diluted earnings (loss) per common share (in dollars)	$	(1.12	)	$	0.37
Balance sheet data:
Total assets	$	50,115		$	47,322
Long-term debt		12,000			-
Deferred consideration		7,588			10,685

7

RESULTS OF OPERATIONS - 2014

Year ended December 31, 2014 compared to year ended December 31, 2013

We recorded a net loss of $18.2 million (loss of $1.12 per share) for the year ended December 31, 2014, compared to net earnings of $4.8 million ($0.37 per share) for the year ended December 31, 2013.

During 2014, our results benefited from a full year of sales of AGGRASTAT^®, which was acquired in connection with our acquisition of Correvio in November 2013. We continue to grow BRINAVESS™ sales now that BRINAVESS™ is available to customers in all EU markets where Merck had previously sold the product. We incurred a net loss in 2014 due to the selling, general and administration costs associated with the Correvio acquisition, and the sales and marketing costs required to support the commercialization of BRINAVESS™ and the continued sales of AGGRASTAT^®. Net earnings for fiscal 2013 were primarily due to the gain on settlement of debt owing to Merck.

In 2015, we expect to continue to incur a net loss as our expenses, including costs to fund our development programs, are expected to continue to be greater than our revenue from the sale of BRINAVESS™ and AGGRASTAT^®.

Revenue

Revenue increased to $30.0 million for the year ended December 31, 2014, from $4.5 million in 2013 primarily due to sales of AGGRASTAT^®.

Cost of goods sold

Cost of goods sold increased to $10.0 million in 2014, compared to $0.9 million in 2013, primarily due to sales of AGGRASTAT^®. Cost of goods sold relates to the sale of AGGRASTAT^® and BRINAVESS™.

Selling, general and administration expense

Selling, general and administration expense (“SG&A”) increased to $33.8 million in 2014, compared to $16.4 million in 2013. The increase was due primarily to costs associated with the Correvio acquisition and an increase in sales and marketing costs to support the commercialization of BRINAVESS™ and the continued sales of AGGRASTAT^®.

Amortization expense

Amortization expense increased to $2.2 million in 2014, compared to $0.6 million in 2013 due primarily to a full year of amortization of the marketing rights associated with the acquisition of Correvio.

8

Acquisition costs

Acquisition costs of $1.5 million for the year ended December 31, 2013 included legal, consulting and accounting fees incurred related to the acquisition of Correvio.

Restructuring

Restructuring costs of $1.2 million for the year ended December 31, 2013 consisted primarily of employee termination benefits related to our integration of Correvio.

Other income and expense

Other expense was $1.6 million for 2014, compared to other income of $21.6 million in 2013. Other expense in 2014 comprised primarily of interest expense on the deferred consideration related to the acquisition of Correvio and on the senior secured term loan facility. Other income in 2013 related primarily to the $20.8 million gain on the settlement of debt owed to Merck.

9

RESULTS OF OPERATIONS - FOURTH QUARTER (UNAUDITED)

(in thousands of U.S. dollars, except share and per share amounts)	Three Months Ended December 31
	2014			2013
Revenue
Product and royalty revenue	$	6,976		$	3,893
Licensing and other fees		-			(26	)
		6,976			3,867
Cost of goods sold		3,618			889
		3,358			2,978
Expenses
Selling, general and administration		9,143			7,282
Research and development		99			40
Amortization costs		540			325
Acquisition costs		-			1,494
Restructuring		-			1,337
		9,782			10,478
Operating loss		(6,424	)		(7,500	)
Other expense (income)
Interest expense		508			121
Other expense (income)		36			(142	)
Foreign exchange gain		(144	)		(349	)
		400			(370	)
Loss before income taxes		(6,824	)		(7,130	)
Income tax expense (recovery)		(338	)		102
Net loss	$	(6,486	)	$	(7,232	)
Other comprehensive loss:
Foreign currency translation adjustments		329			227
Comprehensive loss	$	(6,815	)	$	(7,459	)
Loss per share	$	(0.39	)	$	(0.53	)
Weighted average number of common share
Basic and diluted		16,527,655			13,658,605

10

Revenue increased to $7.0 million in the fourth quarter of 2014, compared to $3.9 million in the same period of 2013 due primarily to the recognition of a full quarter of AGGRASTAT^® sales compared to six weeks in the fourth quarter of 2013.

SG&A expense increased to $9.1 million in the fourth quarter of 2014, compared to $7.3 million in the same period of 2013 due primarily to costs associated with the Correvio acquisition and costs incurred to support the commercialization of BRINAVESS™ and the continued sales of AGGRASTAT^®.

The acquisition and restructuring costs incurred in the fourth quarter of 2013 were related to the acquisition of Correvio. We did not incur similar costs in the fourth quarter of 2014.

QUARTERLY FINANCIAL INFORMATION

The following table highlights selected unaudited consolidated financial data for each of the eight most recent quarters that, in management’s opinion, have been prepared on a basis consistent with the audited consolidated financial statements for the year ended December 31, 2014. The selected financial information presented below reflects all adjustments, consisting primarily of normal recurring adjustments, which are, in the opinion of management, necessary for a fair presentation of results for the interim periods. These results are not necessarily indicative of results for any future period and you should not rely on these results to predict future performance.

11

	Three months ended
(In thousands of U.S. dollars except per share amounts)	December 31, 2014			September 30, 2014			June 30, 2014			March 31, 2014
Revenue	$	6,976		$	7,807		$	7,667		$	7,592
Cost of goods sold		3,618			2,673			2,243			1,493
Selling, general and administration		9,143			7,863			8,808			7,999
Research and development		99			234			59			245
Interest expense		508			495			226			254
Net loss	$	(6,486	)	$	(4,367	)	$	(4,240	)	$	(3,134	)
Loss per share	$	(0.39	)	$	(0.26	)	$	(0.26	)	$	(0.20	)

	Three months ended
(In thousands of U.S. dollars except per share amounts)	December 31, 2013			September 30, 2013			June 30, 2013			March 31, 2013
Revenue	$	3,867		$	477		$	107		$	60
Cost of goods sold		889			47			-			-
Selling, general and administration		7,282			3,954			2,974			2,236
Research and development		40			31			35			370
Restructuring		1,337			-			(57	)		(73	)
Gain on settlement of debt		-			-			-			20,834
Net earnings (loss)	$	(7,232	)	$	(3,614	)	$	(2,774	)	$	18,393
Earnings (loss) per share
Basic and diluted	$	(0.53	)	$	(0.29	)	$	(0.22	)	$	1.47

Variations in our revenue, expense and net earnings (loss) for the periods above resulted primarily from the following factors:

In the first quarter of 2014, our net loss decreased to $3.1 million, or loss of $0.20 per common share, compared to a net loss of $7.2 million, or loss of $0.53 per common share in the fourth quarter of 2013. The decrease was primarily due to higher revenue that resulted from sales of AGGRASTAT^®, which we acquired through our acquisition of Correvio in November 2013. The increase in revenue was partially offset by an increase in SG&A expense due to costs associated with the Correvio acquisition and costs incurred to support the commercialization of BRINAVESS™ and the continued sales of AGGRASTAT^®.

12

In the second quarter of 2014, our net loss increased to $4.2 million, or $0.26 per common share, compared to a net loss of $3.1 million, or $0.20 per common share in the first quarter of 2014. The increase was primarily due to an increase in SG&A expense due to costs incurred to support the commercialization of BRINAVESS™ and the continued sales of AGGRASTAT^®.

In the third quarter of 2014, our net loss increased by $0.2 million to $4.4 million. The increase was a result of increased interest expense from our term loan with Midcap entered into during the third quarter of 2014.

In the fourth quarter of 2014, our net loss increased by $2.1 million to $6.5 million, or $0.39 per common share, compared to a net loss of $4.4 million, or $0.26 per common share in the third quarter of 2014. The increase was primarily due to an increase in cost of goods sold related to supply chain restructuring and inventory reserves, and an increase in SG&A expense due to the timing of the SPECTRUM study costs.

LIQUIDITY AND CAPITAL RESOURCES

We have financed our operations through cash flow generated from sales of AGGRASTAT^® and BRINAVESS™, the issuance of common shares, the MidCap term loan facility and the remaining cash from our previous partner, Merck.

Cash Flows

At December 31, 2014, we had $12.7 million in cash and cash equivalents, compared to $11.0 million at December 31, 2013. The increase in cash and cash equivalents for the year ended December 31, 2014 was primarily due to $21.0 million of net cash provided by financing activities partially offset by $18.5 million of net cash used in operating activities.

Cash used in operating activities for the year ended December 31, 2014 was $18.5 million, an increase of $1.7 million from $16.8 million for the same period in 2013. The increase in cash used was primarily due to the timing of customer receipts and payment of liabilities.

Cash used in investing activities for the years ended December 31, 2014 and 2013 was $0.6 million and $0.3 million, respectively, related to the purchase of property and equipment and the incurrence of patent costs.

