10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended: September 30, 2012

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from             to             

Commission File Number 001-12465

CELL THERAPEUTICS, INC.

(Exact name of registrant as specified in its charter)

Washington	91-1533912
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)
3101 Western Avenue, Suite 600
Seattle, Washington	98121
(Address of principal executive offices)	(Zip Code)

(206) 282-7100

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer	¨	Accelerated filer	x
Non-accelerated filer	¨  (Do not check if a smaller reporting company)	Smaller reporting company	¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:

Class	Outstanding at October 25, 2012
Common Stock, no par value	96,992,513

CELL THERAPEUTICS, INC.

TABLE OF CONTENTS

	PAGE
PART I - FINANCIAL INFORMATION
ITEM 1: Financial Statements
Condensed Consolidated Balance Sheets at September 30, 2012 (unaudited) and December 31, 2011		3
Condensed Consolidated Statements of Operations – Three and Nine Months Ended September  30, 2012 and 2011 (unaudited)		4
Condensed Consolidated Statements of Comprehensive Loss – Three and Nine Months Ended September  30, 2012 and 2011 (unaudited)		5
Condensed Consolidated Statements of Cash Flows – Nine Months Ended September  30, 2012 and 2011 (unaudited)		6
Notes to Condensed Consolidated Financial Statements		7
ITEM 2: Management’s Discussion and Analysis of Financial Condition and Results of Operations		15
ITEM 3: Quantitative and Qualitative Disclosures about Market Risk		30
ITEM 4: Controls and Procedures		30
PART II - OTHER INFORMATION
ITEM 1: Legal Proceedings		31
ITEM 1A: Risk Factors		35
ITEM 2: Unregistered Sales of Equity Securities and Use of Proceeds		55
ITEM 3: Defaults Upon Senior Securities		56
ITEM 4: Mine Safety Disclosures		56
ITEM 5: Other Information		56
ITEM 6: Exhibits		57
Signatures		59

CELL THERAPEUTICS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share amounts)

	September 30,			December 31,
	2012			2011
	(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	14,289		$	47,052
Prepaid expenses and other current assets		5,487			4,023
Total current assets		19,776			51,075
Property and equipment, net		7,734			3,604
Other assets		8,665			7,560
Total assets	$	36,175		$	62,239
LIABILITIES AND SHAREHOLDERS’ EQUITY (DEFICIT)
Current liabilities:
Accounts payable	$	11,936		$	5,750
Accrued expenses		9,067			11,064
Warrant liability		5,445			—
Current portion of long-term obligations		393			970
Total current liabilities		26,841			17,784
Long-term obligations, less current portion		5,768			2,985
Total liabilities		32,609			20,769
Commitments and contingencies
Common stock purchase warrants		13,461			13,461
Shareholders’ equity (deficit):
Preferred stock, no par value:
Authorized shares - 333,333
Series 14 Preferred Stock, $1,000 stated value, 20,000 shares designated, 0 and 10,000 shares issued and outstanding at September 30, 2012 and December 31, 2011, respectively		—			6,736
Common stock, no par value:
Authorized shares - 150,000,000 and 76,666,666 at September 30, 2012 and December 31, 2011, respectively
Issued and outstanding shares - 62,270,179 and 40,613,545 at September 30, 2012 and December 31, 2011, respectively		1,810,035			1,744,801
Accumulated other comprehensive loss		(7,992	)		(8,035	)
Accumulated deficit		(1,811,030	)		(1,714,785	)
Total CTI shareholders’ equity (deficit)		(8,987	)		28,717
Noncontrolling interest		(908	)		(708	)
Total shareholders’ equity (deficit)		(9,895	)		28,009
Total liabilities and shareholders’ equity (deficit)	$	36,175		$	62,239

See accompanying notes.

3

CELL THERAPEUTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts)

(unaudited)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2012			2011			2012			2011
Operating expenses:
Research and development	$	6,951		$	7,530		$	24,080		$	26,982
Selling, general and administrative		7,763			7,760			29,024			25,297
Acquired in-process research and development		—			—			29,108			—
Total operating expenses		14,714			15,290			82,212			52,279
Loss from operations		(14,714	)		(15,290	)		(82,212	)		(52,279	)
Other income (expense):
Investment and other income (expense), net		(270	)		(14	)		(179	)		(67	)
Interest expense		(43	)		(161	)		(51	)		(734	)
Amortization of debt discount and issuance costs		—			(129	)		—			(436	)
Foreign exchange gain (loss)		216			(1,133	)		(96	)		(56	)
Settlement expense		(435	)		—			(435	)		—
Other income (expense), net		(532	)		(1,437	)		(761	)		(1,293	)
Net loss before noncontrolling interest		(15,246	)		(16,727	)		(82,973	)		(53,572	)
Noncontrolling interest		57			65			200			179
Net loss attributable to CTI		(15,189	)		(16,662	)		(82,773	)		(53,393	)
Dividends and deemed dividends on preferred stock		(5,014	)		(13,023	)		(13,472	)		(49,817	)
Net loss attributable to CTI common shareholders	$	(20,203	)	$	(29,685	)	$	(96,245	)	$	(103,210	)
Basic and diluted net loss per common share	$	(0.38	)	$	(0.80	)	$	(2.12	)	$	(3.11	)
Shares used in calculation of basic and diluted net loss per common share		52,921			36,999			45,442			33,145

See accompanying notes.

4

CELL THERAPEUTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(In thousands)

(unaudited)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2012			2011			2012			2011
Net loss before noncontrolling interest	$	(15,246	)	$	(16,727	)	$	(82,973	)	$	(53,572	)
Other comprehensive income (loss):
Foreign currency translation adjustments		(121	)		703			71			(73	)
Net unrealized gain (loss) on securities available-for-sale		48			(107	)		(28	)		(204	)
Other comprehensive income (loss)		(73	)		596			43			(277	)
Comprehensive loss		(15,319	)		(16,131	)		(82,930	)		(53,849	)
Comprehensive loss attributable to noncontrolling interest		57			65			200			179
Comprehensive loss attributable to CTI	$	(15,262	)	$	(16,066	)	$	(82,730	)	$	(53,670	)

See accompanying notes.

5

CELL THERAPEUTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(unaudited)

	Nine Months Ended September 30,
	2012			2011
Operating activities
Net loss	$	(82,773	)	$	(53,393	)
Adjustments to reconcile net loss to net cash used in operating activities:
Acquired in-process research and development		29,108			—
Equity-based compensation expense		6,084			2,320
Depreciation and amortization		1,745			1,748
Provision for VAT assessments		(2,118	)		—
Noncash interest expense		—			436
Noncontrolling interest		(200	)		(179	)
Other		(195	)		(242	)
Changes in operating assets and liabilities:
Prepaid expenses and other current assets		(1,308	)		(644	)
Other assets		(874	)		(2,604	)
Accounts payable		2,207			(335	)
Accrued expenses		(1,895	)		(757	)
Other liabilities		4,462			(1,140	)
Total adjustments		37,016			(1,397	)
Net cash used in operating activities		(45,757	)		(54,790	)
Investing activities
Cash paid for acquisition of assets of S*BIO Pte Ltd.		(17,764	)		—
Cash paid for purchases of property and equipment		(1,966	)		(1,974	)
Proceeds from the sales of property and equipment		—			27
Net cash used in investing activities		(19,730	)		(1,947	)
Financing activities
Proceeds from issuance of Series 8 preferred stock, warrants and additional investment right, net of issuance costs		—			23,213
Proceeds from issuance of Series 10 preferred stock, warrants and additional investment right, net of issuance costs		—			23,530
Proceeds from issuance of Series 12 preferred stock and warrants, net of issuance costs		—			14,962
Proceeds from issuance of Series 13 preferred stock and warrants, net of issuance costs		—			28,149
Proceeds from issuance of Series 15 preferred stock and warrants, net of issuance costs		32,928			—
Cash paid for repayment of 7.5% convertible senior notes		—			(10,250	)
Cash paid for Series 14 preferred stock transaction costs		(170	)		—
Cash paid for Series 16 preferred stock transaction costs		(47	)		—
Cash paid for repurchase of shares in connection with taxes on restricted stock vesting		(77	)		(342	)
Other		(25	)		(23	)
Net cash provided by financing activities		32,609			79,239
Effect of exchange rate changes on cash and cash equivalents		115			61
Net increase (decrease) in cash and cash equivalents		(32,763	)		22,563
Cash and cash equivalents at beginning of period		47,052			22,649
Cash and cash equivalents at end of period	$	14,289		$	45,212
Supplemental disclosure of cash flow information
Cash paid during the period for interest obligations	$	10		$	705
Cash paid for taxes	$	—		$	—
Supplemental disclosure of noncash financing and investing activities
Conversion of Series 9 preferred stock to common stock	$	—		$	25,000
Conversion of Series 11 preferred stock to common stock	$	—		$	24,957
Conversion of Series 12 preferred stock to common stock	$	—		$	10,647
Conversion of Series 13 preferred stock to common stock	$	—		$	19,077
Conversion of Series 14 preferred stock to common stock	$	6,736		$	—
Conversion of Series 15 preferred stock to common stock	$	15,442		$	—
Conversion of Series 16 preferred stock to common stock	$	11,240		$	—
Issuance of common stock upon exercise or exchange of common stock purchase warrants	$	12,351		$	17,485
Issuance of Series 9 preferred stock	$	—		$	25,000
Issuance of Series 11 preferred stock	$	—		$	24,957
Issuance of Series 16 preferred stock for acquisition of assets of S*BIO Pte Ltd.	$	11,344		$	—
Redemption of Series 8 and 10 preferred stock	$	—		$	36,638

See accompanying notes.

6

CELL THERAPEUTICS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

1. Description of Business and Summary of Significant Accounting Policies

Description of Business

Cell Therapeutics, Inc., also referred to in this Quarterly Report on Form 10-Q as CTI, the Company, we, us or our, focuses on the development, acquisition and commercialization of drugs for the treatment of cancer, an area with significant market opportunity that we believe is not adequately served by existing therapies. All of our current product candidates, including Pixuvri™ (pixantrone dimaleate), or Pixuvri, pacritinib, OPAXIO™ (paclitaxel poliglumex), or OPAXIO, tosedostat and brostallicin are under development.

We operate in a highly regulated and competitive environment. The manufacturing and marketing of pharmaceutical products require approval from, and are subject to ongoing oversight by, the Food and Drug Administration, or the FDA, in the United States, by the European Medicines Agency, or EMA, in the European Union, or EU, and by comparable agencies in other countries. Obtaining approval for a new therapeutic product is uncertain, may take many years and may involve the expenditure of substantial resources.

Basis of Presentation

The accompanying unaudited financial information of CTI as of September 30, 2012 and for the three and nine months ended September 30, 2012 and 2011 has been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Quarterly Report on Form 10-Q and Article 10 of Regulation S-X. In the opinion of management, such financial information includes all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation of our financial position at such date and the operating results and cash flows for such periods. Operating results for the three and nine months ended September 30, 2012 are not necessarily indicative of the results that may be expected for the entire year.

Certain information and footnote disclosure normally included in financial statements prepared in accordance with generally accepted accounting principles have been omitted pursuant to the rules of the U.S. Securities and Exchange Commission, or the SEC. These unaudited financial statements and related notes should be read in conjunction with our audited annual financial statements for the year ended December 31, 2011 included in our Annual Report on Form 10-K filed with the SEC on March 8, 2012.

The condensed consolidated balance sheet at December 31, 2011 has been derived from the audited financial statements at that date, but does not include all of the information and footnotes required by generally accepted accounting principles in the United States for complete financial statements.

Principles of Consolidation

The accompanying condensed consolidated financial statements include the accounts of CTI and its wholly-owned subsidiaries, which include Systems Medicine LLC, or SM, and CTI Life Sciences Limited. CTI Life Sciences Limited opened a branch in Italy in December 2009. We also retain ownership of our branch, Cell Therapeutics Inc. – Sede Secondaria, or CTI (Europe); however, we ceased operations related to this branch in September 2009. In addition, CTI Commercial LLC, a wholly-owned subsidiary, was included in the condensed consolidated financial statements until dissolution in March 2012.

As of September 30, 2012, we also had a 67% interest in our majority-owned subsidiary, Aequus Biopharma, Inc., or Aequus. In accordance with the Financial Accounting Standards Board, or FASB, Accounting Standards Codification, or ASC, 810, Consolidation, the noncontrolling interest in Aequus is reported below net loss in noncontrolling interest in the condensed consolidated statement of operations and condensed consolidated statements of comprehensive loss and shown as a component of equity in the condensed consolidated balance sheet.

All intercompany transactions and balances are eliminated in consolidation.

Reverse Stock Splits

On May 15, 2011 and September 2, 2012, we effected a one-for-six and one-for-five reverse stock split, respectively, or the May Split and September Split, respectively. Unless otherwise noted, all impacted amounts included in the condensed

7

consolidated financial statements and notes thereto have been retroactively adjusted for the May Split and September Split. Unless otherwise noted, impacted amounts include shares of common stock authorized and outstanding, share issuances, shares underlying preferred stock, convertible notes, warrants and stock options, shares reserved and loss per share. Additionally, the May Split and September Split impacted preferred stock authorized (but not outstanding because there were no shares of preferred stock outstanding as of the time of the applicable reverse stock split).

Liquidity

The accompanying condensed consolidated financial statements have been prepared assuming that we will continue as a going concern, which contemplates realization of assets and the satisfaction of liabilities in the normal course of business for the twelve-month period following the date of these condensed consolidated financial statements. However, we have incurred net losses since inception and expect to generate losses for the next few years primarily due to research and development costs for Pixuvri, pacritinib, OPAXIO, tosedostat and brostallicin.

Our available cash and cash equivalents were $14.3 million as of September 30, 2012. Subsequent to period end, we received $60.0 million in gross proceeds, before deducting underwriting discounts and commissions and other offering costs, from the issuance of our Series 17 convertible preferred stock, or Series 17 Preferred Stock. See Note 9, Subsequent Events for additional information. At our currently planned spending rate, we believe that our financial resources, in addition to the expected receipts from European Pixuvri sales, will be sufficient to fund our operations for the next fifteen (15) months. Changes in manufacturing, clinical trial expenses, and expansion of our sales and marketing organization in Europe, may consume capital resources earlier than planned. Additionally, we may not receive the country reimbursement rates in Europe for Pixuvri that we currently assume in planning for 2013.

We expect we will need to raise additional funds and are currently exploring alternative sources of equity or debt financing. We may seek to raise such capital through public or private equity financings, partnerships, joint ventures, disposition of assets, debt financings or restructurings, bank borrowings or other sources of financing. Our board of directors may issue shares depending on our financial needs and market opportunities, if deemed to be in the best interest of the shareholders. However, additional funding may not be available on favorable terms or at all. If additional funds are raised by issuing equity securities, substantial dilution to existing shareholders may result. If we fail to obtain additional capital when needed, we may be required to delay, scale back, or eliminate some or all of our research and development programs and may be forced to cease operations, liquidate our assets and possibly seek bankruptcy protection.

Value Added Tax Receivable

Our European operations are subject to a value added tax, or VAT, which is usually applied to all goods and services purchased and sold throughout Europe. The VAT receivable is approximately $5.0 million as of September 30, 2012 and December 31, 2011, respectively, of which $4.8 million and $4.7 million is included in other assets and $0.2 million and $0.3 million is included in prepaid expenses and other current assets as of September 30, 2012 and December 31, 2011, respectively. This receivable balance primarily relates to our Italian operations and typically has a three-year collection period. We review our VAT receivable balance for impairment whenever events or changes in circumstances indicate the carrying amount might not be recoverable.

Acquired in-process research and development

Costs to acquire in-process research and development, projects and technologies which had no alternative future use and which had not reached technological feasibility are expensed as incurred.

Net Loss per Share

Basic net income (loss) per common share is calculated based on the net income (loss) attributable to common shareholders divided by the weighted average number of shares outstanding for the period excluding any dilutive effects of options, warrants, unvested share awards and convertible securities. Diluted net income (loss) per common

8

share assumes the conversion of all dilutive convertible securities, such as convertible debt and convertible preferred stock using the if-converted method, and assumes the exercise or vesting of other dilutive securities, such as options, warrants and share awards using the treasury stock method. As of September 30, 2012 and 2011, options, warrants, unvested share awards, unvested share rights and convertible debt securities aggregating 9.6 million and 5.7 million common share equivalents, respectively, prior to the application of the as-if converted method for convertible securities and the treasury stock method for other dilutive securities, such as options and warrants, are not included in the calculation of diluted net loss per share as they are anti-dilutive.

Fair Value Measurement

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. Fair value measurements are based on a three-tier hierarchy that prioritizes the inputs used to measure fair value. There are three levels of inputs used to measure fair value with Level 1 having the highest priority and Level 3 having the lowest:

Level 1 – Observable inputs, such as unadjusted quoted prices in active markets for identical assets or liabilities.

Level 2 – Observable inputs other than Level 1 inputs, such as quoted prices for similar assets or liabilities, or other inputs that are observable directly or indirectly.

Level 3 – Unobservable inputs that are supported by little or no market activity, requiring an entity to develop its own assumptions.

If the inputs used to measure the financial assets and liabilities fall within more than one level described above, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument.

Recently Adopted Accounting Standards

In May 2011, the FASB issued guidance to enhance fair value measurement and disclosure requirements and provide a common framework between U.S. GAAP and IFRS. This guidance was effective for interim and annual periods beginning on or after December 15, 2011, with early adoption prohibited. The adoption of this guidance on January 1, 2012 did not have a material impact on our condensed consolidated financial statements.

In June 2011, the FASB issued guidance amending the presentation requirements for comprehensive income. For public entities, this guidance was effective for fiscal years, and interim periods within those years, beginning after December 15, 2011, with early adoption permitted. Subsequently, in December 2011, the FASB deferred the effective date of the portion of the June 2011 accounting standards update requiring separate presentation of reclassifications out of accumulated other comprehensive income. Upon adoption on January 1, 2012, we had the option to report total comprehensive income, including components of net income and components of other comprehensive income, as a single continuous statement or in two separate but consecutive statements. We elected to present comprehensive income in two separate but consecutive statements as part of the condensed consolidated financial statements included in this Quarterly Report on Form 10-Q.

Reclassifications

Certain prior year items have been reclassified to conform to current year presentation.

2. Other Comprehensive Income (Loss)

Total accumulated other comprehensive income (loss) consisted of the following (in thousands):

	Net Unrealized Loss on Securities Available-for-sale			Foreign Currency Translation Adjustments			Accumulated Other Comprehensive Income (Loss)
December 31, 2011	$	(165	)	$	(7,870	)	$	(8,035	)
Current period other comprehensive income (loss)		(28	)		71			43
September 30, 2012	$	(193	)	$	(7,799	)	$	(7,992	)

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3. Lease Agreements

During 2005, we reduced our workforce in the United States and Europe. In conjunction with this reduction in force, we vacated a portion of our laboratory and office facilities and recorded excess facilities charges. Charges for excess facilities relate to our lease obligation for excess laboratory and office space in the United States that we vacated as a result of the restructuring plan. We recorded these restructuring charges when we ceased using this space. During 2010, we recorded an additional liability of $1.5 million for excess facilities under an operating lease upon vacating a portion of our corporate office space.

The following table summarizes the changes in the liability for excess facilities during the period ended September 30, 2012 (in thousands):

	2005 Activities			2010 Activities			Total Excess Facilities Liability
Balance at December 31, 2011	$	215		$	530		$	745
Adjustments		(32	)		(62	)		(94	)
Payments		(183	)		(468	)		(651	)
Balance at September 30, 2012	$	—		$	—		$	—

As of September 30, 2012, we have a $1.9 million receivable balance included in prepaid expenses and other current assets related to incentives for leasehold improvements and rent reimbursement under the terms of our operating lease for office space entered into January 2012. In addition, we have approximately $5.0 million in deferred rent recorded as of September 30, 2012, of which $0.4 million is included in current portion of long-term obligations and $4.6 million is included in long-term obligations, less current portion.

4. Share-based Compensation Expense

The following table summarizes share-based compensation expense for the three and nine months ended September 30, 2012 and 2011, which was allocated as follows (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2012		2011		2012		2011
Research and development	$	363	$	206	$	1,379	$	839
Selling, general and administrative		653		574		4,705		1,481
Total share-based compensation expense	$	1,016	$	780	$	6,084	$	2,320

For the three and nine months ended September 30, 2012 and 2011, we incurred share-based compensation expense due to the following types of awards (in thousands):

	Three Months Ended September 30,					Nine Months Ended September 30,
	2012			2011		2012		2011
2012-2014 performance awards	$	(111	)	$	—	$	2,158	$	—
Restricted stock		996			753		3,635		2,243
Options		131			27		291		77
Total share-based compensation expense	$	1,016		$	780	$	6,084	$	2,320

5. Commitments and Contingencies

On August 3, 2009, Sicor—Società Corticosteroidi S.r.l., or Sicor, filed a lawsuit in the Court of Milan to obtain the Court’s assessment that we were bound to source a chemical compound, whose chemical name is BBR2778, from Sicor according to the terms of a supply agreement executed between Sicor and Novuspharma on October 4,

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2002. We assert that the supply agreement in question was properly terminated and that we have no further obligation to comply with its terms. At the hearing of October 11, 2012, the parties informed the court about the ongoing negotiations pending between them and asked to postpone the case. Sicor alleges that the agreement was not terminated according to its terms. At the request of the parties, the court extended the final hearing until March 21, 2013. No estimate of a loss, if any, can be made at this time in the event that we do not prevail.

On December 10, 2009, CONSOB sent us a notice claiming, among other things, violation of the provisions of Section 114, paragraph 1 of the Italian Legislative Decree no. 58/98 due to the asserted late disclosure of the contents of the opinion expressed by Stonefield Josephson, Inc., an independent registered public accounting firm, with respect to our 2008 financial statements. The sanctions established by Section 193, paragraph 1 of the Italian Legislative Decree no. 58/98 for such violations could require us to pay a pecuniary administrative sanction amounting to between $6,000 and $643,000 upon conversion from euros on September 30, 2012.

The Italian Tax Authority, or the ITA, issued notices of assessment to CTI (Europe) based on the ITA’s audit of CTI (Europe)’s VAT returns for the years 2003, 2005, 2006 and 2007. The ITA audits concluded that CTI (Europe) did not collect and remit VAT on certain invoices issued to non-Italian clients for services performed by CTI (Europe). We believe that the services invoiced were non-VAT taxable consultancy services and that the VAT returns are correct as originally filed. We are vigorously defending ourselves against the assessments both on procedural grounds and on the merits of the case. We have a reserve in the amount of $1.3 million upon conversion from euros as of September 30, 2012, of which $1.1 million is included in long-term obligations, less current portion and $0.2 million of the reserve is accounted for as an offset to our VAT receivable included in other assets. If the final decision of the lower tax courts (i.e. the Provincial Tax Court or the Regional Tax Court) or of the Supreme Court is unfavorable to us, we may incur approximately $10.8 million upon conversion from euros on September 30, 2012 in additional losses for VAT assessed, penalties and interest, plus collection fees, notification expenses and additional interest for the period lapsed between the date in which the assessments were issued and the date of effective payment.

On June 16, 2012, Craig W. Philips, then President of Cell Therapeutics, Inc., delivered notice of his intention to resign as President of the Company, effective July 16, 2012. Mr. Philips’ departure was the result of a perceived diminution of responsibilities. The parties finalized a settlement agreement in October 2012, and the Company has accrued approximately $0.4 million as of September 30, 2012.

In addition to the contingencies discussed above, we are from time to time subject to legal proceedings and claims arising in the ordinary course of business, some of which may be covered in whole or in part by insurance.