Cash provided by financing activities for the year ended December 31, 2014 was $21.0 million, compared to cash used in financing activities of $12.8 million for the year ended December 31, 2013. Cash provided by financing activities for the year ended December 31, 2014 primarily reflected net proceeds of $12.4 million from our common share offering completed in the first quarter in addition to net proceeds of $11.0 million from the term loan facility that was completed in the third quarter. Cash used in financing activities for the year ended December 31, 2013 was primarily due to the $13.0 million repayment of debt owed to Merck.

13

Sources and uses of cash

(in thousands of U.S. dollars)	For the Years Ended December 31
	2014			2013
Cash used in operating activities	$	(18,527	)	$	(16,768	)
Cash used in investing activities		(600	)		(309	)
Cash provided by (used in) financing activities		20,971			(12,843	)
Effect of foreign exchange rate on cash and cash equivalents		(120	)		(99	)
Net increase (decrease) in cash and cash equivalents	$	1,724		$	(30,019	)

Funding Requirements

At December 31, 2014, we had working capital of $13.9 million, compared to $10.6 million at December 31, 2013. With the term loan facility in place, we do not expect further funding for working capital needs at this time.

We expect to devote financial resources to our operations, research and development efforts, clinical trials, nonclinical and preclinical studies and regulatory approvals associated with our products in development, as well as to business development efforts. We will require cash to pay interest and make principal payments on the term loan facility as well as the deferred consideration arising from the acquisition of Correvio.

Our future funding requirements will depend on many factors including:

· the extent to which BRINAVESS™ will be successful in obtaining reimbursement in additional countries where it is currently approved

· the cost and outcomes of regulatory submissions and reviews for approval of BRINAVESS™ in additional countries

· the extent to which BRINAVESS™ will be commercially successful globally

· the extent to which AGGRASTAT^® sales will remain stable as it faces generic competition in certain markets

· the future development plans for our products in development

· the consummation of suitable business development opportunities

· the size, cost and effectiveness of our sales and marketing programs

· the consummation, continuation or termination of third-party manufacturing, distribution and sales and marketing arrangements

We believe that our cash on hand, the expected future cash inflows from the sale of BRINAVESS™ and AGGRASTAT^®, and expected proceeds from other financial vehicles will be sufficient to finance our operational and capital needs for at least the next 12 months, including our obligations with respect to the term loan facility and deferred consideration. If our existing cash resources together with the cash we generate from the sales of our products are insufficient to fund our operational and capital needs, we may need to sell additional equity or debt securities or seek additional financing through other arrangements. Any sale of additional equity or debt securities may result in dilution to our shareholders. Debt financing may involve covenants limiting or restricting our ability to take specific actions, such as incurring additional debt or making capital expenditures. Moreover, our ability to obtain additional debt financing may be limited by the term loan facility currently in place. If we seek to raise funds through collaboration or licensing arrangements with third parties, we may be required to relinquish rights to products, product candidates or technologies that we would not otherwise relinquish or grant licenses on terms that may not be favorable to us. There can be no assurance that we will be able to successfully obtain financing in the amounts or terms acceptable to us, if at all, in order to continue our operational activities. If we are unable to obtain financing to fund our development programs and strategic business development activities, we may be required to delay, reduce the scope of, or eliminate one or more of our planned development and commercialization activities, which could harm our future financial condition and operating results.

14

Contractual obligations

As of December 31, 2014, and in the normal course of business, we have the following obligations to make future payments, representing contracts and other commitments that are known and committed.

Contractual Obligations	Payment due by period
(In thousands of U.S. dollars)	2015		2016		2017		2018		2019		There- after		Total
Commitments for clinical and other agreements	$	3,539	$	481	$	6	$	6		-		-	$	4,032
Supplier purchase commitment		1,180		1,180		-		-		-		-		2,360
Deferred consideration		3,044		3,189		1,355		-		-		-		7,588
Interest expense on deferred consideration		759		454		135		-		-		-		1,348
Term loan facility		1,714		4,114		4,114		2,058		-		-		12,000
Interest expense on term loan facility		996		714		364		51		-		-		2,125
Operating lease obligations		489		425		334		337		286		1,079		2,950
Total	$	11,721	$	10,557	$	6,308	$	2,452	$	286	$	1,079	$	32,403

Outstanding share capital

As of March 12, 2015, there were 16,682,929 common shares issued and outstanding, and 1,270,665 common shares issuable upon the exercise of outstanding stock options (of which 735,291 were exercisable) at a weighted average exercise price of CAD $4.67 per share, and 57,500 restricted share units outstanding.

CRITICAL ACCOUNTING POLICIES AND SIGNIFICANT ESTIMATES

Our audited consolidated financial statements are prepared in accordance with U.S. GAAP. These accounting principles require us to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements as well as the reported amounts of revenues and expenses during the reporting periods. 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 were made. Actual results may differ from these estimates under different assumptions or conditions. Significant areas requiring management estimates include accounting for amounts recorded in connection with business combinations, recoverability of inventories, the assessment of net recoverable value and amortization period of intangible assets, reporting of revenue recognition, bad debt and doubtful accounts, income taxes, accounting for stock-based compensation expense, and commitments and contingencies.

15

The significant accounting policies that we believe are the most critical in fully understanding and evaluating our reported financial results include revenue recognition, impairment of long-lived assets, goodwill, amortization, stock-based compensation, and fair value measurements of financial instruments. These and other significant accounting policies are described more fully in Note 2 of our annual consolidated financial statements for the year ended December 31, 2014.

Revenue recognition

Product and royalty revenue

Revenue from sales of products is recognized upon the later of transfer of title or upon shipment of the product to the customer, so long as persuasive evidence of an arrangement exists, the sales price is fixed or determinable, and collection is reasonably assured. Provisions for chargebacks, rebates, sales incentives and returns are provided for in the same period the related sales are recorded. Sales taxes collected from customers in various European markets that must be remitted back to the relevant government authorities are excluded from revenues. Shipping and handling costs are included in cost of sales.

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

Licensing and other fees

We earn revenue from a collaboration and license agreement from the commercial sale of an approved product.

Impairment of long-lived assets

Long-lived assets, including property and equipment, and intangible assets other than goodwill, are assessed for potential impairment when there is evidence that events or changes in circumstances indicate that the carrying amount of an asset may not be recovered. We determine whether the carrying value of a long-lived depreciable asset or asset group is recoverable based on its estimates of future asset utilization and undiscounted expected future cash flows the assets are expected to generate. If the total of the expected undiscounted future cash flows is less than the carrying amount of the asset, a loss is recognized for the excess of the carrying amount over the fair value of the asset. We primarily use the income approach when determining the fair value of assets.

Goodwill

Goodwill represents the excess of the purchase price of an acquired enterprise over the fair value assigned to assets acquired and liabilities assumed in a business combination. Goodwill is allocated as of the date of the business combination to the reporting units that are expected to benefit from the synergies of the business combination.

16

Goodwill has an indefinite life, is not amortized, and is subject to a two-step impairment test on an annual basis. The first step compares the fair value of the reporting unit to its carrying amount, which includes the goodwill. When the fair value of a reporting unit exceeds its carrying amount, goodwill of the reporting unit is considered not to be impaired and the second step of the impairment test is unnecessary. If the carrying amount exceeds the implied fair value of the goodwill, the second step measures the amount of the impairment loss. If the carrying amount exceeds the fair value of the goodwill, an impairment loss is recognized equal to that excess.

Amortization

Amortization of intangible assets incorporates estimates of useful lives and residual values. These estimates may change as more experience is obtained or as general market conditions change impacting the use of intangible assets.

Stock-based compensation and other stock-based payments

We recognize stock-based compensation expense for all stock-based compensation awards based on the fair value at grant date, amortized over the vesting period.

Determining the appropriate fair value model and calculating the fair value of share-based payment awards requires subjective assumptions. The assumptions used in calculating the fair value of share-based payment awards represent management’s best estimates, but these estimates involve inherent uncertainties and the application of management’s judgment. As a result, if factors change and we use different assumptions, our stock-based compensation expense could be materially different in the future.

Fair value measurements of 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.

The determination of fair value requires judgments, assumptions and estimates and may change over time.

17

Recent accounting pronouncements

Revenue from contracts with customers

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers, that introduced a new five-step revenue recognition model to be used to determine how an entity should recognize revenue related to the transfer of goods or services to customer in an amount that reflects the consideration the entity is entitled to receive for those goods or services. This ASU also requires disclosures sufficient to enable users to understand the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers, including qualitative and quantitative disclosures about contracts with customers, significant judgments and changes in judgments, and assets recognized from the costs to obtain or fulfill a contract. This standard is effective for fiscal years beginning after December 15, 2016, including interim periods within that reporting period. The Company is currently evaluating the new guidance to determine the impact it will have on our consolidated financial statements.

Going concern disclosure

In August 2014, the FASB issued ASU 205-40, Presentation of Financial Statements – Going Concern, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern, which requires management to assess at each interim and annual reporting period whether substantial doubt exists about the Company’s ability to operate as a going concern. Substantial doubt exists if the Company will be unable to meet its obligations as they become due within one year after the financial statement issue date. If there is substantial doubt, additional disclosures are required. The new standard is effective for annual and interim financial statements for fiscal years beginning after December 15, 2016.

RELATED PARTY TRANSACTIONS

We incurred expenses for services provided by a law firm in which a director of one of our wholly owned subsidiaries 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, 2014, we incurred legal fees of $0.1 million (2013 - $0.2 million) for services provided by the law firm relating to general corporate matters. Included in accounts payable and accrued liabilities at December 31, 2014 is an amount of $0.1 million (2013 - $0.1 million) owing to the legal firm.

We also incurred expenses for services provided by an accounting firm in which a director of one of our wholly owned subsidiaries is a director. The amounts charged are recorded at their exchange amounts and are subject to normal trade terms. For the year ended December 31, 2014, we incurred accounting fees of $0.1 million (2013 - $0.1 million) for services provided by the accounting firm relating to general corporate matters. Included in accounts payable and accrued liabilities at December 31, 2014 is an amount of $0.01 million (2013 - $0.03 million) owing to the accounting firm.

OFF-BALANCE SHEET ARRANGEMENTS

We have no material undisclosed off-balance sheet arrangements that have or are reasonably likely to have, a current or future effect on our results of operations, financial condition, revenues or expenses, liquidity, capital expenditures or capital resources that is material to investors.

18

DISCLOSURE CONTROLS AND PROCEDURE

Our management is responsible for establishing and maintain adequate disclosure controls and procedures (as such term is defined in applicable securities regulations). Management has evaluated, with the participation of our Chief Executive Officer and Chief Financial Officer, the effectiveness of our disclosure controls and procedures December 31, 2014. Disclosure controls and procedures refer to controls and other procedures designed to ensure that information required to be disclosed in the reports we file or submit with securities regulatory authorities is recorded, processed, summarized and reported, within the time periods specified in applicable securities regulations. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in our reports that we file or submit with securities regulatory authorities is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding our required disclosure.

In designing and evaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management was required to apply its judgment in evaluating and implementing possible controls and procedures.

Based on the foregoing, our Chief Executive Officer and Chief Financial Officer have concluded that, as of December 31, 2014, our disclosure controls and procedures were effective.

INTERNAL CONTROL OVER FINANCIAL REPORTING

Management’s Annual Report on Internal Control over Financial Reporting

Our management, including our Chief Executive Officer and Chief Financial Officer, is responsible for establishing and maintaining adequate internal control over financial reporting (as such term is defined in applicable securities regulations) and has designed and maintained such internal control over financial reporting to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of financial statements for external purposes in accordance with U.S. GAAP.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements even when determined to be effective and can only provide reasonable assurance with respect to financial statement preparation and presentation. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies and procedures may deteriorate.

Under the supervision of our Chief Executive Officer and our Chief Financial Officer, as of December 31, 2014, management evaluated the effectiveness of our internal control over financial reporting based on the framework set forth in Internal Control-Integrated Framework (1992) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). Based on its evaluation under this framework, management concluded that our internal control over financial reporting was effective as of December 31, 2014.

The effectiveness of our internal control over financial reporting as of December 31, 2014 has been audited by KPMG LLP, the independent registered public accounting firm that audited our December 31, 2014 consolidated annual financial statements, as stated in their report theron.

Management intends to assess the effectiveness of our internal control over financial reporting as of December 31, 2015 based on the 2013 COSO framework.

19

Changes in Internal Control over Financial Reporting

Management has evaluated, with the participation of our Chief Executive Officer and Chief Financial Officer, whether any changes in our internal control over financial reporting that occurred during our last fiscal year have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

During 2014, there were no changes with regard to internal control over financial reporting that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.

FINANCIAL INSTRUMENTS AND RISKS

We are exposed to credit risks and market risks related to changes in interest rates and foreign currency exchange rates, each of which could affect the value of our current assets and liabilities. 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. At December 31, 2014, our cash and cash equivalents were primarily held as cash, the majority of which was denominated in U.S. dollars. We do not believe that the results of operations or cash flows would be affected to any significant degree by a sudden change in market interest rates relative to our investment portfolio, due to the relative short-term nature of the investments and our current ability to hold fixed income investments to maturity. 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 fluctuations that could have a material effect on our future operating results or cash flows. We are exposed to interest rate cash flow risk on our cash and cash equivalents and our long-term debt as these instruments bear interest based on current market rates.

20

EX-99.2

Exhibit 99.2

CARDIOME PHARMA CORP.

Consolidated Financial Statements

For the years ended December 31, 2014 and 2013

MANAGEMENT’S REPORT

The accompanying consolidated financial statements of Cardiome Pharma Corp. are the responsibility of management and have been approved by the Board of Directors. The consolidated financial statements and related notes have been prepared by management in accordance with generally accepted accounting principles used in the United States of America, and where appropriate, reflect management’s best estimates and assumptions based upon information available at the time that these estimates and assumptions were made.

Management is responsible for establishing and maintaining a system of internal controls over financial reporting designed to provide reasonable assurance as to the reliability of financial information and the safeguarding of assets.

The Board of Directors is responsible for ensuring that management fulfills 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 directors not involved in the daily operations of the Company. The Audit Committee is responsible for engaging the external auditor and reviewing the financial statements prior to their presentation to the Board of Directors for approval. The Audit Committee meets with management and the external auditors to satisfy itself that management’s responsibilities are properly discharged.

The company’s external auditors, who are appointed by the shareholders, conducted an independent audit in accordance with Canadian generally accepted auditing standards and the standards of the Public Company Accounting Oversight Board (United States), and express their opinion thereon.

/s/ Dr. William Hunter	/s/ Jennifer Archibald
President and CEO	Chief Financial Officer
March 13, 2015	March 13, 2015

 

KPMG LLP Chartered Accountants PO Box 10426 777 Dunsmuir Street Vancouver BC V7Y 1K3 Canada Telephone (604) 691-3000 Fax (604) 691-3031 Internet www.kpmg.ca

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and Board of Directors of Cardiome Pharma Corp.

We have audited the accompanying consolidated balance sheets of Cardiome Pharma Corp. as of December 31, 2014 and December 31, 2013 and the related consolidated statements of operations and comprehensive income (loss), stockholders’ equity and cash flows for the years then ended. These consolidated financial statements are the responsibility of Cardiome Pharma Corp.’s management. Our responsibility is to express an opinion on these consolidated 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 the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit 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, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Cardiome Pharma Corp. as of December 31, 2014 and December 31, 2013, and its consolidated results of operations and its consolidated cash flows for the years then ended in conformity with US generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Cardiome Pharma Corp.’s internal control over financial reporting as of December 31, 2014, based on the criteria established in Internal Control – Integrated Framework (1992) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated March 13, 2015 expressed an unqualified opinion on the effectiveness of Cardiome Pharma Corp.’s internal control over financial reporting.

 

Chartered Accountants

Vancouver, Canada

March 13, 2015

KPMG LLP is a Canadian limited liability partnership and a member firm of the KPMG
network of independent member firms affiliated with KPMG International Cooperative
(“KPMG International”), a Swiss entity.
KPMG Canada provides services to KPMG LLP.

 

KPMG LLP Chartered Accountants PO Box 10426 777 Dunsmuir Street Vancouver BC V7Y 1K3 Canada Telephone (604) 691-3000 Fax (604) 691-3031 Internet www.kpmg.ca

Report of Independent Registered Public Accounting Firm

To the Shareholders and Board of Directors of Cardiome Pharma Corp.

We have audited Cardiome Pharma Corp.’s internal control over financial reporting as of December 31, 2014, based on criteria established in Internal Control – Integrated Framework (1992) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Cardiome Pharma Corp.’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Annual Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on Cardiome Pharma Corp.’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, Cardiome Pharma Corp. maintained, in all material respects, effective internal control over financial reporting as of December 31, 2014, based on criteria established in Internal Control – Integrated Framework (1992) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) .

KPMG LLP is a Canadian limited liability partnership and a member firm of the KPMG
network of independent member firms affiliated with KPMG International Cooperative
(“KPMG International”), a Swiss entity.
KPMG Canada provides services to KPMG LLP.

 

We also have audited, in accordance with Canadian generally accepted auditing standards and the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Cardiome Pharma Corp. as of December 31, 2014 and 2013, and the related consolidated statements of operations and comprehensive income (loss), stockholders’ equity and cash flows for the years then ended, and our report dated March 13, 2015 expressed an unqualified opinion on those consolidated financial statements.

 

Chartered Accountants

Vancouver, Canada

March 13, 2015

CARDIOME PHARMA CORP.