6. Reverse Stock Split

In August 2012, our Board of Directors approved a one-for-five reverse stock split and, on September 2, 2012, the reverse stock split became effective, which we refer to as the September Split. As a result of the September Split, every five shares of our authorized and outstanding common stock were converted into one authorized and outstanding share of common stock and every five shares of our authorized preferred stock were converted into one authorized share of preferred stock; there were no shares of preferred stock outstanding so there was no impact. No fractional shares were issued in the September Split. In lieu of fractional shares, shareholders received cash at a rate of approximately $0.435 per whole pre-split share. The September Split affected all of the holders of our common stock pro rata and did not materially affect any shareholder’s percentage of ownership interest. Any shares of our common stock or shares underlying options and warrants were proportionately reduced and the exercise price of any warrants or options were proportionately increased in accordance with the terms of the related agreements. Unless otherwise noted, all impacted amounts included in the condensed consolidated financial statements and notes thereto have been retroactively adjusted for the September Split.

7. Preferred Stock

Prior to the effective date of the September Split (see Note 6, Reverse Stock Splits), we completed the preferred stock transactions described in this Note 7, Preferred Stock. All of the outstanding shares of the preferred stock issued in these transactions converted to common stock prior to the effective date of the September Split. Accordingly, for purposes of the

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descriptions of these transactions included in this Note 7, Preferred Stock, the number of shares of preferred stock issued and the initial stated value of shares of preferred stock issued are not adjusted to reflect the September Split. However, the number of shares of common stock issued upon conversion of the preferred stock, the conversion price of common stock issued upon conversion, the exercise prices of warrants issued and the number of shares of common stock issued or issuable upon exercise of the warrants in these transactions are adjusted to reflect the September Split.

Series 14 Preferred Stock

In December 2011, we issued 20,000 shares of our Series 14 convertible preferred stock, or Series 14 Preferred Stock. As of December 31, 2011, 10,000 shares of Series 14 Preferred Stock remained outstanding. In January 2012, the remaining 10,000 shares of Series 14 Preferred Stock automatically converted into 1.7 million shares of our common stock pursuant to the terms of the Series 14 Preferred Stock.

Series 15-1 Preferred Stock

In May 2012, we issued 20,000 shares of our Series 15 convertible preferred stock, or Series 15-1 Preferred Stock, and a warrant to purchase up to 2.7 million shares of our common stock, or Series 15-1 Warrant, for gross proceeds of $20.0 million. Issuance costs related to this transaction were approximately $1.3 million.

Each share of our Series 15-1 Preferred Stock was entitled to a liquidation preference equal to the initial stated value of $1,000 per share of Series 15-1 Preferred Stock, plus any accrued and unpaid dividends before the holders of our common stock or any other junior securities receive any payments upon such liquidation. The Series 15-1 Preferred Stock was not entitled to dividends except to share in any dividends actually paid on our common stock or any pari passu or junior securities. The Series 15-1 Preferred Stock was converted into our common stock, at the option of the holder, at a conversion price of $5.00 per share, subject to a 9.99% blocker provision. The Series 15-1 Preferred Stock had no voting rights except as otherwise expressly provided in our amended and restated articles of incorporation or as otherwise required by law. For the nine months ended September 30, 2012, we recognized $8.5 million in dividends and deemed dividends on preferred stock related to the beneficial conversion feature on our Series 15-1 Preferred Stock. In May 2012, all 20,000 shares of our Series 15-1 Preferred Stock were converted into 4.0 million shares of our common stock.

The Series 15-1 Warrant has an exercise price of $5.46 per share of our common stock, was exercisable immediately on the date of issuance and expires five years from the date of issuance. If the price per share of our common stock is less than the exercise price of the warrant at any time while the warrant is outstanding, the warrant may be exchanged for shares of our common stock based on an exchange value, or the Exchange Value, derived from a specified Black-Scholes value formula, subject to certain limitations. We may elect to pay all or some of such Exchange Value in cash upon exchange by the holder. Since the warrant did not meet the additional considerations necessary for equity classification in the applicable authoritative guidance, we determined the warrant is a liability instrument that is marked to fair value with changes in fair value recognized through earnings at each reporting period. Upon issuance, we estimated the fair value of the Series 15-1 Warrant to be approximately $10.3 million. In September 2012, the holder elected to exchange a portion of the Series 15-1 Warrant to purchase 1.3 million shares with an Exchange Value of $5.0 million. The Company elected to issue 2.8 million shares as payment for the Exchange Value.

The fair value of the remaining portion of the Series 15-1 Warrant was approximately $5.4 million as of September 30, 2012. We classified the Series 15-1 Warrant as Level 2 in the fair value hierarchy as the significant inputs used in determining fair value are considered observable market data. Since the exercise price exceeded the market price of our common stock on September 30, 2012, the remaining portion of the Series 15-1 Warrant outstanding was exchangeable for an amount equal to the Exchange Value. The fair value of the Series 15-1 Warrant approximated the Exchange Value, which applied the following assumptions: (i) market price of our common stock of $4.55, (ii) an expected term of 5 years, (iii) volatility of 135%, (iv) no dividend yield, and (v) a risk-free rate of 0.6%. Assumptions (i) through (iv) are specified in the terms of the warrant agreement. The risk-free interest rate used in the Black-Scholes formula is based on the implied yield currently available for U.S. Treasury securities at maturity with an equivalent term.

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Series 15-2 Preferred Stock

In July 2012, we issued 15,000 shares of our Series 15 convertible preferred stock, or Series 15-2 Preferred Stock, and a warrant to purchase up to 3.4 million shares of our common stock, or Series 15-2 Warrant, for gross proceeds of $15.0 million. Issuance costs related to this transaction were approximately $0.8 million. For the three and nine months ended September 30, 2012, we recognized $5.0 million in dividends and deemed dividends on preferred stock related to the beneficial conversion feature on our Series 15-2 Preferred Stock.

Each share of our Series 15-2 Preferred Stock was entitled to a liquidation preference equal to the initial stated value of $1,000 per share of Series 15-2 Preferred Stock, plus any accrued and unpaid dividends before the holders of our common stock or any other junior securities receive any payments upon such liquidation. The Series 15-2 Preferred Stock was converted into 5.0 million shares of our common stock, at the option of the holder, at a conversion price of $2.97475 per share, subject to a 9.99% blocker provision.

The Series 15-2 Warrant had substantially the same features as the Series 15-1 Warrant described above, with the exception of the exercise price of $3.0672 per share of common stock and expires five years from the date of issuance. Upon issuance, we estimated the fair value of the warrant to be approximately $7.2 million. In September 2012, the holder elected to exchange the Series 15-2 Warrant for shares of our common stock with an Exchange Value of $7.4 million. We elected to issue 2.9 million shares of common stock to the holder as payment for the Exchange Value of the Series 15-2 Warrant.

8. Acquisitions

In April 2012, we entered into an asset purchase agreement with S*BIO Pte Ltd., or S*BIO, to acquire all right, title and interest in, and assume certain liabilities relating to, certain intellectual property and other assets related to compounds SB1518 (also referred to as “pacritinib”) and SB1578, or the Seller Compounds, which inhibit Janus Kinase 2, commonly referred to as JAK2. In consideration of the assets and rights acquired under the agreement, we made a payment of $15.0 million in cash and issued 15,000 shares of Series 16 convertible preferred stock, or Series 16 Preferred Stock, to S*BIO at the closing in May 2012. Each share of Series 16 preferred stock had a stated value of $1,000 per share and was convertible into shares of our common stock at an initial conversion price of $5.95 per share, subject to certain adjustments and a 19.99% blocker provision. All outstanding shares of Series 16 Preferred Stock were automatically converted into 2.5 million shares of our common stock in June 2012.

The total initial purchase consideration was as follows (in thousands):

Cash	$	15,000
Fair value of Series 16 Preferred Stock		11,344
Transaction costs		2,764
Total initial purchase consideration	$	29,108

The transaction was treated as an asset acquisition as it was determined that the assets acquired did not meet the definition of a business. We determined that the acquired assets can only be economically used for the specific and intended purpose and have no alternative future use after taking into consideration further research and development, regulatory and marketing approval efforts required in order to reach technological feasibility. Accordingly, the entire initial purchase consideration of $29.1 million was immediately expensed to acquired in-process research and development for the nine months ended September 30, 2012. The contingent consideration arrangement as discussed below will be recognized when the contingency is resolved and the consideration is paid or becomes payable.

As part of the consideration, S*BIO also has a contingent right to certain milestone payments from us up to an aggregate amount of $132.5 million if certain U.S., E.U. and Japanese regulatory approvals are obtained or if certain worldwide net sales thresholds are met in connection with any pharmaceutical product containing or comprising any Seller Compound for use for specific diseases, infections or other conditions. In addition, S*BIO will also be entitled to receive royalty payments from us at incremental rates in the low, single digits based on certain worldwide net sales thresholds on a product-by-product and country-by-country basis.

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9. Subsequent Events

In October 2012, we entered into an underwriting agreement relating to the issuance and sale of 60,000 shares of our Series 17 Preferred Stock for gross proceeds of $60.0 million, before deducting underwriting commissions and discounts and other offering costs. Each share of Series 17 Preferred Stock is entitled to a liquidation preference equal to the stated value of $1,000 per share plus any accrued and unpaid dividends before the holders of our common stock or any other junior securities receive any payments upon such liquidation. The holders of the Series 17 Preferred Stock are entitled to receive dividends equal to and in the same form as dividends actually paid on shares of common stock or other junior securities, as and if such dividends are paid. The Series 17 Preferred Stock is convertible into common stock, at the option of the holder, at an initial conversion price of $1.40 per share. The Series 17 Preferred Stock is subject to a 9.99% blocker provision; provided, however, that in the event of an automatic conversion, the maximum conversion threshold will increase to 19.99% effective from the 90th day after the original issuance date of the Series 17 Preferred Stock, without any further action on the part of a holder. The Series 17 Preferred Stock has no voting rights on general corporate matters. As of October 25, 2012, 48,325 shares of the Series 17 preferred stock have been converted into 34.5 million shares of our common stock.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

This Quarterly Report on Form 10-Q, including the following discussion, contains forward-looking statements, which involve risks and uncertainties and should be read in conjunction with the Condensed Consolidated Financial Statements and the related Notes included in Part I, Item I of this Quarterly Report on Form 10-Q. When used in this Quarterly Report on Form 10-Q, terms such as “anticipates,” “believes,” “continue,” “could,” “estimates,” “expects,” “intends,” “may,” “plans,” “potential,” “predicts,” “should,” or “will” or the negative of those terms or other comparable terms are intended to identify such forward-looking statements. Such statements, which include statements concerning product sales, research and development expenses, selling, general and administrative expenses, additional financings and additional losses, are subject to known and unknown risks and uncertainties, including, but not limited to, those discussed below and elsewhere in this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K, particularly in “Factors Affecting Our Operating Results and Financial Condition,” that could cause actual results, levels of activity, performance or achievement to differ significantly from those projected. Although we believe that expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. We will not update any of the forward-looking statements after the date of this Quarterly Report on Form 10-Q to conform these statements to actual results or changes in our expectations. Readers are cautioned not to place undue reliance on these forward-looking statements, which apply only as of the date of this Quarterly Report on Form 10-Q.

OVERVIEW

We develop, acquire and commercialize novel treatments for cancer. Our goal is to build a leading biopharmaceutical company with a diversified portfolio of proprietary oncology drugs. Our development, acquisition and in-licensing activities concentrate on identifying and developing new, less toxic and more effective ways to treat cancer. We are currently focusing our efforts on the European launch of Pixuvri^TM (pixantrone dimaleate), or Pixuvri, an ongoing Phase III trial of Pixuvri and the development of pacritinib and tosedostat. We continue work with OPAXIO™ (paclitaxel poliglumex), or OPAXIO, and brostallicin through cooperative group and investigator initiated studies. We seek to continue to evaluate additional novel clinical stage compounds to expand our hematologic cancer product pipeline. We are interested in compounds or products that are complementary to our existing pipeline.

As of September 30, 2012, we had incurred aggregate net losses of approximately $1.8 billion since inception. We expect to continue to incur operating losses for at least the next couple of years.

Pixuvri

We are developing Pixuvri, a novel aza-anthracenedione, for the treatment of non-Hodgkin’s lymphoma, or NHL, and various other hematologic malignancies, and solid tumors. Pixuvri was studied in our EXTEND, or PIX301, clinical trial, which was a phase III single-agent trial of Pixuvri for patients with relapsed, refractory aggressive NHL who received two or more prior therapies and who were sensitive to treatment with anthracyclines. In November 2008, we announced that this trial achieved the primary efficacy endpoint. We began a rolling NDA submission to the FDA in April 2009 and completed the submission in June 2009.

In 2010, the FDA completed its inspection of the facilities at NerPharMa DS, S.r.l. and NerPharMa, S.r.l. (two independent pharmaceutical manufacturing companies belonging to Nerviano Medical Sciences S.r.l., in Nerviano, Italy). The FDA found both manufacturing sites in compliance and acceptable for continued manufacturing of the drug in early March 2010. NerPharMa, S.r.l. agreed to manufacture our drug product, Pixuvri, which will be used for clinical and commercial supplies.

On March 22, 2010, the FDA’s ODAC panel voted unanimously that the clinical trial data was not adequate to support approval of Pixuvri for this patient population. In early April 2010, we received a complete response letter from the FDA regarding our NDA for Pixuvri recommending that we design and conduct an additional trial to demonstrate the safety and efficacy of Pixuvri and other items. We met with the FDA in August 2010 at an end of review meeting at which time the FDA informed us that the Pixuvri Investigational New Drug application, or IND, and NDA were being transferred to the newly-formed Division of Hematology Drug Products, or the DHP. We filed an appeal in December 2010 with the FDA’s Center for Drug Evaluation and Research regarding the FDA’s decision in April 2010 to not approve Pixuvri for relapsed/refractory aggressive NHL and to ask the Office of New Drugs, or the OND, to conclude that PIX301 demonstrated efficacy. In March 2011, we met with officials of the OND and presented our arguments supporting our belief that the data contained in the NDA are consistent with the conclusion that Pixuvri is effective for its planned use. At the meeting, the OND requested additional analyses related to the EXTEND clinical study, which we submitted.

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In April 2011, the OND responded to our December 2010 appeal of the FDA’s April 2010 decision to not approve Pixuvri for relapsed or refractory aggressive NHL. In its response, the OND indicated that after considering the data available in the appeal, it does not believe that accelerated approval of our NDA is necessarily out of reach based on a single controlled clinical trial, provided that two key matters can be resolved satisfactorily. First, the circumstances of stopping the PIX301 trial early must be resolved to assure that ongoing results assessment were not dictating the decision to stop. Second, ascertainment of the primary endpoint in the PIX301 study must be determined to have been sound and not subject to bias.

The OND also indicated that our request that the OND find that the data in our NDA demonstrate efficacy and return the NDA to the Office of Oncology Drug Products for consideration of safety and other issues was denied because the OND was not able to conclude that efficacy had been demonstrated. However, the OND also did not find that it could be concluded that PIX301 was a failed study, which warranted application of interim analysis statistical thresholds.

In June 2011, we met with the FDA’s Division of Oncology Drug Products, or DODP, in a meeting that focused on the documents we proposed to provide regarding the circumstances of stopping the enrollment of PIX301 prior to achieving the original planned patient accrual and the make-up of the new radiology expert panel, as well as our plan to address the items noted in the FDA’s complete response letter. The DODP confirmed that our NDA would be reviewed within six months from the resubmission of our NDA. Subsequently, a second independent radiology assessment of response and progression endpoint data from our PIX301 clinical trial of Pixuvri was achieved with statistical significance. We believe this assessment confirmed the statistical robustness of the PIX301 efficacy data that was previously submitted by us to the FDA in our NDA for Pixuvri.

In October 2011, we resubmitted the NDA to the FDA’s Division of Oncology Products 1, or DOP1, for accelerated approval to treat relapsed or refractory aggressive NHL in patients who failed two or more lines of prior therapy. In December 2011, the DOP1 notified us that our resubmitted NDA is considered a complete, Class 2 response to the FDA’s April 2010 complete response letter. The FDA set a PDUFA goal date of April 24, 2012 for a decision on our resubmitted NDA.

ODAC was scheduled to review our resubmitted NDA for Pixuvri on February 9, 2012. In January 2012, we voluntarily withdrew our resubmitted NDA for Pixuvri. The NDA was withdrawn because, after communications with the FDA, we needed additional time to prepare for the review of the NDA by ODAC at its February 9, 2012 meeting. Prior to withdrawing the NDA, we requested that the FDA consider rescheduling the review of the NDA to the ODAC meeting to be held in late March. The FDA was unable to accommodate our request to reschedule, and given the April 24, 2012 PDUFA date, the only way to have Pixuvri possibly considered at a later ODAC meeting was to withdraw and later resubmit the NDA. We are planning to meet with regulatory authorities in 2013 to discuss our resubmission strategy, which we would like to include data generated from our ongoing PIX-R^® phase III study, or PIX306, and therefore the resubmission of the NDA would occur beyond year-end 2012.

We believe the results of the EXTEND trial met its primary endpoint and showed that patients randomized to treatment with Pixuvri achieved a significantly higher rate of confirmed and unconfirmed complete response compared to patients treated with standard chemotherapy had a significantly increased overall response rate and experienced a statistically significant improvement in median progression free survival. Pixuvri had predictable and manageable toxicities when administered at the proposed dose and schedule in the EXTEND clinical trial in heavily pre-treated patients. The most common (incidence greater than or equal to 10%) grade 3/4 adverse events reported for Pixuvri-treated subjects across studies were neutropenia and leukopenia. Other common adverse events (any grade) included infection, anemia, thrombocytopenia, asthenia, pyrexia and cough. Overall, the incidence of grade 3 or greater cardiac adverse events was 7% (five patients) on the Pixuvri arm and 2% (one patient) on the comparator arm. There were an equal number of deaths due to an adverse event in both the Pixuvri and comparator arm.

In March 2011, we initiated the PIX-R^® trial, or PIX306, to study Pixuvri in combination with rituximab in patients with relapsed or refractory aggressive B-cell NHL. The trial will compare a combination of Pixuvri plus rituximab to a combination of gemcitabine plus rituximab in patients who have relapsed after one to three prior regimens for aggressive B-cell NHL and who are not eligible for autologous stem cell transplant. The PIX-R trial

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utilizes overall survival, or OS, as the primary endpoint of the study, with a secondary endpoint of progression free survival, or PFS. The PIX-R trial is targeting to enroll approximately 350 patients and will include patients who have failed at least one line of previous therapy and patients who are not candidates for myeloablative chemotherapy and stem cell transplant. We had discussions with the DHP relating to a Special Protocol Assessment, or SPA, and following these discussions we determined that we would not pursue a SPA. The DHP noted that we could conduct a study utilizing PFS along with OS as co-primary endpoints which would be an acceptable design outside of the formal SPA process. At the initiation of the study, co-primary endpoints of OS and PFS were used. Subsequently, an amendment was made to the study protocol in January 2012, to make OS the sole primary endpoint, and PFS a secondary endpoint. As this study is being conducted without a SPA, regulatory acceptability will depend on the magnitude of the difference between the trial study arms as well as a risk and benefit analysis.

In Europe in July 2009, we were notified by the EMA that Pixuvri was eligible to be submitted for an MAA through the EMA’s centralized procedure. The centralized review process provides for a single coordinated review for approval of pharmaceutical products that is conducted by the EMA on behalf of all EU member states. The EMA also designated Pixuvri as a New Active Substance, or NAS; if approved by the EMA, compounds designated as an NAS are eligible to receive a 10-year market exclusivity period in EU member states. In September 2009, we applied to the EMA for orphan drug designation for Pixuvri, which was granted in December 2009. In September 2009, we also submitted a Pediatric Investigation Plan, or PIP, to the EMA as part of the required filing process for approval of Pixuvri for treating relapsed, refractory aggressive NHL in Europe. In April 2010, the EMA recommended that we submit an updated PIP for Pixuvri following discussions with us about the preclinical and clinical Pixuvri data, including EXTEND, and the desire to explore the potential benefits Pixuvri may offer to children with lymphoid malignancies and solid tumors. We submitted an expanded PIP to the Pediatric Committee of the EMA, or PDCO, in July 2010. The expanded PIP was accepted for review by the PDCO in August 2010. In October 2010, we announced that the PDCO adopted an opinion agreeing to our PIP. The PDCO also recommended deferral of the initiation of the clinical studies until after Pixuvri receives EMA approval. In November 2010, the MAA seeking approval for Pixuvri for the treatment of adult patients with multiple relapsed or refractory aggressive NHL was validated and accepted for review by the EMA. Since Pixuvri was initially granted orphan drug status by the EMA for the treatment of DLBCL, we agreed to withdraw the orphan designation from the EU register in November 2010 based on the expansion of the MAA to the broader aggressive NHL population.

In June 2010, the Italian Medicines Agency, or AIFA, the national authority responsible for drug regulation in Italy, approved the facility at NerPharMa DS, S.r.l. for the production of Pixuvri drug substance. In July 2010, we signed a supply agreement with NerPharMa, S.r.l. for Pixuvri drug product manufacturing. The five-year contract provides for both the commercial and clinical supply of Pixuvri drug product.

After we completed the EMA’s Committee for Medicinal Products for Human Use’s, or CHMP, review of our MAA for Pixuvri, on February 17, 2012, Pixuvri was granted a positive opinion for conditional approval from CHMP. On May 10, 2012, Pixuvri received conditional marketing authorization in the EU from the European Commission as monotherapy for the treatment of adult patients with multiply relapsed or refractory aggressive NHL. The decision allows us to market Pixuvri in the 27 Member States of the EU as well as in Iceland, Liechtenstein and Norway. Pixuvri is currently available in the EU and Turkey, through a named patient program.

Similar to accelerated approval regulations in the US, conditional marketing authorizations are granted in the EU to medicinal products with a positive benefit/risk assessment that address unmet medical needs and whose availability would result in a significant public health benefit. A conditional marketing authorization is renewable annually. Under the provisions of the conditional marketing authorization for Pixuvri, we will be required to complete a post-marketing study aimed at confirming the clinical benefit previously observed.

The EMA’s CHMP accepted PIX306, our ongoing randomized controlled phase III clinical trial, which compares Pixuvri-rituximab to gemcitabine-rituximab in patients who have relapsed after one to three prior regimens for aggressive B-cell NHL and who are not eligible for autologous stem cell transplant. As a condition of approval, we have agreed to have the PIX306 clinical trial results available by June 2015.

We initiated EU commercialization making Pixuvri available in Sweden, Denmark and Finland in September 2012 and Austria in October 2012. We expect to make Pixuvri available in Germany, the United Kingdom and the Netherlands in November 2012 and Norway in December 2012. We plan to expand availability of Pixuvri to France, Italy and Spain as well as other European countries in 2013.

We have entered into an agreement with Quintiles Commercial Europe Limited, or Quintiles, under which we will interview, approve for hire, train and manage a sales force for Pixuvri in the EU. While the sales force would be dedicated to Pixuvri, they are not our employees, but Quintiles employees. We believe this is a cost effective way to launch Pixuvri in the EU. We have also entered into a third-party logistics agreement with Movianto Nederland BV to provide us with warehousing, transportation and distribution services for Pixuvri. Lastly, we have entered into an agreement with LogixX Pharma Solutions, Ltd to act as our interim wholesaler dealers license holder while we apply for our own license.

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Pacritinib

In April 2012, we entered into an asset purchase agreement with S*BIO, or the S*BIO Agreement, to acquire all right, title and interest in, and assume certain liabilities relating to, certain intellectual property and other assets related to compounds SB1518 (also referred to as “pacritinib”) and SB1578, or the Seller Compounds, which inhibit Janus kinase 2, commonly referred to as JAK2. Under the terms of the S*BIO Agreement, we made an initial payment of $2 million in cash at signing. In consideration of the assets and rights acquired under the agreement, we made an additional payment of $13 million in cash and issued 15,000 shares of Series 16 Preferred Stock, convertible into common stock, to S*BIO at the closing in May 2012. The shares of preferred stock were automatically converted into 2.5 million shares of our common stock in June 2012. The S*BIO Agreement also includes regulatory success- and sales-based milestone payments, as well as single digit royalties on net sales. Under the S*BIO Agreement, we are solely responsible for development and commercialization activities of pacritinib worldwide.