Consolidated Balance Sheets

(In thousands of U.S. dollars, except share amounts)

	December 31, 2014			December 31, 2013
Assets
Current assets:
Cash and cash equivalents	$	12,708		$	10,984
Restricted cash (note 6)		2,320			2,323
Accounts receivable, net of allowance for doubtful accounts of $596 (2013 - $325)		9,504			6,674
Inventories (note 7)		5,335			6,597
Prepaid expenses and other assets		1,703			1,749
Deferred tax assets (note 15)		439			-
		32,009			28,327
Property and equipment (note 8)		811			618
Intangible assets (note 9)		16,156			18,069
Goodwill (note 4)		318			318
Other assets		821			-
	$	50,115		$	47,332
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable and accrued liabilities (note 10)	$	13,388		$	14,003
Current portion of long-term debt (note 11)		1,714			-
Current portion of deferred consideration (note 4)		3,044			3,688
		18,146			17,691
Long-term debt (note 11)		10,286			-
Deferred consideration (note 4)		4,544			6,997
		32,976			24,688
Stockholders’ equity:
Common stock		284,760			272,083
Authorized - unlimited number with no par value Issued and outstanding – 16,591,002 (2013 – 14,958,277) (note 12(a))
Additional paid-in capital		34,229			33,349
Deficit		(318,973	)		(300,746	)
Accumulated other comprehensive income		17,123			17,958
		17,139			22,644
	$	50,115		$	47,332

Commitments and contingencies (notes 14 and 18)

See accompanying notes to the consolidated financial statements.

Approved on behalf of the Board:

/s/ Richard M. Glickman	/s/ Harold H. Shlevin
Director	Director

CARDIOME PHARMA CORP.

Consolidated Statements of Operations and Comprehensive Income (Loss)

For the years ended December 31, 2014 and 2013

(In thousands of U.S. dollars, except share and per share amounts)

	December 31, 2014			December 31, 2013
Revenue:
Product and royalty revenue	$	30,042		$	4,143
Licensing and other fees		-			368
		30,042			4,511
Cost of goods sold		10,027			936
		20,015			3,575
Expenses:
Selling, general and administration		33,813			16,446
Research and development		637			476
Amortization (notes 8 and 9)		2,150			649
Acquisition costs (note 4)		-			1,494
Restructuring (note 16)		-			1,207
		36,600			20,272
Operating loss		(16,585	)		(16,697	)
Other expense (income):
Interest expense		1,483			87
Other expense (income)		136			(633	)
Foreign exchange gain		(26	)		(192	)
Gain on settlement of debt (note 11)		-			(20,834	)
		1,593			(21,572	)
Earnings (loss) before income taxes		(18,178	)		4,875
Income tax expense (note 15)		49			102
Net earnings (loss)	$	(18,227	)	$	4,773
Other comprehensive loss:
Foreign currency translation adjustments		835			227
Comprehensive income (loss)	$	(19,062	)	$	4,546
Earnings (loss) per common share (note 13)
Basic and diluted	$	(1.12	)	$	0.37
Weighted average common shares outstanding
Basic		16,230,308			12,769,844
Diluted		16,230,308			12,934,856

See accompanying notes to the consolidated financial statements.

CARDIOME PHARMA CORP.

Consolidated Statements of Stockholders’ Equity

For the years ended December 31, 2014 and 2013

(In thousands of U.S. dollars)

	Common stock			Additional paid-in capital			Deficit			Accumulated other comprehensive income			Total stockholders’ equity
Balance at December 31, 2012	$	262,439		$	32,754		$	(305,519	)	$	18,185		$	7,859
Net earnings		-			-			4,773			-			4,773
Common stock issued upon exercise of options		8			-			-			-			8
Issuance of common stock on acquisition (note 4)		9,629			-			-			-			9,629
Reallocation of additional paid in capital arising from stock-based compensation related to exercise of options		7			(7	)		-			-			-
Stock-based compensation expense recognized (note 12(e))		-			602			-			-			602
Foreign currency translation adjustments		-			-			-			(227	)		(227	)
Balance at December 31, 2013	$	272,083		$	33,349		$	(300,746	)	$	17,958		$	22,644
Net earnings		-			-			(18,227	)		-			(18,227	)
Issuance of common stock (note 12(b))		13,821			-			-			-			13,821
Share issue costs (note 12(b))		(1,415	)		-			-			-			(1,415	)
Common stock issued upon exercise of options		148			-			-			-			148
Reallocation of additional paid in capital arising from stock-based compensation related to exercise of options		123			(123	)		-			-			-
Stock-based compensation expense recognized (note 12(e))		-			1,003			-			-			1,003
Foreign currency translation adjustments		-			-			-			(835	)		(835	)
Balance at December 31, 2014	$	284,760		$	34,229		$	(318,973	)	$	17,123		$	17,139

See accompanying notes to the consolidated financial statements.

CARDIOME PHARMA CORP.

Consolidated Statements of Cash Flows

For the years ended December 31, 2014 and 2013

(In thousands of U.S. dollars)

	December 31, 2014			December 31, 2013
Operating activities:
Net earnings (loss) for the year	$	(18,227	)	$	4,773
Items not affecting cash:
Amortization		2,150			649
Amortization of deferred financing fees		222			-
Stock-based compensation (note 12(e))		1,141			645
Write-down of property and equipment		188			-
Write-down of inventory (note 7)		1,547			-
Gain on settlement of debt (note 11)		-			(20,834	)
Unrealized foreign exchange gain		(520	)		(186	)
Changes in operating assets and liabilities:
Restricted cash		(175	)		(2,059	)
Accounts receivable		(3,495	)		448
Inventories		(286	)		(2,816	)
Prepaid expenses and other assets		(393	)		(18	)
Deferred consideration		(558	)		-
Accounts payable and accrued liabilities		(121	)		2,630
Net cash used in operating activities		(18,527	)		(16,768	)
Investing activities:
Restricted cash paid on acquisition (note 4)		-			(1,266	)
Restricted cash acquired on acquisition (note 4)		-			1,143
Purchase of property and equipment		(522	)		(39	)
Increase in intangible assets		(78	)		(147	)
Net cash used in investing activities		(600	)		(309	)
Financing activities:
Issuance of common stock (note 12(b))		13,821			-
Share issue costs (note 12(b))		(1,415	)		-
Issuance of common stock upon exercise of stock options		148			8
Proceeds from issuance of long-term debt (note 11)		12,000			-
Financing fees (note 11)		(1,043	)		-
Payment of deferred consideration		(2,540	)		-
Proceeds from sale of property and equipment		-			149
Repayment of long-term debt (note 11)		-			(13,000	)
Net cash (used in) provided by financing activities		20,971			(12,843	)
Effect of foreign exchange rate changes on cash and cash equivalents		(120	)		(99	)
Increase (decrease) in cash and cash equivalents during the year		1,724			(30,019	)
Cash and cash equivalents, beginning of year		10,984			41,003
Cash and cash equivalents, end of year	$	12,708		$	10,984
Supplemental cash flow information:
Interest paid	$	1,104		$	-
Interest received		46			10
Net income taxes paid		332			73
Non-cash purchase of Correvio (note 4)		-			20,314

See accompanying notes to the consolidated financial statements.

CARDIOME PHARMA CORP.

Notes to Consolidated Financial Statements

(In thousands of U.S. dollars except share and per share amounts and where otherwise indicated)

As at and for the years ended December 31, 2014 and 2013

1. Basis of presentation:

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. Cardiome is a specialty pharmaceutical company dedicated to the development and commercialization of cardiovascular therapies that will improve the quality of life and health of patients suffering from heart disease. The Company currently has two marketed, in-hospital, cardiology products, BRINAVESS™(vernakalant (IV)) and AGGRASTAT^®, which are commercially available in numerous markets outside of the United States.

The Company has financed its cash requirements primarily from share issuances, payments from research collaborators, licensing fees, draws from a credit facility that was available under the Company’s collaborative agreements and a senior secured term loan facility (note 11). The Company’s ability to realize the carrying value of its assets is dependent on successfully commercializing its products and achieving future profitable operations, the outcome of which cannot be predicted at this time. As a result, in the future it may be necessary for the Company to raise additional funds. These funds may come from sources such as the issuance of shares from treasury, entering into strategic collaboration arrangements, or alternative sources of financing. However, there can be no assurance that the Company will be able to successfully raise sufficient funds to continue the development and commercialization of our products and our operational activities.

2. Summary of significant accounting policies:

The consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) and are presented in U.S. dollars. The following is a summary of significant accounting policies used in the preparation of these consolidated financial statements:

(a) Principles of consolidation:

The consolidated financial statements include the accounts of Cardiome Pharma Corp. and its wholly-owned subsidiaries from their respective dates of acquisition of control. All intercompany transactions and balances have been eliminated on consolidation.

(b) Use of estimates:

The consolidated financial statements have been prepared in conformity with U.S. GAAP, which requires management to make estimates and assumptions that affect the reported amounts in the consolidated financial statements. Significant areas requiring the use of estimates relate to accounting for amounts recorded in connection with business combinations, recoverability of inventories, carrying value of intangible assets, revenue recognition, bad debt and doubtful accounts, income taxes, stock-based compensation expense, and commitments and contingencies. 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.

2

CARDIOME PHARMA CORP.

Notes to Consolidated Financial Statements

(In thousands of U.S. dollars except share and per share amounts and where otherwise indicated)

As at and for the years ended December 31, 2014 and 2013

2. Significant accounting policies (continued):

(c) Business combinations:

In a business combination, the acquisition method of accounting requires that the assets acquired and liabilities assumed be recorded as of the date of the acquisition at their respective fair values with limited exceptions. Assets acquired and liabilities assumed in a business combination that arise from contingencies are recognized at fair value if fair value can reasonably be estimated. If the acquisition date fair value of an asset acquired or liability assumed that arises from a contingency cannot be determined, the asset or liability is recognized if probable and reasonably estimable; if these criteria are not met, no asset or liability is recognized. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Accordingly, the Company may be required to value assets at fair value measures that do not reflect the Company’s intended use of those assets. Any excess of the purchase price (consideration transferred) over the estimated fair values of net assets acquired is recorded as goodwill. Transaction costs and costs to restructure the acquired company are expensed as incurred. The operating results of the acquired business are reflected in the Company’s consolidated financial statements from the date of acquisition.

(d) Foreign currency translation:

The net assets of foreign subsidiaries where the local currencies have been determined to be the functional currencies are translated into U.S. dollars using exchange rates at the balance sheet dates. Equity is translated at historical rates and revenue and expenses are translated at exchange rates prevailing during the period. The foreign exchange gains and losses arising from translation are recorded in the foreign currency translation account, which is included in other comprehensive income (loss) and reflected as a separate component of equity. For those subsidiaries where the U.S. dollar has been determined to be the functional currency, non-monetary foreign currency assets and liabilities are translated using historical rates, while monetary assets and liabilities are translated at the period-end exchange rates. Revenues and expenses denominated in foreign currencies are translated at exchange rates prevailing during the period. Foreign exchange gains and losses are recorded in net earnings (loss) for the period.

3

CARDIOME PHARMA CORP.

Notes to Consolidated Financial Statements

(In thousands of U.S. dollars except share and per share amounts and where otherwise indicated)

As at and for the years ended December 31, 2014 and 2013

2. Significant accounting policies (continued):

(e) Fair value measurements of 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, the most observable inputs are used 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.

(f) Cash and cash equivalents:

Cash and cash equivalents include cash and short-term deposits with original maturities of 90 days or less. Short-term deposits are valued at amortized cost. The carrying amounts approximate fair value due to the short-term maturities of these instruments.

(g) Allowance for doubtful accounts receivable:

The Company maintains an allowance for accounts receivable for estimated losses that may result from our customers’ inability to pay. The Company estimates an allowance for doubtful accounts receivable primarily based on the credit worthiness of customers, aging of receivable balances and general economic conditions. Amounts later determined and specifically identified to be uncollectible are charged against this allowance.

(h) Inventories:

Inventories consist of finished goods, unfinished product (work in process) and raw materials and are valued at the lower of cost or estimated net realizable value, determined on a first-in-first-out basis. Cost is defined as all costs that relate to bringing the inventory to its present condition and location under normal operating conditions. Estimated net realizable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses.

4

CARDIOME PHARMA CORP.

Notes to Consolidated Financial Statements

(In thousands of U.S. dollars except share and per share amounts and where otherwise indicated)

As at and for the years ended December 31, 2014 and 2013

2. Significant accounting policies (continued):

(h) Inventories (continued):

The components of inventory and inventory purchase commitments are reviewed on a regular basis for excess and obsolete inventory based on estimated future usage and sales, demand from drug distributors and hospitals and economic conditions. Management believes that the estimates used in calculating the inventory provision are reasonable and properly reflect the risk of excess and obsolete inventory.

(i) 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
Production equipment	7 years
Computer equipment	3-5 years
Software	3-5 years
Furniture and office equipment	5-7 years

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

(j) Intangible assets:

Intangible assets are comprised of patent costs, trade name and marketing rights. Patent costs which are associated with the preparation, filing, and obtaining of patents are capitalized. Maintenance costs of patents are expensed as incurred.

The estimated useful life of intangible assets with definite life is the period over which the assets are expected to contribute to future cash flows. When determining the useful life, the Company considers the expected use of the asset, useful life of a related intangible asset, any legal, regulatory or contractual provisions that limit the useful life, any legal, regulatory, or contractual renewal or extension provisions without substantial costs or modifications to the existing terms and conditions, the effects of obsolescence, demand, competition and other economic factors, and the expected level of maintenance expenditures relative to the cost of the asset required to obtain future cash flows from the asset.

5

CARDIOME PHARMA CORP.

Notes to Consolidated Financial Statements

(In thousands of U.S. dollars except share and per share amounts and where otherwise indicated)

As at and for the years ended December 31, 2014 and 2013

2. Significant accounting policies (continued):

(j) Intangible assets (continued):

Amortization is provided using the straight-line method over the following terms:

Asset	Rate
Patents	over the useful life
Trade name	10 years
Marketing rights	10 years

(k) Other assets:

Deferred financing fees represent the unamortized costs incurred on issuance of the Company’s term loan facility. Amortization of deferred financing fees on the term loan facility is provided on the effective interest rate method over the term of the facility based on amounts available under the facilities.

(l) Goodwill:

Goodwill represents the excess of the purchase price of an acquired enterprise over the fair value assigned to assets acquired and liabilities assumed in a business combination. Goodwill is allocated as of the date of the business combination to the reporting units that are expected to benefit from the synergies of the business combination.

Goodwill has an indefinite life, is not amortized, and is subject to a two-step impairment test on an annual basis. The first step compares the fair value of the reporting unit to its carrying amount, which includes the goodwill. When the fair value of a reporting unit exceeds its carrying amount, goodwill of the reporting unit is considered not to be impaired and the second step of the impairment test is unnecessary. If the carrying amount exceeds the implied fair value of the goodwill, the second step measures the amount of the impairment loss. If the carrying amount exceeds the fair value of the goodwill, an impairment loss is recognized equal to that excess.

(m) Impairment of long-lived assets:

Long-lived assets, including property and equipment, and intangible assets other than goodwill, are assessed for potential impairment when there is evidence that events or changes in circumstances indicate that the carrying amount of an asset may not be recovered. The Company determines whether the carrying value of a long-lived depreciable asset or asset group is recoverable based on its estimates of future asset utilization and undiscounted expected future cash flows the assets are expected to generate. If the total of the expected undiscounted future cash flows is less than the carrying amount of the asset, a loss is recognized for the excess of the carrying amount over the fair value of the asset.

6

CARDIOME PHARMA CORP.

Notes to Consolidated Financial Statements

(In thousands of U.S. dollars except share and per share amounts and where otherwise indicated)

As at and for the years ended December 31, 2014 and 2013

2. Significant accounting policies (continued):

(n) Revenue recognition:

Product and royalty revenue

Revenue from sales of products is recognized upon the later of transfer of title or upon shipment of the product to the customer, so long as persuasive evidence of an arrangement exists, the sales price is fixed or determinable, and collection is reasonably assured. Provisions for chargebacks, rebates, sales incentives and returns are provided for in the same period the related sales are recorded. Sales taxes collected from customers in various European markets that must be remitted back to the relevant government authorities are excluded from revenues. Shipping and handling costs are included in cost of sales.

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

Licensing and other fees

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

(o) Research and development costs:

Research and development costs are expensed in the period incurred.

(p) 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 the Company’s 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 its 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.

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

Stock options and restricted share units granted to the Company’s directors, executive officers and employees are accounted for using the fair-value based method. Under this method, compensation expense for stock options is measured at fair value at the date of grant using the Black-Scholes valuation model and is expensed over the award’s vesting period. Stock-based compensation granted to consultants is subject to variable accounting treatment and is re-valued at fair value at each balance sheet date until the underlying service is complete. Compensation expense for restricted share units is measured at fair value at the date of grant, which is the market price of the underlying security, and is expensed over the award’s vesting period using the straight-line method.

7

CARDIOME PHARMA CORP.

Notes to Consolidated Financial Statements

(In thousands of U.S. dollars except share and per share amounts and where otherwise indicated)

As at and for the years ended December 31, 2014 and 2013

2. Significant accounting policies (continued):

(r) 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. Income tax credits, such as investment tax credits, are included as part of the provision for income taxes.

(s) Earnings (loss) per share:

Basic earnings (loss) per share is calculated by dividing net earnings (loss) by the weighted average number of common shares outstanding during the period. Diluted earnings per share is computed using the treasury stock method. When the effect of options and other securities convertible into common shares is anti-dilutive, including when the Company has incurred a loss for the period, basic and diluted loss per share are the same.

Diluted earnings 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. Under the treasury stock method, the number of dilutive shares, if any, is determined by dividing the average market price of shares for the period into the net proceeds of in-the-money options.

(t) Comparative figures:

Certain comparative figures have been reclassified to conform with the financial statement presentation adopted for the current year.

8

CARDIOME PHARMA CORP.