Pacritinib is an oral, once a day, tyrosine kinase inhibitor, or TKI, with dual activity against JAK2 and FMS-like tyrosine kinase 3, or FLT3. Mutations in these kinases have been shown to be directly related to the development of a variety of blood related cancers including myeloproliferative neoplasms, leukemia, and lymphoma. Pacritinib has been studied in two phase II trials in a total of 65 myelofibrosis patients. In these trials, 30-74% improvement in the seven of the myelofibrosis symptom assessment form (MF-SAF) scores was observed relative to baseline at cycle 4, 7 or 10 (28 day cycles). Pacritinib does not appear to be myelosuppressive as no grade 3/4 hematological toxicities were observed in either phase II trials. Among evaluable patients, 31% achieved 35% or greater reduction in spleen volume by MRI. Significantly, these effects appear to be independent of patient platelet count. We expect the first of two phase III studies in patients with myelofibrosis to initiate in the fourth quarter of 2012 and the second phase III study to initiate in the second quarter of 2013.

OPAXIO

OPAXIO, which we have previously referred to as XYOTAX, is our novel biologically-enhanced chemotherapeutic agent that links paclitaxel to a biodegradable polyglutamate polymer, resulting in a new chemical entity. We are currently focusing our development of OPAXIO on ovarian, brain (glioblastoma), and locally advanced head and neck cancer.

OPAXIO for ovarian cancer

We are currently focusing our development of OPAXIO as a potential maintenance therapy for women with advanced stage ovarian cancer who achieve a complete remission following first-line therapy with paclitaxel and carboplatin. In March 2004, we entered into a clinical trial agreement with the Gynecologic Oncology Group, or GOG, to perform a phase III trial, or the GOG0212 trial. As such, the GOG0212 trial is conducted and managed by the GOG. The trial is expected to enroll 1,100 patients with 946 patients enrolled as of September 30, 2012. On February 21, 2012, we were informed that the Data Monitoring Committee for GOG0212 adopted an amendment to the study’s statistical analysis plan, or SAP, to perform four interim analyses instead of the previously-planned single interim analysis allowing for an earlier analysis of survival results than previously noted. The first interim analysis is expected to take place when 109, versus the previously-planned 138, events occur in the control arm. There are early stopping criteria for either success or futility. The final fifth analysis would be conducted when 301, versus the previously-planned 277, events have occurred in the control arm. Based on feedback from the GOG, the GOG Data Monitoring Committee currently plans to conduct its first interim analysis of overall survival in 2013.

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OPAXIO for brain (glioblastoma) cancer

In November 2010, results were presented by the Brown University Oncology Group from a phase II trial of OPAXIO combined with temozolomide, or TMZ, and radiotherapy in patients with newly-diagnosed, high-grade gliomas, a type of brain cancer. The trial demonstrated a high rate of complete and partial responses and an encouragingly high rate of six month PFS. Based on these results, the Brown University Oncology Group has initiated a randomized, multicenter, phase II study of OPAXIO and standard radiotherapy versus TMZ and radiotherapy for newly diagnosed patients with glioblastoma with an active gene termed MGMT that reduces responsiveness to TMZ. The trial goals are to estimate disease free and overall survival for the two study arms. Preliminary results are expected to be available in the second half of 2013. In September 2012, OPAXIO was granted orphan-drug designation by the FDA for the treatment of glioblastoma multiforme.

OPAXIO for locally advanced head and neck cancer

A phase I/II study of OPAXIO combined with radiotherapy and cisplatin was initiated by SUNY Upstate Medical University, in patients with locally advanced head and neck cancer. Preliminary results are expected to be presented mid-2013.

Tosedostat

In March 2011, we entered into a co-development and license agreement with Chroma, or the Chroma License Agreement, providing us with exclusive marketing and co-development rights to Chroma’s drug candidate, tosedostat, in North, Central and South America. Tosedostat is an oral, aminopeptidase inhibitor that has demonstrated significant anti-tumor responses in blood related cancers and solid tumors in phase I-II clinical trials. Final results from the phase II OPAL study of tosedostat in elderly patients with relapsed or refractory AML were presented in December 2011 at the 2011 American Society of Hematology Annual Meeting. These results showed that once-daily, oral doses of tosedostat had predictable and manageable toxicities and results demonstrated encouraging response rates including a high-response rate among patients who received prior hypomethylating agents, which are used to treat myelodysplastic syndrome, or MDS, a precursor of AML. There are two ongoing phase II investigator-sponsored trials examining the activity of combining tosedostat with hypomethylating agents (HMAs). We expect that data from these trials may be used to determine the appropriate design for a phase III trial.

By a letter dated July 18, 2012, Chroma notified us that Chroma alleges breaches under the Chroma License Agreement. Chroma asserts that we have not complied with the Chroma License Agreement because we made decisions with respect to the development of tosedostat without the approval of the joint committees to be established pursuant to the terms of the Chroma License Agreement, did not hold meetings of those committees and have not used diligent efforts in the development of tosedostat. We dispute Chroma’s allegations and intend to vigorously defend our development activities and judgments. In particular, we dispute Chroma’s lack of diligence claim based in part on the appropriateness of completing the ongoing phase II combination trials prior to developing a phase III trial design. In addition, we believe that Chroma has failed to comply with its antecedent obligations with respect to the joint committees and failed to demonstrate an ability to manufacture tosedostat to the required standards under the terms of the Chroma License Agreement. Under the Chroma License Agreement there is a 90 day cure period for any nonpayment default, which period shall be extended to 180 days if the party is using efforts to cure. A party may terminate the Chroma License Agreement for a material breach only after arbitration in accordance with the terms of the Chroma License Agreement.

Effective September 25, 2012, we and Chroma entered into a three month standstill with respect to the parties’ respective claims under the Chroma License Agreement, but otherwise reserving the parties’ respective rights as of the commencement of the standstill period. The standstill is terminable by either party on one month’s notice.

Brostallicin

We are developing brostallicin through our worldwide rights to use, develop, import and export brostallicin. Brostallicin is a synthetic DNA minor groove binding agent that has demonstrated anti-tumor activity and a favorable safety profile in clinical trials in which more than 230 patients have been treated to date. We use a genomic-based platform to guide the development of brostallicin.

In the second quarter of 2010, the NCCTG opened for enrollment a phase II study of brostallicin in combination with cisplatin in patients with metastatic triple-negative breast cancer, or mTNBC. mTNBC is defined by tumors lacking expression of estrogen, progesterone receptors and without over-expression of HER2. Women with mTNBC have very limited effective treatments and, based on the novel mechanism of action of brostallicin and the recognized activity of cisplatin in this disease, the combination of the two agents will be explored by the NCCTG. In addition to standard clinical efficacy measures, biological endpoints will also be evaluated to assist in understanding the specific activity of brostallicin in this disease. This study completed planned enrollment and results are expected during the fourth quarter of 2012.

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Research and Preclinical Development

Platinates are an important class of chemotherapy agents used to treat a wide variety of cancers. There are three platinates currently commercially available (cisplatin, carboplatin, and oxaliplatin), which are first-line agents in ovarian cancer, lung cancer, testicular cancer, and colorectal cancer, as well as a broad variety of other diseases. We are developing the dinuclear-platinum complex CT-47463. CT-47463 has a different mechanism of action than the commercially available platinum compounds and is substantially more active on many preclinical models including those with resistance to monoplatinates. We initiated active pharmaceutical ingredient and formulation development as prerequisites to IND enabling activities for bisplatinates. Depending on our resources and priorities, we may choose to resume additional pre-IND work or seek to out-license the product to another third party.

Critical Accounting Policies and Estimates

Management makes certain judgments and uses certain estimates and assumptions when applying accounting principles generally accepted in the United States in the preparation of our condensed consolidated financial statements. We evaluate our estimates and judgments on an on-going basis and base our estimates on historical experience and on assumptions that we believe to be reasonable under the circumstances. Our experience and assumptions form the basis for our judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may vary from what we anticipate and different assumptions or estimates about the future could change our reported results. As described in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, of our Annual Report on Form 10-K for the year ended December 31, 2011, we consider our policies for impairment of long-lived assets, valuation of goodwill, derivatives embedded in certain debt securities, restructuring charges and share-based compensation expense to be the most critical in the preparation of the condensed consolidated financial statements because they involve the most difficult, subjective, or complex judgments about the effect of matters that are inherently uncertain. There have been no material changes to our application of critical accounting policies and significant judgments and estimates since December 31, 2011.

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RESULTS OF OPERATIONS

Three months ended September 30, 2012 and 2011

Research and development expenses. Research and development costs are expensed as incurred in accordance with ASC 730, Research and Development. In instances where we enter into agreements with third parties for research and development activities, we may prepay fees for services at the initiation of the contract. We record the prepayment as a prepaid asset and amortize the asset into research and development expense over the period of time the contracted research and development services are performed. Other types of arrangements with third parties may be fixed fee or fee for service, and may include monthly payments or payments upon completion of milestones or receipt of deliverables. In instances where we enter into cost-sharing arrangements, all research and development costs reimbursed by the collaborator are a reduction to research and development expense while research and development costs paid to the collaborator are an addition to research and development expense. We expense upfront license payments related to acquired technologies which have not yet reached technological feasibility and have no alternative future use.

Our research and development expenses for compounds under development and preclinical development are as follows (in thousands):

	Three Months Ended September 30,
	2012			2011
Compounds under development:
Pixuvri	$	1,319		$	2,942
Pacritinib		349			—
OPAXIO		444			255
Tosedostat		884			567
Brostallicin		(17	)		13
Operating expenses		3,967			3,702
Research and preclinical development		5			51
Total research and development expenses	$	6,951		$	7,530

Costs for compounds under development include external direct expenses such as principal investigator fees, clinical research organization charges and contract manufacturing fees incurred for preclinical, clinical, manufacturing and regulatory activities associated with preparing the compounds for submissions of NDAs or similar regulatory filings to the FDA, EMA or other regulatory agencies outside the United States and Europe, as well as upfront license fees for acquired technology. Operating expenses include our personnel and an allocation of occupancy expenses associated with developing these compounds. Research and preclinical development costs primarily include costs associated with bisplatinates development as well as external laboratory services associated with other compounds. We do not allocate operating costs to the individual compounds under development as our accounting system does not track these costs by individual compound. As a result, we are not able to capture the total cost of each compound. Direct external costs incurred to date for Pixuvri, pacritinib, OPAXIO, tosedostat and brostallicin are $80.6 million, $0.4 million (excluding in-process research and development associated with the acquisition of S*BIO assets), $225.8 million, $9.4 million and $9.5 million, respectively. Costs for Pixuvri prior to our merger with Novuspharma S.p.A, a public pharmaceutical company located in Italy, or CTI (Europe), in January 2004 are excluded from this amount. Costs for pacritinib prior to our acquisition of S*BIO assets in May 2012 are also excluded from this amount. Costs for tosedostat prior to our co-development and license agreement with Chroma are also excluded from this amount. Costs for brostallicin prior to our acquisition of SM in July 2007 are also excluded from this amount.

Research and development expenses decreased to approximately $7.0 million for the three months ended September 30, 2012 from approximately $7.5 million for the three months ended September 30, 2011. Pixuvri costs decreased primarily due to a decrease in consulting costs within our regulatory group, in addition to decreases in clinical activity associated with the wind-down of the PIX203 trial, consulting and lab analysis costs associated with the PIX301 independent assessment and a reduction in costs associated with the PIX306 trial. Costs for pacritinib relate primarily to clinical development and manufacturing activities incurred subsequent to the acquisition of

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related assets from S*BIO. Costs for our OPAXIO program increased primarily due to an increase in clinical development activity associated with investigator initiated studies. Costs for tosedostat increased primarily due to an increase in manufacturing activity. Costs for brostallicin relate primarily to clinical development activities associated with phase I and phase II studies. Our operating expenses increased primarily due to costs associated with an increase in average number of personnel between comparable periods in addition to an increase in non-cash share-based compensation expense. These increases in operating expenses were partially offset by a decrease in discretionary bonus expense.

Our drug candidates Pixuvri, pacritinib, OPAXIO, tosedostat and brostallicin are currently in clinical development. Many drugs in human clinical trials fail to demonstrate the desired safety and efficacy characteristics. Even if our drugs progress successfully through initial human testing, they may fail in later stages of development. A number of companies in the pharmaceutical industry, including us, have suffered significant setbacks in advanced clinical trials, even after reporting promising results in earlier trials. Regulatory agencies, including the FDA and EMA, regulate many aspects of a product candidate’s life cycle, including research and development and preclinical and clinical testing. We or regulatory authorities may suspend clinical trials at any time on the basis that the participants are being exposed to unacceptable health risks. Completion of clinical trials depends on, among other things, the number of patients available for enrollment in a particular trial, which is a function of many factors, including the availability and proximity of patients with the relevant condition. We rely on third parties to conduct clinical trials, which may result in delays or failure to complete trials if the third parties fail to perform or meet applicable standards. We have drug candidates that are still in research and preclinical development, which means that they have not yet been tested on humans. We will need to commit significant time and resources to develop these and additional product candidates.

Our products will be successful and we will be able to generate revenues only if:

• our product candidates are developed to a stage that will enable us to commercialize, sell, or license related marketing rights to third parties; and

• our product candidates, if developed, are approved.

Failure to generate such revenues may preclude us from continuing our research, development and commercial activities for these and other product candidates. We also enter into collaboration agreements for the development and commercialization of our product candidates. We cannot control the amount and timing of resources our collaborators devote to product candidates, which may also result in delays in the development or marketing of products. Because of these risks and uncertainties, we cannot accurately predict when or whether we will successfully complete the development of our product candidates or the ultimate product development cost. Specific comments for individual product candidates are below.

Pixuvri. Pixuvri is an aza-anthracenedione that has distinct structural and physiochemical properties that make its anti-tumor unique in this class of agents. The novel pharmacologic differences between Pixuvri and the other agents in the class may allow re-introduction of anthracycline-like potency in the treatment of patients who are otherwise at their lifetime recommended doxorubicin exposure. We are unable to provide the nature, timing, and estimated costs of the efforts necessary to complete the development of Pixuvri because, among other reasons, we cannot predict with any certainty the pace of enrollment of our clinical trials. Even after a clinical trial is enrolled, preclinical and clinical data can be interpreted in different ways, which could delay, limit or preclude regulatory approval and advancement of this compound through the development process. For these reasons, among others, we cannot estimate the date on which clinical development of Pixuvri will be completed or when we will be able to generate material net cash inflows.

Pacritinib. Pacritinib is an oral, once a day, TKI with dual activity against JAK2 and FLT3. We are unable to provide the nature, timing, and estimated costs of the efforts necessary to complete the development of pacritinib because, among other reasons, we cannot predict with any certainty the pace of enrollment of our clinical trials. Even after a clinical trial is enrolled, preclinical and clinical data can be interpreted in different ways, which could delay, limit or preclude regulatory approval and advancement of this compound through the development process. For these reasons, among others, we cannot estimate the date on which clinical development of pacritinib will be completed or when we will be able to begin commercializing pacritinib to generate material net cash inflows.

OPAXIO. OPAXIO is our novel biologically enhanced chemotherapeutic agent that links paclitaxel to a biodegradable polyglutamate polymer, resulting in a new chemical entity. We are currently focusing our development of OPAXIO on ovarian, brain (glioblastoma), and locally advanced head and neck cancer. We are

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unable to provide the nature, timing, and estimated costs of the efforts necessary to complete the development of OPAXIO because, among other reasons, a third party is conducting the key clinical trial of OPAXIO and even after a clinical trial has been enrolled, preclinical and clinical data can be interpreted in different ways, which could delay, limit or preclude regulatory approval and advancement of this compound through the development process. For these reasons, among others, we cannot estimate the date on which clinical development of OPAXIO will be completed or when we will be able to begin commercializing OPAXIO to generate material net cash inflows.

Tosedostat. Tosedostat is an oral, aminopeptidase inhibitor that has demonstrated significant anti-tumor responses in blood related cancers and solid tumors in phase I-II clinical trials. We are unable to provide the nature, timing, and estimated costs of the efforts necessary to complete the development of tosedostat because, among other reasons, we cannot predict with any certainty the pace of enrollment of our clinical trials. Even after a clinical trial is enrolled, preclinical and clinical data can be interpreted in different ways, which could delay, limit or preclude regulatory approval and advancement of this compound through the development process. For these reasons, among others, we cannot estimate the date on which clinical development of tosedostat will be completed or when we will be able to begin commercializing tosedostat to generate material net cash inflows.

Brostallicin. Brostallicin is a synthetic DNA minor groove binding agent that has demonstrated anti-tumor activity. The NCCTG is conducting a phase II study of brostallicin in combination with cisplatin in patients with mTNBC. We are unable to provide the nature, timing, and estimated costs of the efforts necessary to complete the development of brostallicin because, among other reasons, a third party is conducting the clinical trial of brostallicin and even after a clinical trial has been enrolled, preclinical and clinical data can be interpreted in different ways, which could delay, limit or preclude regulatory approval and advancement of this compound through the development process. For these reasons, among others, we cannot estimate the date on which clinical development of brostallicin will be completed or when we will be able to begin commercializing brostallicin to generate material net cash inflows.

Bisplatinates (CT-47463). Cisplatin is a platinum-based chemotherapy drug used to treat a wide variety of cancers. We are developing new analogues of the dinuclear-platinum complex, or CT-47463, that is more potent than cisplatin. CT-47463 is endowed with a unique mechanism of action, active in preclinical studies on a large panel of tumor models, sensitive and refractory to cisplatin, and has a safety profile comparable to that of cisplatin. The novel bisplatinum analogues are rationally designed and synthesized to have improved biopharmaceutical properties that reduce the intrinsic reactivity of the molecule and that demonstrate preclinical anti-tumor efficacy in solid tumor models. We are unable to provide the nature, timing, and estimated costs of the efforts necessary to complete the development of CT-47463 because, among other reasons, no clinical trial design for CT-47463 has been developed yet and even after a clinical trial is enrolled, preclinical and clinical data can be interpreted in different ways, which could delay, limit or preclude regulatory approval and advancement of this compound through the development process. For these reasons, among others, we cannot estimate the date on which clinical development of CT-47463 will be completed or when we will be able to begin commercializing CT-47463 to generate material net cash inflows.

The risks and uncertainties associated with completing development on schedule and the consequences to operations, financial position and liquidity if the project is not timely completed are discussed in more detail in the following risk factors, which begin on page 35 of this Form 10-Q: “Our financial condition may be harmed if third parties default in the performance of contractual obligations.”; “We may be delayed, limited or precluded from obtaining regulatory approval of OPAXIO as a maintenance therapy for advanced stage ovarian cancer and as a radiation sensitizer.”; “We are subject to extensive government regulation.”; “Even if our drug candidates are successful in clinical trials, we may not be able to successfully commercialize them.”; “If we do not successfully develop our product candidates into marketable products, we may be unable to generate significant revenue or become profitable.”; and “We may take longer to complete our clinical trials than we expect, or we may not be able to complete them at all.”

Selling, general and administrative expenses. Selling, general and administrative expenses were approximately $7.8 million for the three months ended September 30, 2012 and approximately $7.8 million for the three months ended September 30, 2011. During the three months ended September 30, 2012, there was a $1.3 million decrease related to the VAT assessment reserve associated with our CTI (Europe) operations and a $0.7 million decrease in discretionary bonus as compared to the same period in 2011. These decreases were offset by a $1.2 million increase in consulting and other professional services mainly associated with the commercial launch of Pixuvri in the EU and a $0.7 million increase in legal and patent services.

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Foreign exchange gain (loss). The foreign exchange gain for the three months ended September 30, 2012 and foreign exchange loss for the three months ended September 30, 2011 are due to fluctuations in foreign currency exchange rates, primarily related to payables and receivables in our European branches and subsidiaries denominated in foreign currencies.

Settlement expense. Settlement expense of $0.4 million for the three months ended September 30, 2012 relates to the accrual for the cost of benefits to be provided to Craig W. Philips, former President of the Company, as discussed in Note 5, Commitments and Contingencies in the Notes to Condensed Consolidated Financial Statements included in Item 1, Part I of this Quarterly Report on Form 10-Q.

Dividends and deemed dividends on preferred stock. Dividends and deemed dividends on preferred stock were approximately $5.0 million for the three months ended September 30, 2012 related to the issuance of our Series 15-2 Preferred Stock. Dividends and deemed dividends on preferred stock were approximately $13.0 million for the three months ended September 30, 2011 related to the issuance of our Series 13 preferred stock.

Nine months ended September 30, 2012 and 2011

Research and development expenses. Our research and development expenses for compounds under development and preclinical development are as follows (in thousands):

	Nine Months Ended September 30,
	2012		2011
Compounds under development:
Pixuvri	$	7,088	$	8,975
Pacritinib		363		—
OPAXIO		1,314		1,235
Tosedostat		2,435		6,183
Brostallicin		107		53
Operating expenses		12,623		10,426
Research and preclinical development		150		110
Total research and development expenses	$	24,080	$	26,982

Research and development expenses decreased to approximately $24.1 million for the nine months ended September 30, 2012 from approximately $27.0 million for the nine months ended September 30, 2011. Pixuvri costs decreased primarily due to a decrease in clinical activity associated with the wind-down of the PIX203 study, a reduction in consulting and lab analysis costs associated with PIX301 independent assessment and a reduction in costs associated with the PIX306 trial. Manufacturing activities also decreased between periods. These decreases were partially offset by an increase in costs associated with regulatory activities. Costs for pacritinib relate primarily to clinical development and manufacturing activities incurred subsequent to the acquisition of related assets from S*BIO. Costs for our OPAXIO program increased primarily due to an increase in clinical development activity associated with investigator initiated studies. Costs for tosedostat decreased primarily due to the $5.0 million upfront license fee upon execution of the co-development and license agreement with Chroma incurred during the nine months ended September 30, 2011. This decrease was partially offset by increases in clinical development and manufacturing activities. Costs for brostallicin increased primarily due to an increase in costs associated with clinical development activities related to phase I and phase II studies, in addition to an increase in costs associated with manufacturing activities. Our operating expenses increased primarily due to increases in noncash share-based compensation expense, occupancy costs associated with our new office lease and increases in recruiting and consulting activities associated with our clinical development group. Additional increases consisted of costs associated with an increase in average number of personnel between comparable periods.

Selling, general and administrative expenses. Selling, general and administrative expenses increased to approximately $29.0 million for the nine months ended September 30, 2012 from approximately $25.3 million for the nine months ended September 30, 2011. This increase was related to a $3.4 million increase in consulting and other professional services mainly associated with the commercial launch of Pixuvri in the EU, a $3.2 million increase in noncash share-based compensation and a $0.8 million increase in salaries and benefits related to an increase in personnel. These increases were partially offset by a $1.2 million decrease in discretionary bonus, a $1.0 million decrease in legal services and a $2.1 million decrease related to the VAT assessment reserve associated with our CTI (Europe) operations.

Acquired in-process research and development. Acquired in-process research and development for the nine months ended September 30, 2012 relates to charges of $29.1 million recorded in connection with our acquisition of assets of S*BIO.

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Interest expense. Interest expense decreased to approximately $51,000 for the nine months ended September 30, 2012 from approximately $0.7 million for the nine months ended September 30, 2011. Upon maturity, we retired the remaining $10.3 million outstanding principal balance of our 7.5% convertible senior notes in April 2011 and the remaining $10.9 million outstanding principal balance of our 5.75% convertible senior notes in December 2011.

Amortization of debt discount and issuance costs. Amortization of debt discount and issuance costs for the nine months ended September 30, 2011 is primarily related to the amortization of debt discount and issuance costs incurred on our 5.75% and 7.5% convertible senior notes.

Foreign exchange gain (loss). The foreign exchange loss for the nine months ended September 30, 2012 and 2011 is due to fluctuations in foreign currency exchange rates, primarily related to payables and receivables in our European branches denominated in foreign currencies.

Settlement expense. Settlement expense of $0.4 million for the nine months ended September 30, 2012 relates to the accrual for the cost of benefits to be provided to Craig W. Philips, former President of the Company, as discussed in Note 5, Commitments and Contingencies in the Notes to Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

Dividends and deemed dividends on preferred stock. Dividends and deemed dividends on preferred stock were approximately $13.5 million for the nine months ended September 30, 2012 related to the issuances of our Series 15-1 and 15-2 Preferred Stock. Dividends and deemed dividends on preferred stock were approximately $49.8 million for the nine months ended September 30, 2011 primarily related to the redemptions of our Series 8 and 10 preferred stock in addition to the issuances of our Series 12 and 13 preferred stock.