Notes to Consolidated Financial Statements

(In thousands of U.S. dollars except share and per share amounts and where otherwise indicated)

As at and for the years ended December 31, 2014 and 2013

3. Recent accounting pronouncements:

(a) Revenue from contracts with customers:

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers, that introduced a new five-step revenue recognition model to be used to determine how an entity should recognize revenue related to the transfer of goods or services to customer in an amount that reflects the consideration the entity is entitled to receive for those goods or services. This ASU also requires disclosures sufficient to enable users to understand the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers, including qualitative and quantitative disclosures about contracts with customers, significant judgments and changes in judgments, and assets recognized from the costs to obtain or fulfill a contract. This standard is effective for fiscal years beginning after December 15, 2016, including interim periods within that reporting period. The Company is currently evaluating the new guidance to determine the impact it will have on our consolidated financial statements.

(b) Going concern disclosure:

In August 2014, the FASB issued ASU 205-40, Presentation of Financial Statements – Going Concern, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern, which requires management to assess at each interim and annual reporting period whether substantial doubt exists about the Company’s ability to operate as a going concern. Substantial doubt exists if the Company will be unable to meet its obligations as they become due within one year after the financial statement issue date. If there is substantial doubt, additional disclosures are required. The new standard is effective for annual and interim financial statements for fiscal years beginning after December 15, 2016.

4. Acquisition of Correvio LLC:

On November 18, 2013, the Company completed the acquisition of Correvio LLC (“Correvio”), a privately held pharmaceutical company headquartered in Geneva, Switzerland, focused on the worldwide marketing, excluding the United States, of AGGRASTAT^®, a branded prescription pharmaceutical. The acquisition accelerates the Company’s launch of BRINAVESS^™and transformation into a global commercial organization positioned for future growth, reduces BRINAVESS^™ build out costs and shortens the time to profitability by providing an established operational and financial infrastructure with significant operating cost synergies.

The Company acquired 100% of Correvio through the purchase of a combination of assets and shares of its subsidiaries in exchange for 19.9% of the Company’s then outstanding shares and deferred consideration of $12,000. The deferred consideration will be repaid monthly at an amount equal to 10% of cash receipts from product sales and any applicable interest accrued at 10% compounded annually. The deferred consideration must be repaid in full by December 1, 2019.

9

CARDIOME PHARMA CORP.

Notes to Consolidated Financial Statements

(In thousands of U.S. dollars except share and per share amounts and where otherwise indicated)

As at and for the years ended December 31, 2014 and 2013

4. Acquisition of Correvio (continued):

The transaction was accounted using the acquisition method and accordingly, the consideration was allocated to the assets acquired and liabilities assumed on the basis of their respective estimated fair values as of November 18, 2013. The determination of fair value required management to make significant estimates and assumptions. The excess of the purchase price over the final amounts assigned to the assets acquired and liabilities assumed was recorded as goodwill.

The following tables summarize the total consideration transferred and the final amounts of the fair value assigned to the assets acquired and liabilities assumed recognized at the acquisition date:

Consideration
2,481,596 common shares of the Company		9,629	(1)
Deferred consideration		10,685	(2)
Cash consideration		1,266
Fair value of total consideration transferred	$	21,580

⁽¹⁾ The fair value of 19.9% of the Company’s outstanding shares issued on November 18, 2013 (a total of 2,481,596 shares) with a value of $3.88 per share for a total of $9,629 was determined based on the closing price on November 17, 2013.

⁽²⁾ The fair value of the deferred consideration of $12,000 incurred by the Company on November 18, 2013 adjusted by post-closing adjustments of $1,315. The fair value of deferred consideration was based on significant inputs that are not observable in the market (Level 3 inputs) including forecasted cash receipts from product sales and an estimated discount factor.

10

CARDIOME PHARMA CORP.

Notes to Consolidated Financial Statements

(In thousands of U.S. dollars except share and per share amounts and where otherwise indicated)

As at and for the years ended December 31, 2014 and 2013

4. Acquisition of Correvio (continued):

Final allocation of purchase price:
Assets acquired
Restricted cash and deposits	$	1,274
Accounts receivable		6,142
Inventories		3,781
Prepaid expense and other assets		960
Property and equipment		413
Identifiable intangible assets		16,961
Goodwill		318
Liabilities assumed
Accounts payable and accrued liabilities		8,162
Deferred rent		107
Fair value of net assets acquired	$	21,580

The following table provides the components of the identifiable intangible assets acquired that are subject to amortization:

	Estimated
	useful life
Marketing rights	10 years	$	15,830
Trade name	10 years		1,131
		$	16,961

Correvio’s results of operations and estimated fair value of assets acquired and liabilities assumed have been included in the Company’s financial statements from the date of acquisition and include revenue of $3,805 and net losses of $275 to the Company for the period from November 18, 2013 to December 31, 2013.

The following unaudited supplemental pro forma data presents the Company’s operating results as if the acquisition had been completed on January 1, 2013. The pro forma financial information is presented for information purposes only and is not indicative of the results of operations that would have been achieved if the acquisition had actually occurred on January 1, 2013. The pro forma financial information presented includes amortization charges for acquired tangible and intangible assets, based on the values assigned in the purchase price allocation.

11

CARDIOME PHARMA CORP.

Notes to Consolidated Financial Statements

(In thousands of U.S. dollars except share and per share amounts and where otherwise indicated)

As at and for the years ended December 31, 2014 and 2013

4. Acquisition of Correvio (continued):

	2013
Pro forma information
Revenue	$	30,775
Net earnings		2,169
Basic earnings per share	$	0.15
Diluted earnings per share	$	0.14

5. Financial instruments:

Financial instruments consist primarily of cash and cash equivalents, restricted cash, accounts receivable, accounts payable and accrued liabilities, long-term debt and deferred consideration. The fair values of cash and cash equivalents, restricted cash, accounts receivable, and accounts payable and accrued liabilities approximate carrying values because of their short-term nature. At December 31, 2014, the carrying value of the Company’s long-term debt and deferred consideration approximate their fair value based on current market borrowing rates. The long-term debt is classified as Level 2 of the fair value hierarchy. The deferred consideration is classified as Level 3 of the fair value hierarchy.

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.

The Company is subject to credit risk related to its accounts receivable. The majority of the Company’s accounts receivable arise from product sales which are primarily due from drug distributors and hospitals. The Company monitors the creditworthiness of its customers so that it can properly assess and respond to changes in their credit profile.

12

CARDIOME PHARMA CORP.

Notes to Consolidated Financial Statements

(In thousands of U.S. dollars except share and per share amounts and where otherwise indicated)

As at and for the years ended December 31, 2014 and 2013

5. Financial instruments (continued):

(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.

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

6. Restricted cash:

At December 31, 2014, restricted cash included $1,000 (2013 - $1,000) relating to amounts held in escrow in a non-interest bearing account in connection with the acquisition of Correvio (note 4). This amount will be released from escrow upon the Company’s payment of all amounts owing under the deferred consideration liability plus all applicable accrued interest.

The Company also held restricted cash relating to deposits which are pledged as collateral for bank guarantees for sales contracts with various hospitals and health authorities and for value-added tax liabilities of $1,320 (2013 - $1,158) and nil (2013 - $165), respectively. Average interest rates on these deposits range from nil to 0.01% (2013 - nil to 0.01%).

13

CARDIOME PHARMA CORP.

Notes to Consolidated Financial Statements

(In thousands of U.S. dollars except share and per share amounts and where otherwise indicated)

As at and for the years ended December 31, 2014 and 2013

7. Inventories:

	December 31,		December 31,
	2014		2013
Finished goods	$	1,815	$	1,941
Work in process		1,013		3,052
Raw materials		2,449		1,546
Inventory consigned to others		58		58
	$	5,335	$	6,597

During the year ended December 31, 2014, the Company had a write-down of $1,547 (2013 – nil) in inventory.

8. Property and equipment:

			Accumulated		Net book
2014	Cost		amortization		value
Laboratory equipment	$	625	$	542	$	83
Production equipment		96		16		80
Software		110		46		64
Computer equipment		200		111		89
Leasehold improvements		416		30		386
Furniture and office equipment		122		13		109
	$	1,569	$	758	$	811

			Accumulated		Net book
2013	Cost		amortization		value
Laboratory equipment	$	629	$	488	$	141
Production equipment		286		-		286
Software		96		13		83
Computer equipment		144		87		57
Leasehold improvements		39		17		22
Furniture and office equipment		39		10		29
	$	1,233	$	615	$	618

Amortization expense for the year ended December 31, 2014 amounted to $143 (2013 - $104).

14

CARDIOME PHARMA CORP.

Notes to Consolidated Financial Statements

(In thousands of U.S. dollars except share and per share amounts and where otherwise indicated)

As at and for the years ended December 31, 2014 and 2013

9. Intangible assets:

			Accumulated		Net book
2014	Cost		amortization		value
Marketing rights	$	15,830	$	1,782	$	14,048
Trade name		1,131		127		1,004
Patents		4,273		3,169		1,104
	$	21,234	$	5,078	$	16,156

			Accumulated		Net book
2013	Cost		amortization		value
Marketing rights	$	15,830	$	199	$	15,631
Trade name		1,131		14		1,117
Patents		4,179		2,858		1,321
	$	21,140	$	3,071	$	18,069

Amortization expense for the year ended December 31, 2014 amounted to $2,007 (2013 - $545).