LIQUIDITY AND CAPITAL RESOURCES

Cash and cash equivalents. As of September 30, 2012, we had approximately $14.3 million in cash and cash equivalents. Subsequent to period end, we received $60.0 million in gross proceeds, before deducting underwriting discounts and commissions and other offering costs, from the issuance of our Series 17 Preferred Stock. See Note 9, Subsequent Events in the Notes to Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for additional information.

Net cash used in operating activities. Net cash used in operating activities decreased to approximately $45.8 million during the nine months ended September 30, 2012 compared to approximately $54.8 million for the same period during 2011 primarily due to a one-time upfront payment of $5.0 million in March 2011 related to the licensing of tosedostat, which is included in research and development expense, a decrease in cash paid for interest on our convertible notes, and an increase in accounts payable during the nine months ended September 30, 2012.

Net cash used in investing activities. Net cash used in investing activities increased to approximately $19.7 million for the nine months ended September 30, 2012 compared to $1.9 million for the nine months ended September 30, 2011 as a result of $17.8 million paid for the acquisition of assets of S*BIO. See Note 8, Acquisitions in the Notes to Condensed Consolidated Financial Statements in Part I, Item 1 included in this Quarterly Report on Form 10-Q for additional information.

Net cash provided by financing activities. Net cash provided by financing activities was approximately $32.6 million for the nine months ended September 30, 2012. We received approximately $32.9 million in net proceeds from the issuance of our Series 15 preferred stock and warrants to purchase common stock in May 2012 and July 2012. These proceeds were offset by $0.2 million cash paid in 2012 for transaction costs associated with the issuance of Series 14 preferred stock and $0.1 million cash paid for the repurchase of shares in connection with satisfying tax withholding obligations on the vesting of restricted stock awards to employees. Net cash provided by financing activities of approximately $79.2 million for the nine months ended September 30, 2011 was primarily due to issuances of our preferred stock. We received approximately $23.2 million in net proceeds from the issuance of our Series 8 Preferred Stock, warrants to purchase common stock and an additional investment right to purchase shares of our Series 9 Preferred Stock in January 2011. We received approximately $23.5 million in net proceeds from the issuance of our Series 10 preferred stock, warrants to purchase common stock and an additional investment right to purchase shares of our Series 11 Preferred Stock in February 2011. We received approximately $15.0 million in net proceeds from the issuance of our Series 12 preferred stock and warrants to purchase common stock in May 2011. We received approximately $28.1 million in net proceeds from the issuance of our Series 13 preferred stock and warrants to purchase common stock in July 2011. These proceeds were offset by a $10.3 million payment to fully retire the outstanding principal balance on our 7.5% convertible senior notes in April 2011 and $0.3 million cash paid for the repurchase of shares in connection with satisfying tax withholding obligations on the vesting of restricted stock awards to employees.

Capital Requirements and Resources

We have prepared our financial statements assuming that we will continue as a going concern, which contemplates realization of assets and the satisfaction of liabilities in the normal course of business. At our currently planned spending rate, we believe that our financial resources, in addition to the expected receipts from European Pixuvri sales, will be sufficient to fund our operations for the next fifteen (15) months. Changes in manufacturing,

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clinical trial expenses, and expansion of our sales and marketing organization in Europe, may consume capital resources earlier than planned. Additionally, we may not receive the country reimbursement rates in Europe for Pixuvri that we currently assume in planning for 2013.

Capital Resources

We may seek to raise such capital through public or private equity financings, partnerships, joint ventures, disposition of assets, debt financings or restructurings, bank borrowings or other sources. However, our ability to issue equity securities may be limited by the number of shares we may issue under our amended and restated articles of incorporation unless we get shareholder approval to increase authorized shares.

Our future capital requirements will depend on many factors, including:

• results of our clinical trials;

• regulatory approval of our products;

• success in acquiring or divesting products, technologies or businesses;

• progress in and scope of our research and development activities;

• finding appropriate partners for the development and commercialization of our products if they are approved for marketing;

• success in commercializing our products;

• litigation and other disputes; and

• competitive market developments.

Capital Requirements

Future capital requirements will also depend on the extent to which we acquire or invest in businesses, products and technologies or sell or license our products to others. We will require additional financing and such financing may not be available when needed or, if available, we may not be able to obtain it on terms favorable to us or to our shareholders. If additional funds are raised by issuing equity securities, substantial dilution to existing shareholders may result. If we fail to obtain capital when required, we may be required to delay, scale back, or eliminate some or all of our research and development programs, which may adversely affect our ability to operate as a going concern and we may be forced to cease operations, liquidate our assets and possibly seek bankruptcy protection. Insufficient funds may require us to delay, scale back or eliminate some or all of our research and development programs, or may harm our ability to operate as a going concern.

The following table includes information relating to our contractual obligations as of September 30, 2012 (in thousands):

Contractual Obligations	Payments Due by Period
	Total		1 Year		2-3 Years		4-5 Years		After 5 Years
Operating leases:
Facilities	$	22,413	$	2,320	$	4,561	$	4,441	$	11,091
Long-term obligations (1)		28		—		28		—		—
Purchase commitments		5,354		4,368		535		451		—
	$	27,795	$	6,688	$	5,124	$	4,892	$	11,091

(1) This amount does not include long-term obligations of $5.0 million related to deferred rent and $1.1 million related to the reserve for VAT assessments.

Manufacturing Supply Agreements

We signed a manufacturing supply agreement, or the NerPharMa Agreement, with NerPharMa, S.r.l., or NerPharMa (a pharmaceutical manufacturing company belonging to Nerviano Medical Sciences, S.r.l., in Nerviano, Italy), for our drug candidate Pixuvri. The NerPharMa Agreement is a five year non-exclusive agreement and provides for both the commercial and clinical supply of Pixuvri. The NerPharMa Agreement commenced on July 9, 2010 and expires on the fifth anniversary date of the first government approval obtained either in the United States or Europe. The NerPharMa Agreement may be terminated for an uncured material breach, insolvency or the filing of

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bankruptcy, or by mutual agreement. We may also terminate the NerPharMa Agreement (i) upon prior written notice in the event of failure of three or more of seven consecutive lots of product or (ii) in the event NerPharMa is acquired or a substantial portion of NerPharMa’s assets related to the NerPharMa Agreement are sold to another entity.

We signed a manufacturing and supply agreement, or the Chroma Supply Agreement, with Chroma for our drug candidate tosedostat. The Chroma Supply Agreement is a non-exclusive agreement and provides for both the clinical and commercial drug supply of tosedostat. The Chroma Supply Agreement commenced on June 8, 2011 and expires two years from the date when tosedostat is granted first approval for commercial distribution by the applicable regulatory authority in the licensed territory. Upon expiration of the initial term, we have a one year renewal option. We have the right to terminate the Chroma Supply Agreement without cause with 90 days written notice to Chroma. Both parties have the right to terminate for breach, bankruptcy, mutual agreement, or termination of the development agreement.

Additional Milestone Activities

Chroma Therapeutics, Ltd.

We have an agreement with Chroma, the Chroma License Agreement, under which we have an exclusive license to certain technology and intellectual property controlled by Chroma to develop and commercialize the drug candidate, tosedostat, in North, Central and South America, or the Licensed Territory. Pursuant to the terms of the Chroma License Agreement, we paid Chroma an upfront fee of $5.0 million upon execution of the agreement and will make a milestone payment of $5.0 million upon the initiation of the first pivotal trial, which is expected to commence in 2013. The Chroma License Agreement also includes additional development- and sales-based milestone payments related to AML and certain other indications, up to a maximum amount of $209.0 million payable by us to Chroma if all development and sales milestones are achieved.

We will also pay Chroma royalties on net sales of tosedostat in any country within the Licensed Territory, commencing on the first commercial sale of tosedostat in any country in the Licensed Territory and continuing with respect to that country until the later of (a) the expiration date of the last patent claim covering tosedostat in that country, (b) the expiration of all regulatory exclusivity periods for tosedostat in that country or (c) ten years after the first commercial sale in that country. Royalty payments to Chroma are based on net sales volumes in any country within the Licensed Territory and range from the low- to mid-teens as a percentage of net sales.

We will oversee and be responsible for performing the development operations and commercialization activities in the Licensed Territory and Chroma will oversee and be responsible for performing the development operations and commercialization activities worldwide except for the Licensed Territory, or the ROW Territory. Development costs may not exceed $50.0 million for the first three years of the Chroma License Agreement unless agreed by the parties and we will be responsible for 75% of all development costs, while Chroma will be responsible for 25% of all development costs, subject to certain exceptions. Chroma is responsible for the manufacturing of tosedostat for development purposes in the Licensed Territory and the ROW Territory in accordance with the terms of the Chroma Supply Agreement. We have the option of obtaining a commercial supply of tosedostat from Chroma or from another manufacturer at our sole discretion in the Licensed Territory. The Chroma License Agreement may be terminated by us at our convenience upon 120 days’ written notice to Chroma. The Chroma License Agreement may also be terminated by either party following a material breach by the other party subject to notice and cure periods.

By a letter dated July 18, 2012, Chroma notified us that Chroma alleges breaches under the Chroma License Agreement. Chroma asserts that we have not complied with the Chroma License Agreement because we made decisions with respect to the development of tosedostat without the approval of the joint committees to be established pursuant to the terms of the Chroma License Agreement, did not hold meetings of those committees and have not used diligent efforts in the development of tosedostat. We dispute Chroma’s allegations and intend to vigorously defend our development activities and judgments. In particular, we dispute Chroma’s lack of diligence claim based in part on the appropriateness of completing the ongoing phase II combination trials prior to developing a phase III trial design. In addition, we believe that Chroma has failed to comply with its antecedent obligations with respect to the joint committees and failed to demonstrate an ability to manufacture tosedostat to the required standards under the terms of the Chroma License Agreement. Under the Chroma License Agreement there is a 90 day cure period for any nonpayment default, which period shall be extended to 180 days if the party is using efforts to cure. A party may terminate the Chroma License Agreement for a material breach only after arbitration in accordance with the terms of the Chroma License Agreement.

Effective September 25, 2012, we and Chroma entered into a three month standstill with respect to the parties’ respective claims under the Chroma License Agreement, but otherwise reserving the parties’ respective rights as of the commencement of the standstill period. The standstill is terminable by either party on one month’s notice.

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S*BIO Pte Ltd

Pursuant to the S*BIO Agreement, we acquired the Seller Compounds, which inhibit Janus Kinase 2, commonly referred to as JAK2, and we made an initial payment of $2 million in cash at signing. In consideration of the assets and rights acquired under the S*BIO Agreement, we made an additional payment of $13 million in cash and issued 15,000 shares of our Series 16 Preferred Stock, which were automatically converted into 2.5 million shares of our common stock, to S*BIO. The S*BIO Agreement also provides S*BIO with a contingent right to certain milestone payments from us up to an aggregate amount of $132.5 million if certain U.S., E.U. and Japanese regulatory approvals are obtained or if certain worldwide net sales thresholds are met in connection with any pharmaceutical product containing or comprising any Seller Compound for use for specific diseases, infections or other conditions. In addition, S*BIO will also be entitled to receive royalty payments from us at incremental rates in the low, single digits based on certain worldwide net sales thresholds on a product-by-product and country-by-country basis.

At our election, we may pay up to 50% of any milestone payments to S*BIO through the issuance of shares of our common stock or shares of our preferred stock convertible into our common stock, provided that in no event will the issuances of our common stock or preferred stock in connection with the asset purchase, in the aggregate, equal or exceed 20% of our common stock or voting power outstanding as of the date of the S*BIO Agreement, except with the prior approval of our shareholders. At our annual meeting of shareholders on August 31, 2012, our shareholders approved the proposal to issue shares to S*BIO in connection with, or to finance, the acquisition of the Seller Compounds and approval to, at our option, issue shares of our common stock or shares of our preferred stock in lieu of cash for up to 50% of the milestone payments that may be made to S*BIO.

University of Vermont

We have an agreement with the University of Vermont, or UVM, which grants us an exclusive license, with the right to sublicense, for the rights to Pixuvri, or the UVM Agreement. Pursuant to the UVM Agreement, we acquired the rights to make, have made, sell and use Pixuvri. Pursuant to the UVM Agreement, we are obligated to make payments to UVM based on net sales. Our royalty payments range from low-single digits to mid-single digits as a percentage of net sales. The higher royalty rate is payable for net sales in countries where specified UVM licensed patents exist, or where we have obtained orphan drug protection, until such UVM patents or such protection no longer exists. For a period of ten years after first commercialization of Pixuvri, the lower royalty rate is payable for net sales in such countries after expiration of the designated UVM patents or loss of orphan drug protection, and in all other countries without such specified UVM patents or orphan drug protection. Unless otherwise terminated, the term of the UVM Agreement continues for the life of the licensed patents in those countries in which a licensed patent exists, and continues for ten years after the first sale of Pixuvri in those countries where no such patents exist. We may terminate the UVM Agreement, on a country-by-country basis or on a patent-by-patent basis, at any time upon advance written notice. UVM may terminate the UVM Agreement upon advance written notice in the event royalty payments are not made. In addition, either party may terminate the UVM Agreement (a) in the event of an uncured material breach of the UVM Agreement by the other party; or (b) in the event of bankruptcy of the other party.

PG-TXL

We have an agreement, or the PG-TXL Agreement, with PG-TXL Company, L.P., or PG-TXL, which grants us an exclusive worldwide license for the rights to OPAXIO and to all potential uses of PG-TXL’s polymer technology. Pursuant to the PG-TXL Agreement, we acquired the rights to research, develop, manufacture, market and sell anti-cancer drugs developed using this polymer technology. Pursuant to the PG-TXL Agreement, we are obligated to make payments to PG-TXL upon the achievement of certain development and regulatory milestones of up to $14.4 million. The timing of the remaining milestone payments under the PG-TXL Agreement is based on trial commencements and completions for compounds protected by PG-TXL license rights, and regulatory and marketing approval of those compounds by the FDA and the EMA. Additionally, we are required to make royalty payments to PG-TXL based on net sales. Our royalty payments range from low-single digits to mid-single digits as a percentage of net sales. Unless otherwise terminated, the term of the PG-TXL Agreement continues until no royalties are payable to PG-TXL. We may terminate the PG-TXL Agreement (i) upon advance written notice to PG-TXL in the event issues regarding the safety of the products licensed pursuant to the PG-TXL Agreement arise during development or clinical data obtained reveal a materially adverse tolerability profile for the licensed product in humans or (ii) for any reason upon advance written notice. In addition, either party may terminate the PG-TXL Agreement (a) upon advance written notice in the event certain license fee payments are not made; (b) in the event of an uncured material breach of the respective material obligations and conditions of the PG-TXL Agreement; or (c) in the event of liquidation or bankruptcy of a party.

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Gynecologic Oncology Group

We have an agreement with the GOG related to the GOG0212 trial, which the GOG is conducting. We recorded a $1.7 million payment due to the GOG based on the 800 patient enrollment milestone achieved in the second quarter of 2011, of which $0.9 million is outstanding and included in accounts payable as of September 30, 2012. Under this agreement, we are required to pay up to $1.8 million in additional milestone payments related to the trial, of which $0.5 million will become due upon receipt of the interim analysis and data transfer which may occur in 2013. There were 946 patients enrolled as of September 30, 2012.

Nerviano Medical Sciences

Under a license agreement entered into with Nerviano Medical Sciences, S.r.l. for brostallicin, we may be required to pay up to $80.0 million in milestone payments based on the achievement of certain product development results. Due to the early stage of development that brostallicin is in, we are not able to determine whether the clinical trials will be successful and therefore cannot make a determination that the milestone payments are reasonably likely to occur at this time.

Cephalon

Pursuant to an acquisition agreement entered into with Cephalon Inc., or Cephalon, in June 2005, we may receive up to $100.0 million in payments upon achievement by Cephalon of specified sales and development milestones related to TRISENOX. However, the achievement of any such milestones is uncertain at this time.

Novartis

In September 2006, we entered into an exclusive worldwide licensing agreement, or the Novartis Agreement, with Novartis International Pharmaceutical Ltd., or Novartis, for the development and commercialization of OPAXIO. Total product and registration milestones to us for OPAXIO under the Novartis Agreement could reach up to $270 million. Royalty payments to us for OPAXIO are based on worldwide OPAXIO net sales volumes and range from the low-twenties to mid-twenties as a percentage of net sales.

Pursuant to the Novartis Agreement, we are responsible for the development costs of OPAXIO and have control over development of OPAXIO unless and until Novartis exercises its development rights, or the Development Rights. In the event that Novartis exercises the Development Rights, then from and after the date of such exercise, or the Novartis Development Commencement Date, Novartis will be solely responsible for the development of OPAXIO. Prior to the Novartis Development Commencement Date, we are solely responsible for all costs associated with the development of OPAXIO, but will be reimbursed by Novartis for certain costs after the Novartis Development Commencement Date. After the Novartis Development Commencement Date, Novartis will be responsible for costs associated with the development of OPAXIO, subject to certain limitations; however, we are also responsible for reimbursing Novartis for certain costs pursuant to the Novartis Agreement.

The Novartis Agreement also provides Novartis with an option to develop and commercialize Pixuvri based on agreed terms. If Novartis exercises its option on Pixuvri under certain conditions and we are able to negotiate and sign a definitive license agreement with Novartis, Novartis would be required to pay us a $7.5 million license fee, up to $104 million in registration and sales related milestones and a royalty on Pixuvri worldwide net sales. Royalty payments to us for Pixuvri are based on worldwide Pixuvri net sales volumes and range from the low-double digits to the low-thirties as a percentage of net sales.

Royalties for OPAXIO are based on worldwide sales volumes of OPAXIO and royalties for Pixuvri are based on sales volumes in the United States and sales volumes in other countries.

Royalties for OPAXIO and Pixuvri are payable from the first commercial sale of a product until the later of the expiration of the last to expire valid claim of the licensor or the occurrence of other certain events, or the Royalty Term. Unless otherwise terminated, the term of the Novartis Agreement continues on a product-by-product and

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country-by-country basis until the expiration of the last-to-expire Royalty Term with respect to a product in such certain country. In the event Novartis does not exercise its Development Rights until the earlier to occur of (i) the expiration of 30 days following receipt by Novartis of the product approval information package pursuant to the Novartis Agreement or (ii) Novartis’ determination, in its sole discretion, to terminate the Development Rights exercise period by written notice to us (events (i) and (ii) collectively being referred to as the “Development Rights Exercise Period”), the Novartis Agreement will automatically terminate upon expiration of the Development Rights Exercise Period. In the event of an uncured material breach of the Novartis Agreement, the non-breaching party may terminate the Novartis Agreement. Either party may terminate the Novartis Agreement without notice upon the bankruptcy of the other party. In addition, Novartis may terminate the Novartis Agreement without cause at any time (a) in its entirety within 30 days written notice prior to the exercise by Novartis of its Development Rights or (b) on a product-by-product or country-by-country basis on 180 days written notice after the exercise by Novartis of its Development Rights. If we experience a change of control that involves certain major pharmaceutical companies, Novartis may terminate the Novartis Agreement by written notice within a certain period of time to us or our successor entity.

As of September 30, 2012, we have not received any milestone payments and we will not receive any milestone payments unless Novartis elects to exercise its option to participate in the development and commercialization of Pixuvri or exercise its Development Rights for OPAXIO.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Foreign Exchange Market Risk

We are exposed to risks associated with foreign currency transactions insofar as we use U.S. dollars to make contract payments denominated in euros or vice versa. As the net positions of our unhedged foreign currency transactions fluctuate, our earnings might be negatively affected. As of September 30, 2012, our foreign currency transactions were minimal and changes to the exchange rate between the U.S. dollar and foreign currencies would have an immaterial affect on our earnings. In addition, the reported carrying value of our euro-denominated assets and liabilities will be affected by fluctuations in the value of the U.S. dollar as compared to the euro. As of September 30, 2012, we had a net asset balance excluding intercompany payables and receivables in our European branches and subsidiaries denominated in euros. As of September 30, 2012, if the euro had been 20% weaker against the dollar, our net asset balance would have decreased by approximately $1.3 million as of this date.

Item 4. Controls and Procedures

(a) Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in reports filed under the Securities Exchange Act of 1934, or the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms, and that such information is accumulated and communicated to our management to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, our 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.

Our management, under the supervision and with the participation of our President and Chief Executive Officer and Executive Vice President, Finance and Administration, or EVP of Finance, has evaluated the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act as of the end of the period covered by this Quarterly Report on Form 10-Q. Based upon that evaluation, our President and Chief Executive Officer and EVP of Finance have concluded that, as of the end of the period covered by this Quarterly Report on Form 10-Q, our disclosure controls and procedures were effective.

(b) Changes in Internal Control over Financial Reporting

There have been no changes to our internal control over financial reporting that occurred during the period covered by this Quarterly Report on Form 10-Q that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II - OTHER INFORMATION

Item 1. Legal Proceedings

On December 10, 2009, CONSOB sent us a notice claiming two violations of the provisions of Section 114, paragraph 1 of the Italian Legislative Decree no. 58/98 due to the asserted late disclosure of certain information then reported, at CONSOB’s request, in press releases disseminated on December 19, 2008 and March 23, 2009. Such information concerned, respectively: (i) the conversion by BAM Opportunity Fund LP of 9.66% notes into shares of common stock that occurred between October 24, 2008 and November 19, 2008; and (ii) the contents of the opinion expressed by Stonefield Josephson, Inc., an independent registered public accounting firm, with respect to our 2008 financial statements. The sanctions established by Section 193, paragraph 1 of the Italian Legislative Decree no. 58/98 for such violations are pecuniary administrative sanctions amounting to between €5,000 and €500,000, or approximately $6,000 to $643,000 converted using the currency exchange rate as of September 30, 2012, applicable to each of the two asserted violations. According to the applicable Italian legal provisions, CONSOB may impose such administrative sanctions by means of a decree stating the grounds of its decision only after evaluating our possible defenses that were submitted to CONSOB on January 8, 2010 (within 30 days of December 10, 2009, the notification date of the relevant charges, according to the applicable Italian rules). On July 12, 2010, CONSOB (a) notified us that it had begun the preliminary investigation for its decision on these administrative proceedings and (b) provided us with a preliminary investigation report in response to our defenses submitted on January 8, 2010. On August 12, 2010 (within 30 days of July 12, 2010, the notification date of the beginning of the aforesaid preliminary investigation, according to the applicable Italian rules), we submitted further defenses that CONSOB had to evaluate before imposing any possible administrative sanctions. In a letter dated March 10, 2011, CONSOB notified us of a resolution confirming the occurrence of the violation asserted in clause (i) above and applied a fine in the amount of €40,000, or approximately $55,000 converted using the currency exchange rate as of March 10, 2011, which we paid on April 5, 2011. CONSOB has not yet notified us of a resolution with respect to the violation asserted in clause (ii) above, but based on our assessment we believe the likelihood that a pecuniary administrative sanction will be imposed on us for the violation asserted in clause (ii) is probable.

On April 14, 2009, December 21, 2009 and June 25, 2010, the Italian Tax Authority, or the ITA, issued notices of assessment to CTI (Europe) based on the ITA’s audit of CTI (Europe)’s VAT returns for the years 2003, 2005 and 2006 and 2007. The ITA audits concluded that CTI (Europe) did not collect and remit VAT on certain invoices issued to non-Italian clients for services performed by CTI (Europe). The assessments, including interest and penalties, for the years 2003, 2005, 2006 and 2007 are €0.5 million, €5.5 million, €2.5 million and €0.8 million, or approximately $0.7 million, $7.1 million, $3.2 million and $1.1 million converted using the currency exchange rate as of September 30, 2012, respectively. We believe that the services invoiced were non-VAT taxable consultancy services and that the VAT returns are correct as originally filed. We are vigorously defending ourselves against the assessments both on procedural grounds and on the merits of the case. If the final decision of the lower tax courts (i.e. the Provincial Tax Court or the Regional Tax Court) or of the Supreme Court is unfavourable to us, we may be requested to pay to the ITA an amount ranging from €2.9 million to €9.4 million, or approximately $3.7 million to $12.1 million converted using the currency exchange rate as of September 30, 2012, plus collection fees, notification expenses and additional interest for the period lapsed between the date in which the assessments were issued and the date of effective payment.

2003 VAT. On September 13, 2011, the Provincial Tax Court issued decision no. 229/3/2011 with which it (i) fully accepted the merits of our appeal, (ii) declared that no penalties can be imposed against us, and (iii) found the ITA liable to pay us €10,000, or approximately $13,000 converted using the currency exchange rate as of September 30, 2012, as partial refund of the legal expenses we incurred for our appeal. On October 16, 2012, ITA appealed against this decision. We will defend ourselves in front of the Regional Tax Court both on procedural grounds and on the merits of the case.

2005 VAT. On January 13, 2011, the Provincial Tax Court issued decision No. 4/2010 in which it (i) partially accepted our appeal and declared that no penalties can be imposed against us, (ii) confirmed the right of the ITA to reassess the VAT (plus interest) in relation to the transactions identified in the 2005 notice of assessment and (iii) repealed the suspension of the notice of deposit payment. As a result of this decision, our exposure for 2005 VAT assessment is currently reduced by the waiver of penalties of €2.6 million, or approximately $3.4 million converted using the currency exchange rate as of September 30, 2012.

On February 2, 2011, we paid the required VAT deposit of €1.5 million, or approximately $2.1 million converted using the currency exchange rate as of February 2, 2011 (including 50% of the assessed VAT, interest and collection fees). On March 25, 2011, we paid to the Italian collection agent an additional amount of €0.1 million, or

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approximately $0.1 million converted using the currency exchange rate as of March 25, 2011. The additional payment was for interest and collection fees during the suspension period. We do not believe this additional payment was due and we intend to pursue recovery of such payment through litigation. At the end of the first quarter of 2012, the ITA issued an additional notice of deposit payment for an amount of €0.5 million, or approximately $0.7 million converted using the currency exchange rate as of September 30, 2012 (including approximately 16.7% of the assessed VAT, interest and collection fees). Such amount has been partially offset with the refund of the deposit payment made for 2006 VAT (please refer to “2006 VAT” below). On April 10, 2012, an additional deposit payment of €0.1 million, or approximately $0.1 million converted using the exchange rate as of April 10, 2012, was made to the ITA.

The ITA has appealed to the higher court against the decision that no penalties could be imposed on us. We do not believe that the Provincial Tax Court has carefully reviewed all of our arguments, relevant documents and other supporting evidence that our counsel filed and presented during the hearing, including an appraisal from an independent expert. Accordingly, we also filed an appeal against the Provincial Tax Court’s decision. On October 15, 2012, the Regional Tax Court issued decision no. 127/31/2012 with which it (i) fully accepted the merits of our appeal and (ii) confirmed that no penalties can be imposed against us. The ITA is entitled to appeal such decision to the Italian Supreme Court within six months.

2006 VAT. On October 18, 2011, the Provincial Tax Court issued decision no. 276/21/2011 (jointly with the 2007 VAT case) with which it (i) fully accepted the merits of our appeal (ii) declared that no penalties can be imposed against us, and (iii) found for 2006 and 2007 VAT cases the ITA liable to pay us €10,000, or approximately $13,000 converted using the currency exchange rate as of September 30, 2012, as partial refund of the legal expenses incurred for the appeal.

On March 4, 2011, we paid to the ITA the required deposit in respect of the 2006 VAT for an amount of €0.4 million, or approximately $0.6 million converted using the currency exchange as of March 4, 2011 (including 50% of the assessed VAT, interest and collection fees). After the Provincial Tax Court’s decision at the end of the first quarter 2012, the ITA issued an order of refund of the deposit amount. Such refund was offset with the additional deposit payment made on April 10, 2012 for 2005 VAT (please refer to “2005 VAT” above).

The ITA has appealed to the higher court against this decision. We will defend against the ITA’s appeal before the higher Regional Tax Court. The Regional Tax Court has scheduled the first hearing for November 6, 2012.

2007 VAT. On October 18, 2011, the Provincial Tax Court issued decision no. 276/21/2011 (jointly with the 2006 VAT case) in which the Provincial Tax Court (i) fully accepted the merits of our appeal (ii) declared that no penalties can be imposed against us, and (iii) found for 2006 and 2007 VAT cases the ITA liable to pay us €10,000, or approximately $13,000 converted using the currency exchange rate as of September 30, 2012, as partial refund of the legal expenses incurred for the appeal.

On September 26, 2011, we paid to the ITA the required deposit in respect of the 2007 VAT in the amount of €0.1 million, or approximately $0.1 million converted using the currency exchange rate as of September 26, 2011 (including 50% of the assessed VAT, interest and collection fees). After the Provincial Tax Court’s decision at the end of the first quarter 2012, the ITA issued an order of refund of the deposit amount. Such refund has been suspended by the collection agent because of the assessment of social contribution due for an amount equal to €0.1 million, or approximately $0.1 million converted using the currency exchange rate as of September 30, 2012. We do not believe this social contribution was due and we are in the process of resolving the issue with the social contribution authorities.

The ITA has appealed to the higher court against this decision. We will defend against the ITA’s appeal before the higher Regional Tax Court. The Regional Tax Court has scheduled the first hearing for November 6, 2012.

Due to the change of the position for the VAT assessment cases, we have reduced the reserve for VAT assessed by €1.7 million, or approximately $2.1 million converted using the currency exchange rate as of September 30, 2012. Therefore, we have a reserve for VAT assessed, interest and collection fees totalling €1.0 million as of September 30, 2012, or approximately $1.3 million converted using the currency exchange rate as of September 30, 2012, of which $1.1 million included in long-term obligations, less current portion and $0.2 million of the reserve is accounted for as an offset to VAT receivable included in other assets.

On August 3, 2009, Sicor - Società Cortisteroisi S.r.l., or Sicor, filed a lawsuit in the Court of Milan to obtain the Court’s assessment that we were bound to source a chemical compound, whose chemical name is BBR2778, from Sicor according to the terms of a supply agreement executed between Sicor and Novuspharma on October 4, 2002. Sicor alleges that the agreement was not terminated according to its terms. We assert that the supply

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agreement in question was properly terminated and that we have no further obligation to comply with its terms. A hearing was held on January 21, 2010 to discuss preliminary matters and set a schedule for future filings and hearings. The parties filed the authorized pleadings and submitted to the Court their requests for evidence. On November 11, 2010, a hearing was held to examine and discuss the requests for evidence submitted by the parties in the briefs filed pursuant to article 183, paragraph 6 of the Italian code of civil procedure. At the hearing held on November 11, 2010, the judge declared that the case does not require any discovery or evidentiary phase, and may be decided on the basis of the documents and pleadings already filed by the parties. At the hearing held on October 11, 2012 the parties informed the Court about the ongoing negotiations pending between the parties and asked the Court, accordingly, to postpone the case. At the request of the parties, the Court extended the final hearing until March 21, 2013. No estimate of a loss, if any, can be made at this time in the event that we do not prevail.

In March 2010, three purported securities class action complaints were filed against the Company and certain of our officers and directors in the United States District Court for the Western District of Washington. On August 2, 2010, Judge Marsha Pechman consolidated the actions, appointed lead plaintiffs, and approved lead plaintiffs’ counsel. On September 27, 2010, lead plaintiff filed an amended consolidated complaint, captioned Sabbagh v. Cell Therapeutics, Inc. (Case No. 2:10-cv-00414-MJP), naming the Company, Dr. James A. Bianco, Louis A. Bianco, and Craig W. Philips as defendants. The amended consolidated complaint alleges that defendants violated the federal securities laws by making certain alleged false and misleading statements related to the FDA approval process for Pixuvri. The action seeks damages on behalf of purchasers of our stock during a purported class period of March 25, 2008 through March 22, 2010. On October 27, 2010, defendants moved to dismiss the amended consolidated complaint. On February 4, 2011, the Court denied in large part the defendants’ motion. Defendants answered the amended consolidated complaint on March 28, 2011, and discovery commenced, with trial set for June 25, 2012. On December 14, 2011, the parties filed a letter with the Court indicating they had agreed to the general terms of a settlement, and asking the Court to remove the case deadlines from the Court calendar. On February 14, 2012, plaintiffs filed a motion for preliminary approval of the settlement, along with related documents. On March 16, 2012, the Court granted preliminary approval of the settlement, granted conditional certification to the proposed class, and approved the proposed forms of notice to the class. A settlement hearing occurred on July 20, 2012. The Court entered a Final Judgment and Order of Dismissal with Prejudice on July 25, 2012. The negotiated terms of the settlement include a $19.0 million dollar settlement fund, which was paid by our insurance carriers. As a result, there is no estimated loss to us.

In April 2010, three shareholder derivative complaints were filed against the Company and certain of its officers and directors in the United States District Court for the Western District of Washington. These derivative complaints allege that defendants breached their fiduciary duties to the Company by making or failing to prevent the issuance of certain alleged false and misleading statements related to the FDA approval process for Pixuvri. The allegations in the derivative actions are substantially similar to those in the securities action. On May 10, 2010, Judge Marsha Pechman consolidated the shareholder derivative actions under the caption Shackleton v. Bauer (Case No. 2:10-cv-00414-MJP), and appointed the law firms of Robbins Umeda LLP and Federman & Sherwood as co-lead counsel for derivative plaintiffs. Three more derivative complaints were filed in June, July and October 2010, and they have also been consolidated with Shackleton v. Bauer. The court has set a trial date of December 3, 2012 for the shareholder derivative action. At this stage of the litigation no probability of loss can be predicted in the event we do not prevail.

In December 2011, we were informed of a decree by the Italian Ministry for Education, University and Research, or the Ministry, dated July 7, 2011 revoking a financial support granted to Novuspharma S.p.A. (now the Company, following the merger of Novuspharma into the Company in January 2004) in July 2002, or the Financial Support, and requesting the repayment of the amount paid to Novuspharma as grant for the expenses (i.e. €0.5 million, plus interest for an additional amount of €0.1 million) by January 15, 2012, or the January Decree. The Financial Support was granted (following a proper application by Novuspharma) for a research project about new compounds for the treatment of tumors of the gastrointestinal area, or the Project. The initial amount of the Financial Support was (i) up to €2.3 million as a subsidized loan, and (ii) up to €2.5 million as a grant for expenses (a portion of which, corresponding to €0.5 million, was effectively paid to Novuspharma). Following the interruption of the Project in June 2004, due to unforeseeable technical reasons not ascribable to the beneficiary company, the Financial Support was reduced (i) to €0.6 million for the subsidized loan, and (ii) to €0.6 million for the grant for expenses. In 2005, we requested the Ministry to authorize the joint ownership of the Project by both Cell Therapeutics Europe S.r.l., or CTE, and our Italian branch. In May 2007, the Ministry accepted such joint ownership of the Project subject to the issuance of a guarantee, or the Guarantee, for the portion corresponding to the subsidized loan, but we never issued such Guarantee. In 2009, our Italian branch’s research activities were terminated. Since we assert that the January Decree is unlawful and that the relevant issuance represents a breach of the Ministry’s duty of good faith and an abuse of right, on February 13, 2012, we served a writ of summons upon the Ministry, suing it in the civil Court of Rome in order to have the January Decree declared ineffective. However, if we are unable to successfully defend ourselves against the January Decree issued by the Ministry, we may be requested to pay €0.6 million (i.e. the amount paid to Novuspharma as grant for the expenses plus interest, as described above), or approximately $0.8 million converted using the currency exchange rate as of September 30, 2012, plus counterparty’s attorney’s fees, litigation costs and additional default interest for the period lapsed between January 16, 2012 and the date of the effective payment. While the parties were engaged in pending settlement negotiations, (i) the Ministry interrupted the recovery process of the relevant financial support, and (ii) at the first hearing before the Court of Rome that took place on July 20, 2012, the Ministry failed to appear at the hearing, with the consequence that the Judge declared it in default of

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appearance, and we requested a postponement to continue the negotiations with the Ministry; the judge granted the postponement and the next hearing is now scheduled for April 5, 2013. On September 17, 2012, we were informed of a decree, dated August 27, 2012, issued by the General Director of the Ministry, or the August Decree, that is aimed at rectifying the January Decree and according to which the revocation will apply to only the portion of the relevant financial support that had never been requested by or granted to the Company (i.e., €0.2 million as subsidized loan and €0.1 million as grant for expenses, that we never received and therefore not obliged to return). We believe that the August Decree is still subject to the approval by the Italian Court of Auditors (Corte dei Conti). We expect to be informed by the Ministry of this approval once it is granted by the Italian Court of Auditors. At this time, considering the contents of the August Decree, the likelihood of an unfavorable outcome of these legal proceedings is remote.

In July 2012, a complaint was filed against us in the Superior Court of Washington for King County captioned GLY Construction Inc. v. Cell Therapeutics, Inc. and Selig Holdings Company (Case No. 12-2-22742-0 SEA), naming the Company and Selig Holdings Company as defendants. The complaint asserts claims for breach of contract, unjust enrichment/quantum meruit and lien foreclosure, and alleges that we failed to pay certain amounts to plaintiffs for work performed for construction improvements totaling approximately $4.0 million. We contend that these amounts should be offset by amounts owed under the lease agreement with Selig Holdings Company. We asserted cross-claims for breach of contract and business devastation against Selig in the above-referenced lawsuit. These cross-claims were based on Selig’s refusal to pay amounts owed under the lease agreement, including amounts owed to GLY and other expenses incurred. GLY, Selig and the Company reached a settlement on all of GLY’s claims on or around September 4, 2012. The settlement included a partial lump sum payment with subsequent monthly payments from both Selig and us. We still have claims against Selig for amounts owed under the lease agreement, including portions of the settlement amount paid by us to GLY. The remaining litigation between Selig and us is in the early stages and, as such, no probability of success can be predicted at this time.

In March 2011, we entered into a license and co-development agreement, or the Chroma License Agreement, with Chroma Therapeutics, Ltd., or Chroma, providing us with exclusive marketing and co-development rights to Chroma’s drug candidate, tosedostat, in North, Central and South America. By a letter dated July 18, 2012 Chroma notified us that Chroma alleges breaches under the Chroma License Agreement. Chroma asserts that we have not complied with the Chroma License Agreement because we made decisions with respect to the development of tosedostat without the approval of the joint committees to be established pursuant to the terms of the Chroma License Agreement, did not hold meetings of those committees and have not used diligent efforts in the development of tosedostat. We dispute Chroma’s allegations and intend to vigorously defend our development activities and judgments. In particular, we dispute Chroma’s lack of diligence claim based in part on the appropriateness of completing the ongoing phase II combination trials prior to developing a phase III trial design. In addition, we believe that Chroma has failed to comply with its antecedent obligations with respect to the joint committees and failed to demonstrate an ability to manufacture tosedostat to the required standards under the terms of the Chroma License Agreement. Under the Chroma License Agreement there is a 90 day cure period for any nonpayment default, which period shall be extended to 180 days if the party is using efforts to cure. A party may terminate the Chroma License Agreement for a material breach only after arbitration in accordance with the terms of the Chroma License Agreement.

Effective September 25, 2012, we and Chroma entered into a three month standstill with respect to the parties’ respective claims under the Chroma License Agreement, but otherwise reserving the parties’ respective rights as of the commencement of the standstill period. The standstill is terminable by either party on one month’s notice.

On June 16, 2012, Craig W. Philips, then President of Cell Therapeutics, Inc., delivered notice of his intention to resign as President of the Company, effective July 16, 2012. Mr. Philips’ departure was the result of a perceived diminution of responsibilities. The parties finalized a settlement agreement in October 2012, and the Company has accrued approximately $0.4 million as of September 30, 2012.

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In addition to the items discussed above, we are from time to time subject to legal proceedings and claims arising in the ordinary course of business, some of which may be covered in whole or in part by insurance.

Item 1A. Risk Factors

This Quarterly Report on Form 10-Q contains forward-looking statements that involve risks and uncertainties. The occurrence of any of the following risks described below and elsewhere in this document, including the risk that our actual results may differ materially from those anticipated in these forward-looking statements, could materially adversely affect our business, financial condition, operating results or prospects and the trading price of our securities. Additional risks and uncertainties that we do not presently know or that we currently deem immaterial may also impair our business, financial condition, operating results and prospects and the trading price of our securities.

Factors Affecting Our Operating Results and Financial Condition

We are largely dependent on the commercial success of Pixuvri and although we anticipate generating revenue from sales of Pixuvri, we may never significantly increase these sales or become profitable.

We are at an early stage of commercialization and we anticipate that, for at least the next several years, our ability to generate revenues and become profitable will depend in large part on the commercial success of our only marketed product candidate, Pixuvri, which in turn, will depend on several factors, including our ability to:

• successfully maintain and increase market demand for, and sales of, Pixuvri in Europe through our sales and marketing efforts by expanding our sales force;

• obtain greater acceptance of Pixuvri by physicians and patients;

• maintain compliance with regulatory requirements;

• obtain a renewal annually of our conditional marketing authorization for Pixuvri in the E.U. and complete a post-marketing study of Pixuvri aimed at confirming the clinical benefit previously observed in Pixuvri;

• establish and maintain agreements with wholesalers and distributors on commercially reasonable terms;

• maintain commercial manufacturing arrangements with third-party manufacturers as necessary to meet commercial demand for Pixuvri and continue to manufacture commercial quantities at acceptable cost levels; and

• successfully maintain intellectual property protection for Pixuvri.

We cannot be certain that our marketing of Pixuvri in Europe will result in increased demand for, and sales of, the product. Further, if we are unsuccessful in expanding our sales force in Europe, we may be unable to successfully sell Pixuvri in Europe. If we fail to successfully sell Pixuvri in Europe, or our sales are lower than expected, we may be unable to generate sufficient revenues to grow or sustain our business and we may never become profitable, and our business, financial condition, operating results and prospects and the trading price of our securities could be harmed.

Our current business strategy is highly dependent upon our ability to successfully execute on our sales and marketing strategy for the commercialization of Pixuvri. If we are unable to successfully execute on our sales and marketing strategy, we may not be able to generate significant product revenues or execute on our business strategy.

One of the priorities of our business strategy is to successfully execute the commercial launch of Pixuvri in Europe. We may not be able to successfully commercialize Pixuvri in Europe as planned. In order to commercialize Pixuvri in Europe, we must continue to build our sales, marketing, distribution, managerial and other non-technical capabilities. We currently have limited resources and the continued development of our own commercial organization to market Pixuvri and any additional product candidates we may develop will be expensive and time-consuming and could delay any product launch, and we cannot be certain that we will be able to successfully develop this capability. We will also have to compete with other pharmaceutical and biotechnology companies to recruit, hire, train and retain sales and marketing personnel. To the extent we rely on additional third parties to commercialize Pixuvri or any other product candidates that may be approved in the future, we may receive less revenues than if we commercialized these products ourselves. In addition, we may have little or no control over the sales efforts of any third parties involved in our commercialization efforts. In the event we are unable to successfully develop our own commercial organization or collaborate with a third-party sales and marketing organization, we may not be able to commercialize our product candidates, including Pixuvri, and execute on our business strategy. If we are unable to successfully implement our commercial plans and drive adoption by patients and physicians of Pixuvri, or any other product candidates that may be approved in the future, marketing and commercialization efforts, then we will not be able to generate sustainable revenues from product sales, which could harm our business, financial condition, operating results and prospects and the trading price of our securities.

We need to raise additional funds and expect that we will need to continue to raise funds in the future, and additional funds may not be available on acceptable terms, or at all; failure to raise significant additional funds may cause us to cease development of our products and operations.

We have substantial operating expenses associated with the development of our product candidates and as of September 30, 2012, we had cash and cash equivalents of $14.3 million. Subsequent to period end, we received approximately $60.0 million in gross proceeds from the issuance of preferred stock (before deducting underwriting discounts and commissions and offering expenses), see Note 9, Subsequent Events in the Notes to Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for additional information. At our currently planned spending rate, we believe that our financial resources, in addition to the expected receipts from European Pixuvri sales, will be sufficient to fund our operations for the next fifteen (15) months. Changes in manufacturing, clinical trial expenses, and expansion of our sales and marketing organization in Europe, may consume capital resources earlier than planned. Additionally, we may not receive the country reimbursement rates in Europe for Pixuvri that we currently assume in planning for 2013. There can be no assurance that we will have sufficient earnings, access to liquidity or cash flow in the future to meet our operating expenses and other obligations.

Raising additional capital will likely require that we issue additional shares of our common stock. Because of the number of shares reserved for, and to be reserved for, issuance under various convertible securities, derivative securities and otherwise, we have a limited amount of authorized shares of common stock available for issuance and it can be difficult for us to obtain an increase in our authorized shares. If we do not have enough shares authorized to effect an equity financing, our ability to raise capital through equity financings may be harmed. To the extent that we raise additional capital through the sale of equity securities, or securities convertible into our equity securities, our shareholders may experience dilution of their proportionate ownership of us.

We may not be able to raise such capital or, if we can, it may not be on favorable terms. We may seek to raise additional capital through public or private equity financings, partnerships, joint ventures, dispositions of assets, debt financings or restructurings, bank borrowings or other sources. To obtain additional funding, we may need to enter into arrangements that require us to relinquish rights to certain technologies, drug candidates, products and/or potential markets. In addition, some financing alternatives may require us to meet additional regulatory requirements in the European Union (including Italy) and the United States and we may be subject to certain contractual limitations, which may increase our costs and harm our ability to obtain additional funding. If adequate funds are not otherwise available, we will further curtail operations significantly, including the delay, modification or cancellation of operations and plans related to Pixuvri, pacritinib, OPAXIO, tosedostat and brostallicin and may be forced to cease operations, liquidate our assets and possibly seek bankruptcy protection. Bankruptcy may result in the termination of agreements pursuant to which we license certain intellectual property rights, including the rights to Pixuvri, pacritinib, OPAXIO, tosedostat, brostallicin and bisplatinates.

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We need to implement a reduction in expenses across our operations if we are unable to secure additional financing.

We may need substantial additional capital to fund our current operations, particularly in light of the cash needed to fund development of our drug candidates. If we are unable to secure additional financing on acceptable terms in the near future, we will need to implement additional cost reduction initiatives, such as further reductions in the cost of our workforce and the discontinuation of a number of business initiatives to further reduce our rate of cash utilization and extend our existing cash balances. We believe that these additional cost reduction initiatives, if undertaken, could provide us with additional time to continue our pursuit of additional funding sources and also strategic alternatives. In the event that we are unable to obtain financing on acceptable terms and reduce our expenses, we may be required to limit or cease our operations, pursue a plan to sell our operating assets, seek bankruptcy protection, or otherwise modify our business strategy, which could materially harm our future business prospects.

Our common stock is listed on The NASDAQ Capital Market and the Mercato Telematico Azionario stock market in Italy, or the MTA, and we may not be able to maintain those listings or trading on these exchanges may be halted or suspended, which may make it more difficult for investors to sell shares of our common stock.

The closing bid price of our common stock has been below the minimum $1.00 per share requirement for continued listing of our common stock on The NASDAQ Capital Market under NASDAQ Listing Rule 5550(a)(2). On June 29, 2012, we received a notification from The NASDAQ Stock Market LLC, or NASDAQ, indicating non-compliance with this requirement and providing a grace period of 180 calendar days to regain compliance with this requirement or be delisted if we do not regain compliance. On August 7, 2012, in an effort to regain compliance with the NASDAQ listing requirements and increase the per-share trading price of our common stock, our board of directors approved the September Split. The September Split became effective on September 2, 2012. On September 19, 2012, we announced that we received a letter from NASDAQ indicating that as of that date we had regained compliance with NASDAQ Marketplace Rule 5550(a)(2). As a result, our common stock will continue to be listed and traded on The NASDAQ Capital Market. However, notwithstanding our current compliance with NASDAQ listing standards, there can be no assurance that we will be able to maintain our continued listing on The NASDAQ Capital Market in the future.