The estimated aggregate amortization expense for intangible assets held at December 31, 2014, for each of the five succeeding years is expected as follows:

2015	$	1,972
2016		1,885
2017		1,867
2018		1,835
2019		1,813

15

CARDIOME PHARMA CORP.

Notes to Consolidated Financial Statements

(In thousands of U.S. dollars except share and per share amounts and where otherwise indicated)

As at and for the years ended December 31, 2014 and 2013

10. Accounts payable and accrued liabilities:

Accounts payable and accrued liabilities comprise:

	December 31,		December 31,
	2014		2013
Trade accounts payable	$	5,474	$	5,719
Employee-related accruals		2,719		3,367
Restructuring (note 16)		-		732
Interest payable (notes 4 and 11)		291		125
Other accrued liabilities		4,904		4,060
	$	13,388	$	14,003

11. Long term debt:

(a) Merck

Pursuant to collaboration agreements with Merck Sharp & Dohme Corp. (“Merck”) signed in 2009, Merck granted the Company an interest-bearing credit facility of up to $100,000, secured by a first priority interest to the Company’s patents and all associated proceeds. On September 25, 2012, Merck terminated the agreements.

In December 2012, the Company agreed to settle its debt obligation by way of a $20,000 settlement amount to settle its outstanding debt of $50,000 plus accrued interest of $2,164. The Company paid $7,000 on December 31, 2012 and $13,000 on March 1, 2013, extinguishing all outstanding debt obligations to Merck. The Company recorded a gain on debt settlement of $20,834 for the year ended December 31, 2013.

(b) MidCap

On July 18, 2014, the Company closed a senior, secured term loan facility with MidCap Financial, LLC for up to $22,000 consisting of two tranches bearing interest at a rate of LIBOR plus 8%. Interest is payable on a monthly basis. The first tranche of $12,000 is available for working capital and general corporate purposes. The second tranche of up to $10,000 is available to support a product or company acquisition. The loan carries a term of 48 months and is secured by substantially all of the assets of the Company. At December 31, 2014, the Company has drawn $12,000 of the first tranche of the loan facility. Future repayments are as follows:

2015	$	1,714
2016		4,114
2017		4,114
2018		2,058
Total repayments	$	12,000

16

CARDIOME PHARMA CORP.

Notes to Consolidated Financial Statements

(In thousands of U.S. dollars except share and per share amounts and where otherwise indicated)

As at and for the years ended December 31, 2014 and 2013

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 shares	of shares
Balance, December 31, 2012		12,470,335
Issued on acquisition of Correvio (note 4)		2,481,596
Issued for cash upon exercise of options		5,192
Issued upon exercise of options in cashless transaction		1,154
Balance, December 31, 2013		14,958,277
Issued through at-the-market offering		30,513
Issued through common share offering		1,500,000
Issued upon exercise of options in cashless transaction		32,212
Issued for cash upon exercise of options		70,000
Balance, December 31, 2014		16,591,002

(i) On February 18, 2014, the Company completed a prospectus supplement under which the Company may issue common shares in one or more at-the-market (“ATM”) offerings up to an aggregate of $8,900. During the year ended December 31, 2014, the Company issued 30,513 common shares under the ATM program for gross proceeds of $289.

On March 11, 2014, the Company completed a prospectus offering of 1,500,000 common shares from treasury at CAD $10.00 per common share for net proceeds of $12,369. Additionally, 1,500,000 common shares were sold in a secondary offering from CarCor Investment Holdings LLC, the shareholder from which the Company purchased Correvio, at CAD $10.00 per common share for net proceeds of $12,720.  The Company did not receive any of the proceeds of the sale of common shares by CarCor Investment Holdings LLC.

(c) Stock options:

Under the terms of the Company’s incentive stock option plan (the “Plan”), the Company may grant options to directors, executive officers, employees and consultants of the Company. The Plan provides for granting of options at the fair market value of the Company’s common shares at the grant date. Options generally vest over periods of up to four years with an expiry term of five years and generally vest in equal amounts at the end of each month. On June 16, 2014, shareholders approved an amendment to the Plan (the “Amended Plan”) whereby the maximum number of shares available for issue under the Amended Plan is a rolling number equal to a maximum of 12.5% of the issued common shares outstanding at the time of grant. Prior to this amendment, the number of shares available for issuance was a specified, fixed amount. Under the Amended Plan, the maximum number of stock options issuable to insiders continues to be restricted to 10% of the issued and outstanding common shares of the Company.

17

CARDIOME PHARMA CORP.

Notes to Consolidated Financial Statements

(In thousands of U.S. dollars except share and per share amounts and where otherwise indicated)

As at and for the years ended December 31, 2014 and 2013

12. Stockholders’ equity (continued):

Details of the stock option transactions for the years ended December 31, 2014 and 2013 is summarized as follows:

	Number			Weighted average exercise price (CAD$)		Weighted average remaining contractual life (years)		Aggregate intrinsic value (CAD$)
Outstanding as at December 31, 2012		1,118,112			14.64		2.94		67
Options granted		545,000			3.28
Options exercised		(6,710	)		1.70
Options forfeited		(245,226	)		22.53
Options expired		(209,264	)		33.40
Outstanding as at December 31, 2013		1,201,912			4.68		3.71		4,400
Options granted		260,000			8.27
Options exercised		(111,155	)		2.17
Options forfeited		(11,335	)		7.48
Options expired		(61,132	)		24.03
Outstanding as at December 31, 2014		1,278,290			4.68		3.34		8,411
Exercisable as at December 31, 2014		700,920			4.38		2.94		5,150

The outstanding options expire at various dates ranging from May 25, 2015 to September 25, 2019.

18

CARDIOME PHARMA CORP.

Notes to Consolidated Financial Statements

(In thousands of U.S. dollars except share and per share amounts and where otherwise indicated)

As at and for the years ended December 31, 2014 and 2013

12. Stockholders’ equity (continued):

At December 31, 2014, stock options to executive officers and directors, employees and consultants were outstanding as follows:

	Options outstanding						Options exercisable
			Weighted		Weighted				Weighted
			average		average				average
			remaining		exercise				exercise
Range of			contractual		price				price
exercise prices (CAD$)	Number		life (years)		(CAD$)		Number		(CAD$)
$1.65 to $1.67		272,000		3.22		1.65		132,550		1.65
$1.68 to $2.08		226,845		2.74		1.70		186,681		1.70
$2.09 to $3.78		230,000		2.51		2.45		191,750		2.45
$3.79 to $43.20		549,445		4.01		8.34		189,939		10.88
		1,278,290		3.34		4.68		700,920		4.38

A summary of the Company’s non-vested stock option activity and related information for the year ended December 31, 2014 is as follows:

	Number			Weighted average
	of			grant-date fair value
Non-vested options	options			(U.S.$)
Non-vested at December 31, 2013		599,474			2.10
Granted		260,000			4.55
Vested		(269,409	)		2.58
Forfeited		(11,195	)		3.98
Expired		(1,500	)		12.60
Non-vested at December 31, 2014		577,370			3.19

As of December 31, 2014, there was $1,023 (2013 - $1,349) of total unrecognized compensation cost related to non-vested stock options. That cost is expected to be recognized over a weighted average period of 1.6 years (2013 – 1.6 years).

The aggregate intrinsic value of stock options exercised during the year ended December 31, 2014 was $666 (2013 - $32).

The aggregate fair value of vested options during the year ended December 31, 2014 was $696 (2013 - $444).

For the year ended December 31, 2014, cash received relating to the exercise of stock options was $148 (2013 - $8).

19

CARDIOME PHARMA CORP.

Notes to Consolidated Financial Statements

(In thousands of U.S. dollars except share and per share amounts and where otherwise indicated)

As at and for the years ended December 31, 2014 and 2013

12. Stockholders’ equity (continued):

(d) Restricted stock plan:

During 2014, the Company established a treasury-based Restricted Share Unit Plan (the “RSU Plan”) to provide long-term incentives to certain executives and other key employees and to support the objective of employee share ownership through the granting of restricted share units (“RSUs”). There is no exercise price and no monetary payment is required from the employees to the Company upon grant of the RSUs or upon the subsequent issuance of shares to settle the award. The vested RSUs may be settled through the issuance of common shares from treasury, by the delivery of common shares purchased on the open market, in cash or in any combination of the foregoing, at the option of the Company. Vesting of RSUs is conditional upon the expiry of a time-based vesting period. The duration of the vesting period and other vesting terms applicable to the grant of the RSUs are determined at the time of the grant. The maximum number of RSU’s issuable under the RSU Plan is 413,001. As at December 31, 2014, the Company approved 59,500 RSUs which are not yet considered to be granted under GAAP criteria.

(e) Stock-based compensation:

The estimated fair value of options granted to executive officers and directors, and employees is amortized over the vesting period. For the year ended December 31, 2014, stock-based compensation expense of $1,141 (2013 - $645) is recorded in selling, general and administration expenses.