If our common stock ceases to be listed for trading on The NASDAQ Capital Market for any reason, it may harm our stock price, increase the volatility of our stock price, decrease the level of trading activity and make it more difficult for investors to buy or sell shares of our common stock. Furthermore, our failure to maintain a listing on The NASDAQ Capital Market may constitute an event of default under any future indebtedness which would accelerate the maturity date of such future debt or trigger other obligations. Delisting from NASDAQ could also affect our ability to maintain our listing on the Borsa Italiana. Trading in our common stock has been halted or suspended in the past and may also be halted or suspended due to market or trading conditions at the discretion of NASDAQ, the Commissione Nazionale per le Società e la Borsa, or “CONSOB” (which is the public authority responsible for regulating the Italian securities markets), or the Borsa Italiana (which ensures the development of the managed markets in Italy). In addition, if we are not listed on The NASDAQ Capital Market or if our public float falls below $75 million, we will be limited in our ability to file new shelf registration statements on SEC Form S-3 and/or to fully use one or more registration statements on SEC Form S-3. We have relied significantly on shelf registration statements on SEC Form S-3 for most of our financings in recent years, so any such limitations may harm our ability to raise the capital we need.

We may be unable to obtain a quorum for meetings of our shareholders or obtain necessary shareholder approvals and therefore be unable to take certain corporate actions.

At our annual meeting of shareholders held on August 31, 2012, or the Annual Meeting, our shareholders approved an amendment to our amended and restated articles of incorporation, as amended, or our articles of incorporation, to increase the total number of authorized shares and authorized shares of common stock available for issuance. However, in the future, if we are unable to obtain a quorum at our shareholder meetings and/or fail to obtain shareholder approval of corporation actions, such failure could harm us. Our articles of incorporation require that a quorum, generally consisting of one-third of the outstanding shares of voting stock, be represented in person, by telephone or by proxy in order to transact business at a meeting of our shareholders. In addition, amendments to our articles of incorporation, such as an amendment to increase our authorized capital stock, generally require the approval of a majority of our outstanding shares. As a result, there is a risk that we may not get shareholder approval for amendments to our articles of incorporation, including an amendment to increase the number of authorized shares of common stock at a time when we need those shares to effect a future equity financing. If we do not receive shareholder approval for such increase in authorized shares, our ability to raise capital through equity financings will be significantly harmed.

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A substantial majority of our common shares are held by Italian institutions and, under Italian laws and regulations, it is difficult to communicate with the beneficial holders of those shares to obtain votes. In 2006, when a quorum required a majority of the outstanding shares of our voting stock be represented in person or by proxy, we scheduled two annual meetings of shareholders, but were unable to obtain quorum at either meeting. Following that failure to obtain a quorum, we contacted certain depository banks in Italy where significant numbers of shares of our common stock were held and asked them to cooperate by making a book-entry transfer of their share positions at Monte Titoli to their U.S. correspondent bank, who would then transfer the shares to an account of the Italian bank at a U.S. broker-dealer that is an affiliate of that bank. Certain of the banks contacted agreed to make the share transfer pursuant to these arrangements as of the record date of the meeting, subject to the relevant beneficial owner being given notice before such record date and taking no action to direct the voting of such shares. We were able to obtain a quorum to hold special meetings of the shareholders in April 2007, January 2008, March 2009 and June 2011 and annual meetings of the shareholders in September 2007, June 2008, October 2009, September 2010, November 2011 and August 2012. Nevertheless, obtaining a quorum at future meetings even at the lower thresholds established by certain provisions of the Washington Business Corporation Act enacted in April 2011, and obtaining necessary shareholder approvals will depend in part upon the willingness of the Italian depository banks to continue participating in the custody transfer arrangements, and we cannot be assured that those banks that have participated in the past will continue to participate in custody transfer arrangements in the future. We are continuing to explore other alternatives to achieve a quorum for and shareholder representation at our meetings; however, we cannot be certain that we will find an alternate method if we are unable to continue to use the custody transfer arrangements. As a result, we may be unable to obtain a quorum at future annual or special meetings of shareholders or obtain shareholder approval of proposals when needed.

Even if we obtain a quorum at our shareholder meetings, we may not obtain enough votes to approve matters to be resolved upon at those meetings. Under Rule 452 of the New York Stock Exchange, or Rule 452, the U.S. broker-dealer may only vote shares absent direction from the beneficial owner on certain specified “routine” matters, such as certain amendments to our articles of incorporation to increase authorized shares that are to be used for general corporate purposes and the ratification of our auditors. If our shareholders do not instruct their brokers on how to vote their shares on “non-routine” matters, then we may not obtain the necessary number of votes for approval. “Non-routine” matters include, for example, proposals that relate to the authorization or creation of indebtedness or preferred stock. Revisions to Rule 452 that further limit matters for which broker discretionary voting is allowed, such as the revisions imposed by the Dodd-Frank Act to prohibit broker discretionary voting on matters related to executive compensation and in the election of directors, may further harm our ability to obtain a quorum and shareholder approval of certain matters. Therefore it is possible that even if we are able to obtain a quorum for our meetings of the shareholders we still may not receive enough votes to approve proxy proposals presented at such meeting and, depending on the proposal in question, including if a proposal is submitted to our shareholders to increase the number of authorized shares of common stock, such failure could harm us. For example, a proposal to approve a reverse stock split failed to receive sufficient votes to pass at the March 2009 shareholders meeting.

We may continue to incur net losses, and we may never achieve profitability.

We were incorporated in 1991 and have incurred a net operating loss every year since our formation. As of September 30, 2012, we had an accumulated deficit of $1.8 billion. We are pursuing regulatory approval for Pixuvri, pacritinib, OPAXIO, tosedostat and brostallicin. We will need to conduct research, development, testing and regulatory compliance activities and undertake manufacturing and drug supply activities the costs of which, together with projected general and administrative expenses, may result in operating losses for the foreseeable future. We may never become profitable even if we are able to commercialize Pixuvri as planned, commercialize other products currently in development or otherwise.

We may be unable to use our net operating losses to reduce future income tax liability.

We have substantial tax loss carryforwards for U.S. federal income tax purposes. As a result of prior changes in the stock ownership of the Company, our ability to use such carryforwards to offset future income or tax liability is

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limited under section 382 of the Internal Revenue Code of 1986, as amended. Moreover, future changes in the ownership of our stock, including those resulting from issuance of shares of our common stock upon exercise of outstanding warrants, may further limit our ability to use our net operating losses.

We have received audit reports with a going concern disclosure on our consolidated financial statements.

As we may need to raise additional financing to fund our operations and satisfy obligations as they become due, our independent registered public accounting firm has included an explanatory paragraph in their reports on our December 31, 2011, 2010 and 2009 consolidated financial statements regarding their substantial doubt as to our ability to continue as a going concern. This may have a negative impact on the trading price of our common stock and we may have a more difficult time obtaining necessary financing.

We will incur a variety of costs and may never realize the anticipated benefits of any acquisitions we may make, including our acquisition of pacritinib.

In May 2012, we completed our acquisition of pacritinib from S*BIO. If appropriate opportunities become available, we may attempt to acquire other businesses and assets that we believe are a strategic fit with our business. The process of negotiating an acquisition and integrating an acquired business and assets, including the acquisition of pacritinib, may result in operating difficulties and expenditures. In addition, our acquisitions may require significant management attention that would otherwise be available for ongoing development of our business, whether or not any such transaction is ever consummated. Moreover, we may never realize the anticipated benefits of any acquisition, including the acquisition of pacritinib. Any additional acquisitions could result in potentially dilutive issuances of equity securities, the incurrence of debt, contingent liabilities and/or amortization expenses related to intangible assets, which could harm our business, financial condition, operating results and prospects and the trading prices of our securities.

The global financial crisis may have an impact on our business and financial condition in ways that we currently cannot predict, and may further limit our ability to raise additional funds.

The ongoing credit crisis and related turmoil in the global financial system has had and may continue to have an impact on our business and our financial condition. We may face significant challenges if conditions in the financial markets do not improve or continue to worsen. In particular, our ability to access the capital markets and raise funds required for our operations may be severely restricted at a time when we would like, or need, to do so, which could have an adverse effect on our ability to meet our current and future funding requirements and on our flexibility to react to changing economic and business conditions.

We are required to comply with the regulatory structure of Italy because our stock is traded on the MTA, which could result in administrative and other challenges and additional expenses.

Our common stock is traded on the MTA and we are required to also comply with the rules and regulations of CONSOB and the Borsa Italiana, which ensures the development of the managed markets in Italy. Collectively, these entities regulate companies listed on Italy’s public markets. Conducting our operations in a manner that complies with all of the applicable laws and rules requires us to devote additional time and resources to regulatory compliance matters. For example, the process of seeking to understand and comply with the laws of each country, including tax, labor and regulatory laws, might require us to incur the expense of engaging additional outside counsel, accountants and other professional advisors and might result in delayed business initiatives as we seek to ensure that each new initiative will comply with all of the applicable regulatory regimes. In addition, the Borsa Italiana and CONSOB have made several requests for information asking us to provide additional clarifications about our business operations and financial condition, and we have complied with such requests and have met with CONSOB on several occasions to answer questions. Compliance with Italian regulatory requirements may delay additional issuances of our common stock; we are currently taking steps to attempt to conform to the requirements of the Italian stock exchange and CONSOB to allow such additional issuances.

In addition, under Italian law, we must publish a registration document, securities note and summary that have to be approved by CONSOB prior to issuing common stock that exceeds, in any twelve-month period, 10% of the number of shares of our common stock outstanding at the beginning of that period (except for certain applicable exceptions).

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If we are unable to obtain and maintain a registration document, securities note or summary to cover general financing efforts under Italian law, we may be required to raise money using alternative forms of securities. For example, we may need to use convertible preferred stock and convertible debt since the common stock resulting from the conversion of such securities, subject to the current provisions of European Directive No. 71/2003 and, according to the current interpretations of the Committee of European Securities Regulators, is not subject to the 10% limitation imposed by E.U. and Italian law. However, there can be no assurance that these exceptions to the registration document requirement are not changed from time to time.

Moreover, on December 10, 2009, CONSOB sent us a notice claiming two violations of the provisions of Section 114, paragraph 1 of the Italian Legislative Decree no. 58/98 due to the asserted late disclosure of certain information then reported, at CONSOB’s request, in press releases disseminated on December 19, 2008 and March 23, 2009. Such information concerned, respectively: (i) the conversion by BAM Opportunity Fund LP of 9.66% notes into shares of common stock that occurred between October 24, 2008 and November 19, 2008; and (ii) the contents of the opinion expressed by Stonefield Josephson, Inc., an independent registered public accounting firm, with respect to our 2008 financial statements. The sanctions established by Section 193, paragraph 1 of the Italian Legislative Decree no. 58/98 for such violations are pecuniary administrative sanctions amounting to between €5,000 and €500,000, or approximately $6,000 to $643,000 converted using the currency exchange rate as of September 30, 2012, applicable to each of the two asserted violations. According to the applicable Italian legal provisions, CONSOB may impose such administrative sanctions by means of a decree stating the grounds of its decision only after evaluating our possible defenses that were submitted to CONSOB on January 8, 2010 (within 30 days of December 10, 2009, the notification date of the relevant charges, according to the applicable Italian rules). On July 12, 2010, CONSOB (a) notified us that it had begun the preliminary investigation for its decision on these administrative proceedings and (b) provided us with a preliminary investigation report in response to our defenses submitted on January 8, 2010. On August 12, 2010 (within 30 days of July 12, 2010, the notification date of the beginning of the aforesaid preliminary investigation, according to the applicable Italian rules), we submitted further defenses that CONSOB would have to evaluate before imposing any possible administrative sanctions. In a letter dated March 10, 2011, CONSOB notified us of a resolution confirming the occurrence of the violation asserted in clause (i) above and applied a fine in the amount of €40,000, or approximately $55,000 converted using the foreign currency exchange rate as of March 10, 2011, which we paid on April 5, 2011. CONSOB has not yet notified us of a resolution with respect to the violation asserted in clause (ii) above, but based on our assessment, we believe the likelihood that a pecuniary administrative sanction will be imposed on us for such asserted violation (ii) is probable.

Our assets and liabilities that remain in our European branches and subsidiaries make us subject to increased risk regarding currency exchange rate fluctuations.

We are exposed to risks associated with the translation of euro-denominated financial results and accounts into U.S. dollars. As long as we continue to have assets and liabilities held in our European branches and subsidiaries, the carrying value of these assets and liabilities will be affected by fluctuations in the value of the U.S. dollar as compared to the euro. Changes in the value of the U.S. dollar as compared to the euro might have an adverse effect on our reported results of operations and financial condition.

We may owe additional amounts for value added taxes related to our operations in Europe.

Our European operations are subject to value added tax, or VAT, which is usually applied to all goods and services purchased and sold throughout Europe. The VAT receivable was $5.0 million as of September 30, 2012 and December 31, 2011, respectively. On April 14, 2009, December 21, 2009 and June 25, 2010, the Italian Tax Authority, or the ITA, issued notices of assessment to CTI (Europe) based on the ITA’s audit of CTI (Europe)’s VAT returns for the years 2003, 2005 and 2006 and 2007. The ITA audits concluded that CTI (Europe) did not collect and remit VAT on certain invoices issued to non-Italian clients for services performed by CTI (Europe). The assessments, including interest and penalties, for the years 2003, 2005, 2006 and 2007 are €0.5 million, €5.5 million, €2.5 million and €0.8 million, or approximately $0.7 million, $7.1 million, $3.2 million and $1.1 million converted using the currency exchange rate as of September 30, 2012, respectively. We believe that the services invoiced were non-VAT taxable consultancy services and that the VAT returns are correct as originally

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filed. We are vigorously defending ourselves against the assessments both on procedural grounds and on the merits of the case. If the final decision of lower tax courts (i.e. the Provincial Tax Court or the Regional Tax Court) or of the Supreme Court was unfavourable to us, we may be requested to pay to the ITA an amount ranging from €2.9 million to €9.4 million, or approximately $3.7 million to $12.1 million converted using the currency exchange rate as of September 30, 2012, plus collection fees, notification expenses and additional interest for the period lapsed between the date in which the assessments were issued and the date of effective payment. Further information pertaining to these cases can be found in this Quarterly Report on Form 10-Q under Part II, Item 1 “Legal Proceedings” and is incorporated by reference herein.

Our financial condition may be harmed if third parties default in the performance of contractual obligations.

Our business is dependent on the performance by third parties of their responsibilities under contractual relationships and if third parties default on their performance of their contractual obligations, we could suffer significant financial losses and operational problems, which could in turn adversely affect our financial performance, cash flows or results of operations and may jeopardize our ability to maintain our operations.

We may not realize any royalties, milestone payments or other benefits under the License and Co-Development Agreement entered into with Novartis Pharmaceutical Company Ltd.

We have entered into a license and co-development agreement related to OPAXIO and Pixuvri with Novartis pursuant to which Novartis received an exclusive worldwide license for the development and commercialization of OPAXIO and an option to enter into an exclusive worldwide license to develop and commercialize Pixuvri. We will not receive any royalty or milestone payments under this agreement unless Novartis exercises its option related to Pixuvri and we are able to reach a definitive agreement or Novartis elects to participate in the development and commercialization of OPAXIO. Novartis is under no obligation to make such election and enter into a definitive license agreement or exercise such right and may never do so. In addition, even if Novartis exercises such rights, any royalties and milestone payments we may be eligible to receive from Novartis are subject to the receipt of the necessary regulatory approvals and the attainment of certain sales levels. In the event Novartis does not elect to participate in the development of OPAXIO or Pixuvri, we may not be able to find another suitable partner for the commercialization and development of those products, which may have an adverse effect on our ability to bring those drugs to market. In addition, we would need to obtain a release from Novartis prior to entering into any agreement to develop and commercialize Pixuvri or OPAXIO with a third party. We may never receive the necessary regulatory approvals and our products may not reach the necessary sales levels to generate royalty or milestone payments even if Novartis elects to exercise its option with regard to Pixuvri and enter into a definitive license agreement or to participate in the development and commercialization of OPAXIO. Novartis has the right under the agreement in its sole discretion to terminate such agreement at any time upon written notice to us. Further information about the status of the regulatory approval for Pixuvri can be found in “Risk Factors—Factors Affecting Our Operating Results and Financial Condition—We cannot guarantee that we will obtain regulatory approval to manufacture or market any of our drug candidates.”

We cannot guarantee that we will obtain regulatory approval to manufacture or market any of our drug candidates.

Obtaining regulatory approval to market drugs to treat cancer is expensive, difficult and risky. Preclinical and clinical data can be interpreted in different ways, which could delay, limit or preclude regulatory approval. Negative or inconclusive results or adverse medical events during a clinical trial could delay, limit or prevent regulatory approval.

Information about the status of the regulatory approval of Pixuvri can be found in this Quarterly Report on Form 10-Q under Part I, Item 2 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and is incorporated by reference herein.

In March 2011, we initiated a randomized pivotal trial of Pixuvri for the treatment of relapsed or refractory aggressive B-cell NHL. This clinical trial, referred to as PIX306 or PIX-R, is now open to patient enrollment. PIX-R will compare a combination of Pixuvri plus rituximab to a combination of gemcitabine plus rituximab in patients who have relapsed after one to three prior regimens for aggressive B-cell NHL and who are not eligible for autologous stem cell transplant. We cannot predict the outcome of PIX-R or whether PIX-R will serve as either a

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post-marketing commitment trial or as a pivotal trial. Moreover, the FDA may request that we conduct more clinical trials in addition to PIX-R to obtain FDA approval of our NDA for Pixuvri and we do not know what this trial will cost or how long it would take to execute this study and provide additional information to the FDA. We may also need to take additional steps to obtain regulatory approval of Pixuvri. The expense to design and conduct clinical trials are substantial and any additional clinical trials or actions we may need to pursue to obtain approval of Pixuvri may negatively affect our business, financial condition and results of operations.

We may be delayed, limited or precluded from obtaining regulatory approval of OPAXIO as a maintenance therapy for advanced-stage ovarian cancer and as a radiation sensitizer.

Our future financial success depends in part on obtaining regulatory approval of OPAXIO. We are currently focusing our development of OPAXIO as a potential maintenance therapy for women with advanced-stage ovarian cancer who achieve a complete remission following first-line therapy with paclitaxel and carboplatin and as a radiation sensitizer. This study, the GOG0212 trial, is under the control of the GOG and is expected to enroll 1,100 patients with 946 patients enrolled as of September 30, 2012. The GOG Data Monitoring Committee plans to conduct the first interim analysis of overall survival and, based on feedback provided by the GOG, that interim analysis is currently expected in 2013. If successful, we could utilize those results to form the basis of an NDA for OPAXIO. However, prior clinical trials for OPAXIO have not been successful. In March 2005, we announced the results of STELLAR 3, and in May 2005, we announced the results of STELLAR 2 and 4, our phase III clinical trials of OPAXIO in non-small cell lung cancer, or NSCLC. All three trials failed to achieve their primary endpoints of superior overall survival compared to current marketed agents for treating NSCLC. Accordingly, there can be no assurance that the GOG0212 will provide compelling evidence or any positive results, which would preclude any submission of an NDA to the FDA. In addition, we cannot predict the outcome of the GOG0212 study and that study may not demonstrate or be adequate to support regulatory approval of OPAXIO by the FDA.

In March 2008, we submitted an MAA to the EMA for first-line treatment of patients with advanced NSCLC who are poor performance status, or PS2, based on a non-inferior survival and improved side effect profile which we believe was demonstrated in our previous clinical trials. The application was based on a positive opinion we received from the EMA’s Scientific Advice Working Party; the EMA agreed that switching the primary endpoint from superiority to non-inferiority is feasible if the retrospective justification provided in the marketing application is adequate. In September 2009, we notified the EMA of our decision to withdraw the MAA and we refocused our resources on the approval of OPAXIO for its potential superiority indication in maintenance therapy for ovarian cancer and as a radiation sensitizer in the treatment of esophageal cancer.

We are subject to extensive government regulation.

We are subject to rigorous and extensive regulation by the FDA in the United States and by comparable agencies in other states and countries, including the EMA in the European Union. Failure to comply with regulatory requirements could result in various adverse consequences, including possible delay in approval or refusal to approve a product, withdrawal of approved products from the market, product seizures, injunctions, regulatory restrictions on our business and sales activities, monetary penalties, or criminal prosecution.

Our products may not be marketed in the United States until they have been approved by the FDA and may not be marketed in other countries until they have received approval from the appropriate agencies. Except for conditional approval of Pixuvri in Europe, none of our current product candidates have received approval for marketing in any country.

Information about the status of the regulatory approval of Pixuvri can be found in this Quarterly Report on Form 10-Q under Part I, Item 2 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and is incorporated by reference herein. Except for conditional approval of Pixuvri in the European Union, none of our current product candidates have received approval for marketing in any country.

In March 2011, we initiated a randomized pivotal trial of Pixuvri for the treatment of relapsed or refractory aggressive B-cell NHL. This clinical trial, referred to as PIX306 or PIX-R, is now open to patient enrollment. PIX-R will compare a combination of Pixuvri plus rituximab to a combination of gemcitabine plus rituximab in patients who have relapsed after one to three prior regimens for aggressive B-cell NHL and who are not eligible for autologous stem cell transplant. We cannot predict the outcome of PIX-R or whether PIX-R will serve as either a post-marketing commitment trial or as a pivotal trial. Moreover, the FDA may request that we conduct more clinical

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trials in addition to PIX-R to obtain FDA approval of our NDA for Pixuvri and we do not know what this trial will cost or how long it would take to execute this study and provide additional information to the FDA. We may also need to take additional steps to obtain regulatory approval of Pixuvri. The expense to design and conduct clinical trials are substantial and any additional clinical trials or actions we may need to pursue to obtain approval of Pixuvri may negatively affect our business, financial condition and results of operations.

Obtaining regulatory approval requires substantial time, effort and financial resources, and we may not be able to obtain approval of any of our products on a timely basis, or at all. In addition, data obtained from preclinical and clinical trials are susceptible to varying interpretations, and government regulators and our collaborators may not agree with our interpretation of our clinical trial results. If our products are not approved quickly enough to provide net revenues to defray our operating expenses, our business, financial condition and results of operations will be harmed.

In the event that we receive marketing approval for any of our product candidates, we will be subject to numerous regulations and statutes regulating the manner of selling and obtaining reimbursement for those products. For example, federal statutes generally prohibit providing certain discounts and payments to physicians to encourage them to prescribe our product. Violations of such regulations or statutes may result in treble damages, criminal or civil penalties, fines or exclusion of us or our employees from participation in federal and state health care programs. Although we have policies prohibiting violations of relevant regulations and statutes, unauthorized actions of our employees or consultants, or unfavorable interpretations of such regulations or statutes may result in third parties or regulatory agencies bringing legal proceedings or enforcement actions against us. Because we will likely need to develop a new sales force for any future marketed products, we may have a greater risk of such violations from lack of adequate training or experience. The expense to retain and pay legal counsel and consultants to defend against any such proceedings would be substantial, and together with the diversion of management’s time and attention to assist in any such defense, may negatively affect our business, financial condition and results of operations.

In addition, both before and after approval, our contract manufacturers and our products are subject to numerous regulatory requirements covering, among other things, testing, manufacturing, quality control, labeling, advertising, promotion, distribution and export. Manufacturing processes must conform to current Good Manufacturing Practice, or cGMPs. The FDA, EMA and other regulatory authorities periodically inspect manufacturing facilities to assess compliance with cGMPs. Accordingly, manufacturers must continue to expend time, money and effort to maintain compliance. Failure to comply with FDA, EMA or other applicable regulations may cause us to curtail or stop the manufacture of such products until we obtain regulatory compliance.

The marketing and promotion of pharmaceuticals is also heavily regulated, particularly with regard to prohibitions on the promotion of products for off-label uses. In April 2007, we paid a civil penalty of $10.6 million and entered into a settlement agreement with the United States Attorney’s Office for the Western District of Washington arising out of their investigation into certain of our prior marketing practices relating to TRISENOX, which was divested to Cephalon Inc. in July 2005. As part of that settlement agreement and in connection with the acquisition of Zevalin, we also entered into a corporate integrity agreement with the Office of Inspector General of the U.S. Department of Health and Human Services, which required us to establish a compliance committee and compliance program and adopt a formal code of conduct.

We face direct and intense competition from our competitors in the biotechnology and pharmaceutical industries, and we may not compete successfully against them.

Competition in the oncology market is intense and is accentuated by the rapid pace of technological development. We anticipate that we will face increased competition in the future as new companies enter the market. Our competitors in the United States and elsewhere are numerous and include, among others, major multinational pharmaceutical companies, specialized biotechnology companies and universities and other research institutions. Specifically:

• If we are successful in bringing Pixuvri to market in the United States, Pixuvri will face competition from currently marketed anthracyclines, such as mitoxantrone (Novantrone^®). In addition, Pixuvri may face competition in the United States and the European Union if new anti-cancer drugs with reduced toxicity are developed and marketed in the United States and/or the European Union.

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• If we are successful in bringing OPAXIO to market, we will face direct competition from oncology-focused multinational corporations. OPAXIO will compete with other taxanes. Many oncology-focused multinational corporations currently market or are developing taxanes, epothilones, and other cytotoxic agents, which inhibit cancer cells by a mechanism similar to taxanes, or similar products. Such corporations include, among others, Bristol-Myers Squibb Co. and others, which market paclitaxel and generic forms of paclitaxel; Sanofi-Aventis, which markets docetaxel; Genentech, Roche and OSI Pharmaceuticals, which market Tarceva™; Genentech and Roche, which market Avastin™; Eli Lilly, which markets Alimta^®; and Celgene, which markets Abraxane™. In addition, other companies such as Telik, Inc. are also developing products, which could compete with OPAXIO.

• If we are successful in bringing pacritinib to market, pacritinib will face competition from ruxolitinib (Jakafi^®) and new drugs targeting similar diseases that may be developed and marketed.

• If we are successful in bringing tosedostat to market, tosedostat will face competition from currently marketed products, such as Dacogen^®, Vidaza^®, Clolar^®, Revlimid^®, Thalomid^® and new anti-cancer drugs that may be developed and marketed.

• If we are successful in bringing brostallicin to market, we will face direct competition from other minor groove binding agents including Yondelis^®, which is currently developed by PharmaMar and has received Authorization of Commercialization from the European Commission for soft tissue sarcoma.

Many of our competitors, particularly the multinational pharmaceutical companies, either alone or together with their collaborators, have substantially greater financial resources and substantially larger development and marketing teams than us. In addition, many of our competitors, either alone or together with their collaborators, have significantly greater experience than we do in developing, manufacturing and marketing products. As a result, these companies’ products might come to market sooner or might prove to be more effective, less expensive, have fewer side effects or be easier to administer than ours. In any such case, sales of our current or future products would likely suffer and we might never recoup the significant investments we are making to develop these product candidates.

Uncertainty regarding third-party reimbursement and healthcare cost containment initiatives may limit our returns.

The ongoing efforts of governmental and third-party payors to contain or reduce the cost of healthcare may affect our ability to commercialize our products successfully. Governmental and other third-party payors continue to attempt to contain healthcare costs by:

• challenging the prices charged for health care products and services;

• limiting both coverage and the amount of reimbursement for new therapeutic products;

• denying or limiting coverage for products that are approved by the FDA or the EMA, but are considered experimental or investigational by third-party payors;

• refusing in some cases to provide coverage when an approved product is used for disease indications in a way that has not received FDA or EMA marketing approval; and

• denying coverage altogether.

The continuing efforts of government and insurance companies, health maintenance organizations and other payers of healthcare costs to contain or reduce costs of health care may affect our future revenues and profitability, and the future revenues and profitability of our potential customers, suppliers and collaborative partners and the

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availability of capital. In the United States, given the comprehensive health care reform legislation that the President signed into law on March 23, 2010, under the Patient Protection and Affordable Care Act (HR 3590), or the PPACA, the U.S. Congress and state legislatures will likely continue to focus on health care reform, the cost of healthcare services and products and on the reform of the Medicare and Medicaid systems. While we cannot predict whether any such legislative or regulatory proposals will be adopted, the announcement or adoption of these proposals could significantly influence the purchase of healthcare services and products, resulting in lower prices and reducing demand for our products. In addition, in almost all European markets, pricing and choice of prescription pharmaceuticals are subject to governmental control. Therefore, the price of our products and their reimbursement in Europe will be determined by national regulatory authorities.

Even if we succeed in bringing any of our proposed products to the market, they may not be considered cost-effective and third-party or government reimbursement might not be available or sufficient. If adequate third-party or government coverage is not available, we may not be able to maintain price levels sufficient to realize an appropriate return on our investment in research and product development. In addition, legislation and regulations affecting the pricing of pharmaceuticals may change in ways adverse to us before or after any of our proposed products are approved for marketing.

If users of our products are unable to obtain adequate reimbursement from third-party payers, or if new restrictive legislation is adopted, market acceptance of our products may be limited and we may not achieve anticipated revenues.

Our ability to commercialize our products will depend in part on the extent to which appropriate reimbursement levels for the cost of our products and related treatment are obtained by governmental authorities, private health insurers and other organizations, such as health maintenance organizations, or HMOs. Third-party payers are increasingly challenging the prices charged for medical care. Also, the trend toward managed health care in the United States and the concurrent growth of organizations such as HMOs, which could control or significantly influence the purchase of health care services and products, as well as legislative proposals to further reform health care or reduce government insurance programs, may all result in lower prices for our products if approved for commercialization. The cost containment measures that health care payers and providers are instituting and the effect of any health care reform could materially harm our ability to sell our products at a profit.

Products that appear promising in research and development may be delayed or fail to reach later stages of development or the market.

The successful development of pharmaceutical products is highly uncertain and obtaining regulatory approval to market drugs to treat cancer is expensive, difficult and risky. Products that appear promising in research and development may be delayed or fail to reach later stages of development or the market for several reasons, including:

• clinical trial results may show the product to be less effective than desired or to have harmful or problematic side effects;

• preclinical tests may show the product to be toxic or lack efficacy in animal models;

• failure to receive the necessary U.S. and international regulatory approvals or a delay in receiving such approvals;

• difficulties in formulating the product, scaling the manufacturing process or getting approval for manufacturing;

• manufacturing costs, pricing, reimbursement issues or other factors may make the product uneconomical to commercialize;

• other companies or people have or may have proprietary rights to a product candidate, such as patent rights, and will not let the product candidate be sold on reasonable terms, or at all; or

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• the product candidate is not cost effective in light of existing therapeutics.

Preclinical and clinical data can be interpreted in different ways, which could delay, limit or prevent regulatory approval. Negative or inconclusive results or adverse medical events during a clinical trial could delay, limit or prevent regulatory approval. In addition, any significant problem in the production of our products, such as the inability of a supplier to provide raw materials or supplies used to manufacture our products, equipment obsolescence, malfunctions or failures, product quality or contamination problems, or changes in regulatory requirements or standards that require modifications to our manufacturing process could delay, limit or prevent regulatory approval which could harm our business, financial condition and results or the trading price of our securities. There can be no assurance as to whether or when we will receive regulatory approvals for our products.

If any of our license agreements for intellectual property underlying Pixuvri, pacritinib, OPAXIO, tosedostat, brostallicin, bisplatinates or any other products are terminated, we may lose the right to develop or market that product.

We have licensed intellectual property, including patent applications relating to intellectual property for Pixuvri, pacritinib, tosedostat, brostallicin and bisplatinates. We have also in-licensed the intellectual property for our drug delivery technology relating to OPAXIO which uses polymers that are linked to drugs, known as polymer-drug conjugates. Some of our product development programs depend on our ability to maintain rights under these licenses. Each licensor has the power to terminate its agreement with us if we fail to meet our obligations under these licenses. We may not be able to meet our obligations under these licenses. If we default under any license agreement, we may lose our right to market and sell any products based on the licensed technology.

We hold rights under numerous patents that we have acquired or that protect inventions originating from our research and development, and the expiration of any one or more of these patents may allow our competitors to copy the inventions that are currently protected.

We dedicate significant resources to protecting our intellectual property, which is important to our business. We have filed numerous patent applications in the United States and various other countries seeking protection of inventions originating from our research and development and we have also obtained rights to various patents and patent applications under licenses with third parties and through acquisitions. Patents have been issued on many of these applications. We have pending patent applications or issued patents in the United States and foreign countries directed to Pixuvri, pacritinib, OPAXIO, tosedostat, brostallicin and other product candidates. However, the lives of these patents are limited. Patents for the individual products extend for varying periods according to the date of the patent filing or grant and the legal term of patents in the various countries where patent protection is obtained. The OPAXIO-directed patents will expire on various dates ranging from 2017 through 2018. The pacritinib-directed patent will expire from 2026 through 2029. The Pixuvri-directed patents will expire in 2014. The tosedostat-directed patents will expire in 2017. The brostallicin-directed patents will expire on various dates ranging between 2017 through 2021. The patent expiration ranges given above are only for U.S. issued patents. The Pixuvri-directed patents in Europe will expire from 2012 through 2015. Although such patent expirations do not account for potential extensions that may be available in certain countries (for example, certain Pixuvri-directed patents may be subject to possible patent-term extensions that could provide extensions through 2019 in the United States and 2021 in Europe), there can be no assurance that such extensions will be obtained. The expiration of these patents may allow our competitors to copy the inventions that are currently protected and better compete with us.

If there is an adverse outcome in the securities class actions and shareholder derivative litigation that have been filed against us, our business may be harmed.

Cyril Sabbagh (Securities Class Action):

In March 2010, three purported securities class action complaints were filed against us and certain of our officers and directors in the United States District Court for the Western District of Washington. On August 2, 2010, Judge Marsha Pechman consolidated the actions, appointed lead plaintiffs, and approved lead plaintiffs’ counsel. On September 27, 2010, lead plaintiff filed an amended consolidated complaint, captioned Sabbagh v. Cell Therapeutics, Inc. (Case No. 2:10-cv-00414-MJP), naming us, Dr. James A. Bianco, Louis A. Bianco, and Craig W. Philips as defendants. The amended consolidated complaint alleges that defendants violated the federal securities

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laws by making certain alleged false and misleading statements related to the FDA approval process for Pixuvri. The action seeks damages on behalf of purchasers of our stock during a purported class period of March 25, 2008 through March 22, 2010. On October 27, 2010, defendants moved to dismiss the amended consolidated complaint. On February 4, 2011, the Court denied in large part the defendants’ motion. Defendants answered the amended consolidated complaint on March 28, 2011, and discovery commenced, with trial set for June 25, 2012. On December 14, 2011, the parties filed a letter with the Court indicating they had agreed to the general terms of a settlement, and asking the Court to remove the case deadlines from the Court calendar. On February 14, 2012, plaintiffs filed a motion for preliminary approval of the settlement, along with related documents. On March 16, 2012, the Court granted preliminary approval of the settlement, granted conditional certification to the proposed class, and approved the proposed forms of notice to the class. A settlement hearing occurred on July 20, 2012. The Court entered a Final Judgment and Order of Dismissal with Prejudice on July 25, 2012. The negotiated terms of the settlement include a $19.0 million dollar settlement fund, which was paid by our insurance carriers. As a result, there is no estimated loss to the Company.

Joseph Shackleton (Derivative Action):

In April 2010, three shareholder derivative complaints were filed against the Company and certain of its officers and directors in the United States District Court for the Western District of Washington. These derivative complaints allege that defendants breached their fiduciary duties to the Company by making or failing to prevent the issuance of certain alleged false and misleading statements related to the FDA approval process for Pixuvri. The allegations in the derivative actions are substantially similar to those in the securities action. On May 10, 2010, Judge Marsha Pechman consolidated the shareholder derivative actions under the caption Shackleton v. Bauer (Case No. 2:10-cv-00414-MJP), and appointed the law firms of Robbins Umeda LLP and Federman & Sherwood as co-lead counsel for derivative plaintiffs. Three more derivative complaints were filed in June, July and October 2010, and they have also been consolidated with Shackleton v. Bauer. The court has set a trial date of December 3, 2012 for the shareholder derivative action. At this stage of the litigation no probability of loss can be predicted in the event we do not prevail.

As with any litigation proceeding, we cannot predict with certainty the eventual outcome of pending litigation. Furthermore, we may have to incur substantial expenses in connection with these lawsuits. In the event of an adverse outcome, our business could be materially harmed.

If we fail to adequately protect our intellectual property, our competitive position could be harmed.

Development and protection of our intellectual property are critical to our business. If we do not adequately protect our intellectual property, competitors may be able to practice our technologies. Our success depends in part on our ability to:

• obtain patent protection for our products or processes both in the United States and other countries;

• protect trade secrets; and

• prevent others from infringing on our proprietary rights.

The patent position of biopharmaceutical firms generally is highly uncertain and involves complex legal and factual questions. The U.S. Patent and Trademark Office has not established a consistent policy regarding the breadth of claims that it will allow in biotechnology patents. If it allows broad claims, the number and cost of patent interference proceedings in the United States and the risk of infringement litigation may increase. If it allows narrow claims, the risk of infringement may decrease, but the value of our rights under our patents, licenses and patent applications may also decrease. Patent applications in which we have rights may never issue as patents and the claims of any issued patents may not afford meaningful protection for our technologies or products. In addition, patents issued to us or our licensors may be challenged and subsequently narrowed, invalidated or circumvented. Litigation, interference proceedings or other governmental proceedings that we may become involved in with respect to our proprietary technologies or the proprietary technology of others could result in substantial cost to us. Patent litigation is widespread in the biotechnology industry, and any patent litigation could harm our business. Costly litigation might be necessary to protect a patent position or to determine the scope and validity of third-party proprietary rights, and we may not have the required resources to pursue any such litigation or to protect our patent rights. Any adverse outcome in litigation with respect to the infringement or validity of any patents owned by third

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parties could subject us to significant liabilities to third parties, require disputed rights to be licensed from third parties or require us to cease using a product or technology. With respect to our in-licensed patents, if we attempt to initiate a patent infringement suit against an alleged infringer, it is possible that our applicable licensor will not participate in or assist us with the suit and as a result we may not be able to effectively enforce the applicable patents against the alleged infringers.

We also rely upon trade secrets, proprietary know-how and continuing technological innovation to remain competitive. Third parties may independently develop such know-how or otherwise obtain access to our technology. While we require our employees, consultants and corporate partners with access to proprietary information to enter into confidentiality agreements, these agreements may not be honored.

Our products could infringe upon the intellectual property rights of others, which may cause us to engage in costly litigation and, if unsuccessful, could cause us to pay substantial damages and prohibit us from selling our products.

At times, we may monitor patent filings for patents that might be relevant to some of our products and product candidates in an effort to guide the design and development of our products to avoid infringement, but have not conducted an exhaustive search. We may not be able to successfully challenge the validity of third-party patents and could be required to pay substantial damages, possibly including treble damages, for past infringement and attorneys’ fees if it is ultimately determined that our products infringe such patents. Further, we may be prohibited from selling our products before we obtain a license, which, if available at all, may require us to pay substantial royalties. Moreover, third parties may challenge the patents that have been issued or licensed to us. Even if infringement claims against us are without merit, or if we challenge the validity of issued patents, lawsuits take significant time, may be expensive and may divert management attention from other business concerns.

We could fail in financing efforts or be delisted from NASDAQ if we fail to receive shareholder approval when needed.

We are required under the NASDAQ Marketplace Rules to obtain shareholder approval for any issuance of additional equity securities that would comprise more than 20% of the total shares of our common stock outstanding before the issuance of such securities sold at a discount to the greater of book or market value in an offering that is not deemed to be a “public offering” by the NASDAQ Marketplace Rules or NASDAQ. NASDAQ Marketplace Rules also require shareholder approval if an issuance would result in a change of control as defined under the NASDAQ Marketplace Rules and other circumstances. Funding of our operations in the future may require issuance of additional equity securities that would comprise more than 20% of the total shares of our common stock outstanding. However, we might not be successful in obtaining the required shareholder approval for any future issuance that requires shareholder approval pursuant to the NASDAQ Marketplace Rules, particularly in light of the difficulties we have experienced in obtaining a quorum and holding shareholder meetings as outlined above. If we are unable to in the future, obtain financing due to shareholder approval difficulties, such failure may harm our ability to continue operations.

We may be unable to obtain the raw materials necessary to produce our OPAXIO product candidate in sufficient quantity to meet demand when and if such product is approved.

We may not be able to continue to purchase the materials necessary to produce OPAXIO, including paclitaxel, in adequate volume and quality. Paclitaxel is derived from certain varieties of yew trees and the supply of paclitaxel is controlled by a limited number of companies. We purchase the raw materials paclitaxel and polyglutamic acid from single sources. Should the paclitaxel or polyglutamic acid purchased from our sources prove to be insufficient in quantity or quality, should a supplier fail to deliver in a timely fashion or at all, or should these relationships terminate, we may not be able to qualify and obtain a sufficient supply from alternate sources on acceptable terms, or at all.

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Our dependence on third-party manufacturers means that we do not always have direct control over the manufacture, testing or distribution of our products.

We do not currently have internal analytical laboratory or manufacturing facilities to allow the testing or production and distribution of drug products in compliance with cGMPs. Because we do not directly control our suppliers, these vendors may not be able to provide us with finished product when we need it.

We will be dependent upon these third parties to supply us in a timely manner with products manufactured in compliance with cGMPs or similar manufacturing standards imposed by United States and/or foreign regulatory authorities where our products will be tested and/or marketed. While the FDA, EMA and other regulatory authorities maintain oversight for cGMP compliance of drug manufacturers, contract manufacturers and contract service providers may at times violate cGMPs. The FDA, EMA and other regulatory authorities may take action against a contract manufacturer who violates cGMPs. Failure to comply with FDA, EMA or other applicable regulations may cause us to curtail or stop the manufacture of such products until we obtain regulatory compliance.

In addition, one of our other products under development, OPAXIO, has a complex manufacturing process and supply chain, which may prevent us from obtaining a sufficient supply of drug product for the clinical trials and commercial activities currently planned or underway on a timely basis, if at all. The active pharmaceutical ingredients and drug products for Pixuvri, pacritinib, tosedostat and brostallicin are manufactured by single vendors. Finished product manufacture and distribution for Pixuvri, pacritinib, and brostallicin are to be manufactured and distributed by different single vendors. We are currently disputing our right to cancel the exclusive manufacturing contract between us and the former manufacturer of Pixuvri. We assert multiple grounds for terminating this exclusive manufacturing agreement, which the former manufacturer disputes. The former manufacturer has asserted that we do not have the right to terminate the manufacturing contracts and has filed a lawsuit in the Court of Milan to compel us to source Pixuvri from that manufacturer. A hearing was held on January 21, 2010 to discuss preliminary matters and set a schedule for future filings and hearings. On November 11, 2010, a hearing was held aimed at examining and discussing the requests for evidence submitted by the parties in the briefs filed pursuant to article 183, paragraph 6 of the Italian code of civil procedure. At the hearing on November 11 2010, the judge declared that the case does not require any discovery or evidentiary phase, as it may be decided on the basis of the documents and pleadings filed by the parties. At the hearing on October 11, 2012, the parties informed the court about the ongoing negotiations pending between them and asked the court, accordingly, to postpone the case. At the request of the parties, the court extended the final hearing until March 21, 2013.

Even if our drug candidates are successful in clinical trials, we may not be able to successfully commercialize them.

Since our inception in 1991, we have dedicated substantially all of our resources to the research and development of our technologies and related compounds. We have been granted conditional marketing authorization for Pixuvri in the European Union, and all of our other compounds are currently in research or development and have not received marketing approval for these other compounds or FDA marketing approval of Pixuvri.

Prior to commercialization, each product candidate requires significant research, development and preclinical testing and extensive clinical investigation before submission of any regulatory application for marketing approval. The development of anti-cancer drugs, including those we are currently developing, is unpredictable and subject to numerous risks. Potential products that appear to be promising at early stages of development and even products that have been granted conditional marketing authorization, such as Pixuvri, may not reach the market for a number of reasons including that they may:

• be found ineffective or cause harmful side effects during preclinical testing or clinical trials;

• fail to receive necessary regulatory approvals;

• be difficult to manufacture on a scale necessary for commercialization;

• be uneconomical to produce;

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• fail to achieve market acceptance; or

• be precluded from commercialization by proprietary rights of third parties.

The occurrence of any of these events could adversely affect the commercialization of our products. Products, if introduced, may not be successfully marketed and/or may not achieve customer acceptance. If we fail to commercialize products or if our future products do not achieve significant market acceptance, we will not likely generate significant revenues or become profitable.

If we do not successfully develop our product candidates into marketable products, we may be unable to generate significant revenue or become profitable.

We divested our commercial product, TRISENOX, in July 2005 and fully divested our commercial product, Zevalin, in March 2009. Currently only our product Pixuvri is approved for marketing in the European Union. Pacritinib, OPAXIO, tosedostat and brostallicin are currently in clinical trials; the development and clinical trials of these products may not be successful and, even if they are, we may not be successful in developing any of them into a commercial product. For example, our STELLAR phase III clinical trials for OPAXIO for the treatment of non-small cell lung cancer failed to meet their primary endpoints. In addition, a number of companies in the pharmaceutical industry, including us, have suffered significant setbacks in advanced clinical trials, even after reporting promising results in earlier trials. We will need to commit significant time and resources to develop these and any additional product candidates. Even if our trials are viewed as successful, we may not get regulatory approval. Our product candidates will be successful only if:

• our product candidates are developed to a stage that will enable us to commercialize them or sell related marketing rights to pharmaceutical companies;

• we are able to commercialize product candidates in clinical development or sell the marketing rights to third parties; and

• our product candidates, if developed, are approved by the regulatory authorities.

We are dependent on the successful completion of these goals in order to generate revenues. The failure to generate such revenues may preclude us from continuing our research and development of these and other product candidates.

If we are unable to enter into new in-licensing arrangements, our future product portfolio and potential profitability could be harmed.

One component of our business strategy is in-licensing drug compounds developed by other pharmaceutical and biotechnology companies or academic research laboratories. Our product candidates Pixuvri, OPAXIO, tosedostat, brostallicin and bisplatinates are in clinical and pre-clinical development and are in-licensed from a third-party.

Competition for new promising compounds and commercial products can be intense. If we are not able to identify future in-licensing opportunities and enter into future licensing arrangements on acceptable terms, our future product portfolio and potential profitability could be harmed.

We may take longer to complete our clinical trials than we expect, or we may not be able to complete them at all.

Before regulatory approval for any potential product can be obtained, we must undertake extensive clinical testing on humans to demonstrate the safety and efficacy of the product. For example, as a condition of the approval of the MAA for Pixuvri, we have agreed to have available the trial results of our ongoing randomized controlled phase III clinical trial, PIX306, by June 2015. The PIX306 clinical trial compares a combination of Pixuvri plus rituximab to a combination of gemcitabine plus rituximab in patients who have relapsed after one to three prior regimens for aggressive B-cell NHL and who are not eligible for autologous stem cell transplant. Although for planning purposes we forecast the commencement and completion of clinical trials, the actual timing of these events can vary dramatically due to a number of factors. For example:

• we may not obtain authorization to permit product candidates that are already in the preclinical development phase to enter the human clinical testing phase;

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• the FDA or the EMA may object to proposed protocols;

• there may be shortages of available product supplies or the materials that are used to manufacture the products;

• the quality or stability of the product candidates may fall below acceptable standards;

• authorized preclinical or clinical testing may require significantly more time, resources or expertise than originally expected to be necessary;

• clinical testing may not show potential products to be safe and efficacious and, as with many drugs, may fail to demonstrate the desired safety and efficacy characteristics in human clinical trials;

• clinical testing may show that potential products are not appropriate for the specific indication for which they are being tested;

• the results from preclinical studies and early clinical trials may not be indicative of the results that will be obtained in later-stage clinical trials;

• we or regulatory authorities may suspend clinical trials at any time on the basis that the participants are being exposed to unacceptable health risks or for other reasons; and

• the rates of patient recruitment and enrollment of patients who meet trial eligibility criteria may be lower than anticipated, which is a function of many factors, including the number of patients with the relevant conditions, the nature of the clinical testing, the proximity of patients to clinical testing centers, the eligibility criteria for tests as well as competition with other clinical testing programs involving the same patient profile but different treatments.