The weighted average fair value of stock options granted during the year ended December 31, 2014 was $4.55 (2013 - $2.17). The estimated fair value of the stock options granted was determined using the Black-Scholes option pricing model with the following weighted-average assumptions:

	December 31,			December 31,
	2014			2013
Dividend yield		-			-
Expected volatility		87.5	%		82.7	%
Risk-free interest rate		1.1	%		1.3	%
Expected average life of the options		3.3 years			3.7 years
Estimated forfeiture rate		0.5	%		13.4	%

20

CARDIOME PHARMA CORP.

Notes to Consolidated Financial Statements

(In thousands of U.S. dollars except share and per share amounts and where otherwise indicated)

As at and for the years ended December 31, 2014 and 2013

12. Stockholders’ equity (continued):

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. Forfeitures are estimated at the time of grant and, if necessary, management revises that estimate if actual forfeitures differ and adjusts stock-based compensation expense accordingly.

13. Basic and diluted earnings (loss) per share:

Reconciliations between basic and diluted earnings (loss) per shares are set forth below:

	December 31,			December 31,
	2014			2013
Net earnings (loss)	$	(18,227	)	$	4,773
Weighted average number of common shares for basic earnings (loss) per share		16,230,308			12,769,844
Dilutive effect of options		-			165,012
Diluted weighted average number of common shares for diluted earnings per share		16,230,308			12,934,856
Basic and diluted earnings (loss) per share	$	(1.12	)	$	0.37

21

CARDIOME PHARMA CORP.

Notes to Consolidated Financial Statements

(In thousands of U.S. dollars except share and per share amounts and where otherwise indicated)

As at and for the years ended December 31, 2014 and 2013

14. Commitments:

(a) Operating leases:

The Company has entered into operating leases for office space. Future minimum payments under the various operating leases are as follows:

2015	$	489
2016		425
2017		334
2018		337
2019		286
Thereafter		1,079
Total minimum payments required	$	2,950

Rent expense for the year ended December 31, 2014 was $599 (2013 - $129), net of sublease income of $127 (2013 - $651).

(b) Commitments for clinical and other agreements:

The Company entered into various clinical and other agreements requiring it to fund future expenditures of $4,032 (2013 - $3,997) between 2015 and 2018.

(c) Purchase commitments:

In connection with the acquisition of Correvio (note 4), the Company has purchase commitments with certain suppliers who assist in the production of AGGRASTAT^®. The commitments currently extend until the end of 2016. The amount of the purchase commitment is based on physical quantities manufactured; however there is a minimum purchase obligation of $1,180 for 2015 and $1,180 for 2016. The total amount purchased under this obligation was $2,148 for the year ended December 31, 2014 (2013 - $1,832).

15. Income taxes:

The components of earnings (loss) before income taxes consist of the following:

	2014			2013
Canadian	$	(6,042	)	$	12,245
Foreign		(12,136	)		(7,370	)
Earnings (loss) before income taxes	$	(18,178	)	$	4,875

22

CARDIOME PHARMA CORP.

Notes to Consolidated Financial Statements

(In thousands of U.S. dollars except share and per share amounts and where otherwise indicated)

As at and for the years ended December 31, 2014 and 2013

15. Income taxes (continued):

The reconciliation of income tax computed at statutory tax rates to income tax expense (recovery), using a 26.0% (2013 – 25.8%) statutory tax rate, is:

	December 31,			December 31,
	2014			2013
Income (loss) before income taxes	$	(18,178	)	$	4,875
Statutory tax rate		26.0	%		25.8	%
Income tax expense (recovery) at Canadian statutory income tax rates	$	(4,726	)	$	1,229
Change in valuation allowance		1,524			405
Permanent and other differences		369			(185	)
Tax rate differences		1,445			(1,347	)
Foreign exchange adjustments and other differences		1,437			-
Income tax expense	$	49		$	102

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

	December 31,			December 31,
	2014			2013
Deferred tax assets:
Tax loss carryforwards	$	71,914		$	70,054
Research and development deductions and investment tax credits		29,126			29,146
Tax values of depreciable assets in excess of accounting values		2,719			2,485
Share issue costs and other		406			517
Total deferred tax assets		104,165			102,202
Valuation allowance		(103,726	)		(102,202	)
Net deferred tax assets	$	439		$	-

At December 31, 2014, the Company has investment tax credits of $17,934 (2013 - $18,454) available to reduce deferred income taxes otherwise payable.

The Company also has total loss carryforwards of $301,791 (2013 - $292,754) available to offset future taxable income in Canada in the amount of $164,917 (2013 - $159,656), in Switzerland in the amount of $91,249 (2013 - $85,842), in the United States in the amount of $44,596 (2013 - $45,316), and in the United Kingdom in the amount of $1,029 (2013 - $1,061).

23

CARDIOME PHARMA CORP.

Notes to Consolidated Financial Statements

(In thousands of U.S. dollars except share and per share amounts and where otherwise indicated)

As at and for the years ended December 31, 2014 and 2013

15. Income taxes (continued):

The Company’s Canadian federal and provincial investment tax credits and non-capital losses for income tax purposes expire as follows:

	Investment		Non-capital
	tax credits		losses
2015	$	343	$	11,673
2016		1,064		7,596
2017		975		3,460
2018		158		35,288
2019		501		6,290
Thereafter		14,893		237,484
	$	17,934	$	301,791

The amount of liability for unrecognized tax benefits under U.S. GAAP as of December 31, 2014 is nil (2013 - 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 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, 2014, a provision of nil (2013 - nil) has been made in the financial statements for estimated tax liabilities. Tax years ranging from 2004 to 2012 remain subject to examination in the various countries we operate in.

24

CARDIOME PHARMA CORP.

Notes to Consolidated Financial Statements

(In thousands of U.S. dollars except share and per share amounts and where otherwise indicated)

As at and for the years ended December 31, 2014 and 2013

16. Restructuring:

In connection with the acquisition of Correvio in November 2013, the Company terminated several employees as part of integrating Correvio’s operations.

In March and July of 2012, the Company reduced its workforce, exited redundant leased facilities and terminated certain contracts. The workforce reduction initiative was completed in 2012, with the related liability substantially paid out in the first quarter of 2013. Idle-use expense and other charges recognized in the year ended December 31, 2012 included lease termination costs. The liability associated with idle-use expense and other charges, which is related to redundant leased facilities, has been fully settled.

The following tables summarize the provisions related to the restructuring for years ended December 31, 2014 and 2013:

	Employee termination benefits			Idle-use expense and other charges			Total
Balance at December 31, 2012	$	320		$	247		$	567
Restructuring expense recognized		1,336			-			1,336
Revisions to prior accruals		(12	)		(117	)		(129	)
Payments made		(926	)		(30	)		(956	)
Non-cash items		-			(86	)		(86	)
Balance at December 31, 2013		718			14			732
Payments made		(718	)		-			(718	)
Non-cash items		-			(14	)		(14	)
Balance at December 31, 2014	$	-		$	-		$	-

17. Related party transactions:

The Company incurred expenses for services provided by a law firm in which a director of one of the Company’s wholly owned subsidiaries 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, 2014, the Company incurred legal fees of $145 (2013 - $174) for services provided by the law firm relating to general corporate matters. Included in accounts payable and accrued liabilities at December 31, 2014 is $52 (2013 - $66) owing to the legal firm.

The Company also incurred expenses for services provided by an accounting firm in which a director of one of the Company’s wholly owned subsidiaries is a director. The amounts charged are recorded at their exchange amounts and are subject to normal trade terms. For the year ended December 31, 2014, the Company incurred accounting fees of $64 (2013 - $91) for services provided by the accounting firm relating to general corporate matters. Included in accounts payable and accrued liabilities at December 31, 2014 is $8 (2013 - $25) owing to the accounting firm.

25

CARDIOME PHARMA CORP.

Notes to Consolidated Financial Statements

(In thousands of U.S. dollars except share and per share amounts and where otherwise indicated)

As at and for the years ended December 31, 2014 and 2013

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.

26

CARDIOME PHARMA CORP.

Notes to Consolidated Financial Statements

(In thousands of U.S. dollars except share and per share amounts and where otherwise indicated)

As at and for the years ended December 31, 2014 and 2013

19. Segmented information:

During 2013, the Company began recognizing revenue from product sales at which time management began to measure the Company’s operations by the geographic area in which such products are sold.

Year ended December 31, 2014	Europe			Rest of World			Total
Revenue		14,308			15,734			30,042
Cost of goods sold		5,037			4,990			10,027
Gross margin		9,271			10,744			20,015
Gross margin %		65	%		68	%		67	%

Year ended December 31, 2013	Europe			Rest of World			Total
Revenue	$	1,897		$	2,614		$	4,511
Cost of goods sold		622			314			936
Gross margin		1,275			2,300			3,575
Gross margin %		67	%		88	%		79	%

During the years ended December 31, 2014 and 2013, we had two customers that accounted for more than 10% of our revenue. In 2014, these customers accounted for 23% and 19% of our revenue, respectively (2013 – 25% and 22%, respectively).

Property and equipment by geographic area were as follows:

As at December 31	2014		2013
Europe	$	118	$	132
Rest of World		693		486
	$	811	$	618

27