We may not be able to complete the PIX306 clinical trial by June 2015 or at all. If we are unable to submit the clinical trial data from the PIX306 clinical study by June 2015 it may result in the withdrawal of the conditional marketing authorization by the EU. We expect to continue to rely on third parties, such as contract research organizations, academic institutions and/or cooperative groups, to conduct, oversee and monitor clinical trials as well as to process the clinical results and manage test requests, which may result in delays or failure to complete trials if the third parties fail to perform or to meet the applicable standards.

If we fail to commence, complete, experience delays in any of our present or planned clinical trials or need to perform more or larger clinical trials than planned, our development costs may increase and/or our ability to commercialize our product candidates may be harmed. If delays or costs are significant, our financial results and our ability to commercialize our product candidates may be harmed.

If we fail to establish and maintain collaborations or if our partners do not perform, we may be unable to develop and commercialize our product candidates.

We have entered into collaborative arrangements with third-parties to develop and/or commercialize product candidates and are currently seeking additional collaborations. For example, we entered into an agreement with the GOG to perform a phase III trial of OPAXIO in patients with ovarian cancer. Additional collaborations might be necessary in order for us to fund our research and development activities and third-party manufacturing arrangements, seek and obtain regulatory approvals and successfully commercialize our existing and future product candidates. If we fail to enter into additional collaborative arrangements or fail to maintain our existing

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collaborative arrangements, the number of product candidates from which we could receive future revenues would decline. For example, in 2005 we sold our product TRISENOX to Cephalon and, pursuant to the terms of the purchase agreement under which TRISENOX was sold, we are entitled to receive milestone payments upon the approval by the FDA of new labeled uses for TRISENOX; however, Cephalon may decide not to submit any additional information to the FDA to apply for label expansion of TRISENOX, in which case we would not receive a milestone payment under the agreement.

Our dependence on collaborative arrangements with third parties will subject us to a number of risks that could harm our ability to develop and commercialize products, including that:

• collaborative arrangements may not be on terms favorable to us;

• disagreements with partners may result in delays in the development and marketing of products, termination of our collaboration agreements or time consuming and expensive legal action;

• we cannot control the amount and timing of resources partners devote to product candidates or their prioritization of product candidates and partners may not allocate sufficient funds or resources to the development, promotion or marketing of our products, or may not perform their obligations as expected;

• partners may choose to develop, independently or with other companies, alternative products or treatments, including products or treatments which compete with ours;

• agreements with partners may expire or be terminated without renewal, or partners may breach collaboration agreements with us;

• business combinations or significant changes in a partner’s business strategy might adversely affect that partner’s willingness or ability to complete its obligations to us; and

• the terms and conditions of the relevant agreements may no longer be suitable.

The occurrence of any of these events could harm the development or commercialization of our products.

Because we base several of our drug candidates on unproven technologies, we may never develop them into commercial products.

We base several of our product candidates upon novel technologies that we are using to develop drugs for the treatment of cancer. These technologies have not been proven. Furthermore, preclinical results in animal studies may not predict outcomes in human clinical trials. Our product candidates may not be proven safe or effective. If these technologies do not work, our drug candidates will not develop into commercial products.

Because there is a risk of product liability associated with our products, we face potential difficulties in obtaining insurance.

Our business exposes us to potential product liability risks inherent in the testing, manufacturing and marketing of human pharmaceutical products, and we may not be able to avoid significant product liability exposure. While we have insurance covering the product use in our clinical trials for our product candidates, it is possible that we will not be able to maintain such insurance on acceptable terms or that any insurance obtained will not provide adequate coverage against potential liabilities. Our inability to obtain sufficient insurance coverage at an acceptable cost or otherwise to protect against potential product liability claims could prevent or limit the commercialization of any products we develop. A successful product liability claim in excess of our insurance coverage could exceed our net worth.

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Since we use hazardous materials in our business, we may be subject to claims relating to improper handling, storage or disposal of these materials.

Our research and development activities involve the controlled use of hazardous materials, chemicals and various radioactive compounds. We are subject to international, federal, state and local laws and regulations governing the use, manufacture, storage, handling and disposal of such materials and certain waste products. Although we believe that our safety procedures for handling and disposing of such materials comply with the standards prescribed by the regulations, the risk of accidental contamination or injury from these materials cannot be eliminated completely. In the event of such an accident, we could be held liable for any damages that result and any such liability not covered by insurance could exceed our resources. Compliance with environmental laws and regulations may be expensive, and current or future environmental regulations may impair our research, development or production efforts.

We may not be able to conduct animal testing in the future, which could harm our research and development activities.

Certain of our research and development activities involve animal testing. Such activities have been the subject of controversy and adverse publicity. Animal rights groups and other organizations and individuals have attempted to stop animal testing activities by pressing for legislation and regulation in these areas and by disrupting activities through protests and other means. To the extent the activities of these groups are successful, our business could be materially harmed by delaying or interrupting our research and development activities.

The unfavorable outcome of litigation and other claims against us could harm our financial condition and results of operations.

We are subject to a variety of claims and lawsuits from time to time, some of which arise in the ordinary course of our business. Adverse outcomes in some or all of such pending cases may result in significant monetary damages or injunctive relief against us. While we currently believe that resolution of these matters, individually or in the aggregate, will not have a material adverse impact on our financial position, results of operations or trading price of our securities, the ultimate outcome of litigation and other claims is subject to inherent uncertainties, and our view of these matters may change in the future. It is possible that our financial condition and results of operations could be harmed in any period in which the effect of an unfavorable final outcome becomes probable and reasonably estimable.

Our financial condition and results of operations could be harmed by public health issues, wars and other military action, as well as terrorist attacks and threats and government responses thereto, especially if any such actions were directed at us or our facilities or customers.

Public health issues, terrorist attacks in the United States and elsewhere, government responses thereto, and military actions in Afghanistan and elsewhere, may disrupt our operations or those of our customers and suppliers and may affect the availability of materials needed to manufacture our products or the means to transport those materials to manufacturing facilities and finished products to customers. A health pandemic could cause damage or disruption to international commerce by creating economic and political uncertainties that may have a strong negative impact on the global economy, us, and our customers or suppliers. Should a severe public health issues arise, we could be negatively impacted by the need for more stringent employee travel restrictions, additional limitations in the availability of freight services, governmental actions limiting the movement of products between various regions and disruptions in the operations of our customers or suppliers. The long-term effects public health issues, the terrorist attacks, and the ongoing war on terrorism on our business and on the global economy remain unknown. In addition, any of these events could increase volatility in the United States and world financial markets which may depress the price of our common stock and may limit the capital resources available to us or our customers or suppliers, which could result in decreased orders from customers, less favorable financing terms from suppliers, and scarcity or increased costs of materials and components of our products. Additionally, terrorist attacks directly upon us may significantly disrupt our ability to conduct our business. Any of these occurrences could have a significant impact on our operating results, revenues and costs and may result in increased volatility of the trading price of our securities.

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Higher health care costs could harm our business.

We will be impacted by the PPACA. Under the PPACA, we may be required to amend our health care plans to, among other things, provide affordable coverage, as defined in the PPACA, to all employees, or otherwise be subject to a payment per employee based on the affordability criteria in the Act: cover adult children of our employees to age 26; delete lifetime limits; and delete pre-existing condition limitations. Many of these requirements will be phased in over a period of time. Additionally, some states and localities have passed state and local laws mandating the provision of certain levels of health benefits by some employers. Increased health care costs could harm our business, financial condition and results of operations.

Risks Related To the Securities Markets

The market price of our common stock is extremely volatile, which may affect our ability to raise capital in the future and may subject the value of your investment in our securities to sudden decreases.

The market price for securities of biopharmaceutical and biotechnology companies, including ours, historically has been highly volatile, and the market from time to time has experienced significant price and volume fluctuations that are unrelated to the operating performance of such companies. For example, during the twelve month period ended October 25, 2012, our stock price has ranged from a low of $1.37 to a high of $8.25 (as adjusted to reflect the one-for-five reverse stock split effective September 2, 2012). Fluctuations in the trading price or liquidity of our common stock may harm the value of your investment in our common stock.

Factors that may have a significant impact on the market price and marketability of our securities include:

• announcements by us or others of results of preclinical testing and clinical trials and regulatory actions;

• announcements by us or others of serious adverse events that have occurred during treatment of patients following the grant of conditional marketing authorization for Pixuvri in the European Union;

• announcements of technological innovations or new commercial therapeutic products by us, our collaborative partners or our present or potential competitors;

• our issuance of debt, equity or other securities, which we need to pursue to generate additional funds to cover our operating expenses;

• our quarterly operating results;

• developments or disputes concerning patent or other proprietary rights;

• developments in our relationships with collaborative partners;

• acquisitions or divestitures;

• litigation and government proceedings;

• adverse legislation, including changes in governmental regulation;

• third-party reimbursement policies;

• changes in securities analysts’ recommendations;

• short selling;

• changes in health care policies and practices;

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• halting or suspension of trading in our common stock by NASDAQ, CONSOB or the Borsa Italiana;

• economic and other external factors; and

• general market conditions.

In the past, following periods of volatility in the market price of a company’s securities, securities class action litigation has often been instituted. For example, in the case of our company, we and certain of our officers and directors were named as defendants in purported securities class action and shareholder derivative lawsuits brought on behalf of a putative class of purchasers of our securities from March 25, 2008 through March 22, 2010. These lawsuits seek unspecified damages and, as with any litigation proceeding, we cannot predict with certainty the eventual outcome of pending litigation. Furthermore, we may have to incur substantial expenses in connection with these lawsuits and our management’s attention and resources could be diverted from operating our business as we respond to the litigation. We maintain significant insurance to cover these risks for us and our directors and officers, but our insurance is subject to high deductibles to reduce premium expense, and there is no guarantee that the insurance will cover any specific claim that we currently face or may face in the future, or that it will be adequate to cover all potential liabilities and damages.

Shares of common stock are equity securities and are subordinate to any future indebtedness.

Shares of our common stock are common equity interests. This means that our common stock will rank junior to any outstanding shares of our preferred stock that we may issue in the future to any future indebtedness we may incur and to all creditor claims and other non-equity claims against us and our assets available to satisfy claims on us, including claims in a bankruptcy or similar proceeding. Any future indebtedness and preferred stock may restrict payment of dividends on our common stock.

Additionally, unlike indebtedness, where principal and interest customarily are payable on specified due dates, in the case of our common stock, (i) dividends are payable only when and if declared by our board of directors or a duly authorized committee of our board of directors, and (ii) as a corporation, we are restricted to making dividend payments and redemption payments out of legally available assets. We have never paid a dividend on our common stock and have no current intention to pay dividends in the future. Furthermore, our common stock places no restrictions on our business or operations or on our ability to incur indebtedness or engage in any transactions, subject only to the voting rights available to shareholders generally.

The market price of our common stock may be harmed by market conditions affecting the stock markets in general, including price and trading fluctuations on The NASDAQ Capital Market.

The market price of our common stock may be harmed by market conditions affecting the stock markets in general, including price and trading fluctuations on The NASDAQ Capital Market. These conditions may result in (i) volatility in the level of, and fluctuations in, the market prices of stocks generally and, in turn, our shares of common stock, and (ii) sales of substantial amounts of our common stock in the market, in each case that could be unrelated or disproportionate to changes in our operating performance.

There may be future sales or other dilution of our equity, which may harm the market price of shares of our common stock.

We expect to issue additional shares of our common stock upon the conversion of our outstanding shares of Series 17 preferred stock. We expect to issue additional equity securities to fund our operating expenses as well as for other purposes. The market price of our shares of common stock or preferred stock could decline as a result of sales of a large number of shares of our common stock or preferred stock or similar securities in the market, or the perception that such sales could occur in the future.

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Anti-takeover provisions in our charter documents, in our shareholder rights plan, or rights plan, and under Washington law could make removal of incumbent management or an acquisition of us, which may be beneficial to our shareholders, more difficult.

Provisions of our amended and restated articles of incorporation and amended and restated bylaws may have the effect of deterring or delaying attempts by our shareholders to remove or replace management, to commence proxy contests, or to effect changes in control. These provisions include:

• a classified board of directors so that only approximately one-third of our board of directors is elected each year;

• elimination of cumulative voting in the election of directors;

• procedures for advance notification of shareholder nominations and proposals;

• the ability of our board of directors to amend our amended and restated bylaws without shareholder approval; and

• the ability of our board of directors to issue shares of preferred stock without shareholder approval upon the terms and conditions and with the rights, privileges and preferences as the board of directors may determine.

Pursuant to our rights plan, an acquisition of 20% or more of our common stock could result in the exercisability of the preferred stock purchase right accompanying each share of our common stock (except those held by a 20% shareholder, which become null and void), thereby entitling the holder to receive upon exercise, in lieu of a number of units of preferred stock, that number of shares of our common stock having a market value of two times the exercise price of the right. The existence of our rights plan could have the effect of delaying, deferring or preventing a third party from making an acquisition proposal for us and may inhibit a change in control that some, or a majority, of our shareholders might believe to be in their best interest or that could give our shareholders the opportunity to realize a premium over the then-prevailing market prices for their shares. In addition, as a Washington corporation, we are subject to Washington law which imposes restrictions on some transactions between a corporation and certain significant shareholders. These provisions, alone or together, could have the effect of deterring or delaying changes in incumbent management, proxy contests or changes in control.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Stock Repurchases in the Third Quarter

The following table sets forth information with respect to purchases of our common stock during the three months ended September 30, 2012 (as adjusted to reflect the one-for-five reverse stock split effective September 2, 2012):

Period	Total Number of Shares Purchased (1)		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Programs		Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs
July 1 – July 31, 2012		105	$	3.02		—		—
August 1 – August 31, 2012		751	$	2.01		—		—
September 1 – September 30, 2012		293	$	2.42		—		—
Total		1,149	$	2.21		—		—

(1) Represents purchases of shares in connection with satisfying tax withholding obligations on the vesting of restricted stock awards to employees.

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Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

Not applicable.

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Item 6. Exhibits

(a) Exhibits

    3.1 Amended and Restated Articles of Incorporation (incorporated by reference to Exhibit 4.1 to the Registrant’s Registration Statement on Form S-3 (File No. 333-153358), filed on September 5, 2008).

    3.2 Articles of Amendment to Amended and Restated Articles of Incorporation; Designation of Preferences, Rights and Limitations of Series F Preferred Stock (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K, filed on February 9, 2009).

    3.3 Amendment to Amended and Restated Articles of Incorporation (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K, filed on March 27, 2009).

    3.4 Articles of Amendment to Amended and Restated Articles of Incorporation; Designation of Preferences, Rights and Limitations of Series 1 Preferred Stock (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K, filed on April 13, 2009).

    3.5 Articles of Amendment to Amended and Restated Articles of Incorporation; Designation of Preferences, Rights and Limitations of Series 2 Preferred Stock (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K, filed on August 21, 2009).

    3.6 Articles of Amendment to Amended and Restated Articles of Incorporation; Certificate of Designation, Preferences and Rights of Series ZZ Junior Participating Cumulative Preferred Stock (incorporated by reference to Exhibit 3.1 to the Registrant’s Registration Statement on Form 8-A, filed on December 28, 2009).

    3.7 Articles of Amendment to Amended and Restated Articles of Incorporation; Designation of Preferences, Rights and Limitations of Series 3 Preferred Stock (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K, filed on January 19, 2010).

    3.8 Articles of Amendment to Amended and Restated Articles of Incorporation; Designation of Preferences, Rights and Limitations of Series 4 Preferred Stock (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K, filed on April 5, 2010).

    3.9 Articles of Amendment to Amended and Restated Articles of Incorporation; Designation of Preferences, Rights and Limitations of Series 5 Preferred Stock (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K, filed on May 27, 2010).

    3.10 Articles of Amendment to Amended and Restated Articles of Incorporation; Designation of Preferences, Rights and Limitations of Series 6 Preferred Stock (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K, filed on July 27, 2010).

    3.11 Amendment to Amended and Restated Articles of Incorporation (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K, filed on September 17, 2010).

    3.12 Articles of Amendment to Amended and Restated Articles of Incorporation; Designation of Preferences, Rights and Limitations of Series 7 Preferred Stock (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K, filed on October 22, 2010).

    3.13 Articles of Amendment to Amended and Restated Articles of Incorporation; Designation of Preferences, Rights and Limitations of Series 8 Preferred Stock (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K, filed on January 18, 2011).

    3.14 Articles of Amendment to Amended and Restated Articles of Incorporation, Designation of Preferences, Rights and Limitations of Series 9 Preferred Stock (incorporated by reference to Exhibit 3.2 to the Registrant’s Current Report on Form 8-K, filed on January 18, 2011).

    3.15 Articles of Amendment to Amended and Restated Articles of Incorporation; Designation of Preferences, Rights and Limitations of Series 10 Preferred Stock (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K, filed on February 24, 2011).

    3.16 Articles of Amendment to Amended and Restated Articles of Incorporation; Designation of Preferences, Rights and Limitations of Series 11 Preferred Stock (incorporated by reference to Exhibit 3.2 to the Registrant’s Current Report on Form 8-K, filed on February 24, 2011).

    3.17 Articles of Amendment to Amended and Restated Articles of Incorporation; Designation of Preferences, Rights and Limitations of Series 12 Preferred Stock (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K, filed on May 2, 2011).

    3.18 Articles of Amendment to Amended and Restated Articles of Incorporation (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K, filed on May 18, 2011).

    3.19 Amendment to Amended and Restated Articles of Incorporation (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed on June 17, 2011).

    3.20 Articles of Amendment to Amended and Restated Articles of Incorporation; Designation of Preferences, Rights and Limitations of Series 13 Preferred Stock (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed on July 6, 2011).

    3.21 Amendment to Amended and Restated Articles of Incorporation (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K, filed on November 15, 2011).

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    3.22 Articles of Amendment to Amended and Restated Articles of Incorporation; Designation of Preferences, Rights and Limitations of Series 14 Preferred Stock (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K, filed on December 14, 2011).

    3.23 Articles of Amendment to Amended and Restated Articles of Incorporation; Designation of Preferences, Rights and Limitations of Series 15-1 Preferred Stock (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K, filed on May 31, 2012).

    3.24 Articles of Amendment to Amended and Restated Articles of Incorporation; Designation of Preferences, Rights and Limitations of Series 16 Preferred Stock (incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K, filed on June 5, 2012).

    3.25 Articles of Amendment to Amended and Restated Articles of Incorporation; Designation of Preferences, Rights and Limitations of Series 15-2 Preferred Stock (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K, filed on August 1, 2012).

    3.26 Amendment to Amended and Restated Articles of Incorporation (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K, filed on August 31, 2012).

    3.27 Amendment to Amended and Restated Articles of Incorporation (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K, filed on September 4, 2012).

    3.28 Articles of Amendment to Amended and Restated Articles of Incorporation; Designation of Preferences, Rights and Limitations of Series 17 Preferred Stock (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K, filed on October 11, 2012).

    3.29 Second Amended and Restated Bylaws (incorporated by reference to Exhibit 3.2 to the Registrant’s Current Report on Form 8-K, filed on February 22, 2010).

    4.1 Form of Warrant to Purchase Common Stock (incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K, filed on August 1, 2012).

    4.2 First Amendment to Shareholder Rights Agreement, dated as of August 31, 2012, between the Registrant and Computershare Trust Company, N.A., as Rights Agent (incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K, filed on September 4, 2012).

    4.3 Form of Series 17 Preferred Stock Certificate (incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K, filed on October 11, 2012).

  10.1† Master Services Agreement, dated July 9, 2012, between Quintiles Commercial Europe Limited and CTI Life Sciences Ltd. (incorporated by reference to Exhibit 10.6 to the Registrant’s Quarterly Report on Form 10-Q, filed on August 2, 2012).

  10.2 Letter of Guarantee, dated July 1, 2012, between the Registrant and Quintiles Commercial Europe Limited (incorporated by reference to Exhibit 10.7 to the Registrant’s Quarterly Report on Form 10-Q, filed on August 2, 2012).

  10.3 2007 Equity Incentive Plan, as amended and restated (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K, filed on September 4, 2012).

  10.4† Logistics Agreement, dated September 1, 2012, between Movianto Nederland BV and CTI Life Sciences Limited.*

  10.5 Settlement Agreement and Full and Final Release of Claims, dated as of October 25, 2012, by and between the Registrant and Craig W. Philips (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K, filed on October 31, 2012).

  31.1 Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*

  31.2 Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*

  32 Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*

101. INS XBRL Instance

101. SCH XBRL Taxonomy Extension Schema

101. CAL XBRL Taxonomy Extension Calculation

101. DEF XBRL Taxonomy Extension Definition

101. LAB XBRL Taxonomy Extension Labels

101. PRE XBRL Taxonomy Extension Presentation

† Portions of this exhibit have been omitted pursuant to a request for confidential treatment and filed separately with the SEC.

* Filed herewith.

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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:

	CELL THERAPEUTICS, INC.
	(Registrant)
Dated: November 1, 2012	By:	/s/ James A. Bianco, M.D.
		James A. Bianco, M.D.
		President and Chief Executive Officer
Dated: November 1, 2012	By:	/s/ Louis A. Bianco
		Louis A. Bianco
		Executive Vice President,
		Finance and Administration

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EX-10.4

Exhibit 10.4

CTI/ Movianto Nederland

** Indicates that certain information contained herein has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

LOGISTICS AGREEMENT

Dated September 1, 2012

BETWEEN

CTI Life Sciences Limited, a company duly established according to the laws of the United Kingdom, with its registered office located at Highlands House, Basingstoke Road, Spencers Wood, Reading, Berkshire, RG7 1NT, UK.

hereafter “CLIENT”

AND

Movianto Nederland BV, a company duly established according to the laws of the Netherlands, with its registered office located at Keltenweg 70, 5342 LP, Oss, The Netherlands.

hereafter “MOVIANTO”

CTI Life Sciences Limited, and MOVIANTO may also be hereinafter referred to as “a Party” or as “the Parties”, as the case may be.

WITNESSETH

WHEREAS MOVIANTO is acting as a logistics service provider in the TERRITORY and has been selected to provide certain warehousing and distribution services in Netherlands for CTI Life Sciences Limited and its Associates.

WHEREAS CTI Life Sciences Limited wishes to have use of MOVIANTO’s warehousing and distribution services in Netherlands for its pharmaceutical products.

NOW THEREFORE THE PARTIES AGREE ON THE FOLLOWING TERMS AND CONDITIONS:

1. Interpretation

1.1 Defined Terms

In this AGREEMENT the following capitalised words and expressions shall have the following meanings, respectively:

“ADDITIONAL PRODUCT” means any finished drug products or medicinal products and health care products not covered by this Agreement as of the EFFECTIVE

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DATE and which are subsequently added to the scope of this Agreement by CLIENT in accordance with Clause 2.3.

“AGREEMENT” means this Logistics Agreement as agreed between the parties.

“APPLICABLE LAWS AND REGULATIONS” means all EU and national laws, regulations, guidelines and professional and industry codes of conduct applicable in the TERRITORY to the SERVICES, including but not limited to Directive 2001/83/EC of the European Parliament and of the Council of 6 November 2001 on the Community code relating to medicinal products for human use (the “Community Code on medicinal products”), the GOOD DISTRIBUTION PRACTICE and the national laws, regulations and guidance implementing the above Directive and Guidelines.

“AVC / CMR CONDITIONS OF CARRIAGE” means standard terms and conditions of carriage issued by Stichting Vervoeradres from time to time.

“ASSOCIATE” means with respect to either Party, any person, firm, trust, corporation or other entity or combination thereof which directly or indirectly controls, is controlled by, or is under common control with such Party; the terms “control” and “controlled” meaning ownership of fifty percent (50%) or more, including ownership by trusts with substantially the same beneficial interests, of the voting and equity rights of such person, firm, trust, corporation or other entity or combination thereof or the power to direct the management of such person, firm, trust, corporation or other entity or combination thereof.

“COMMERCIAL DEBT” means all accounts receivable that have not cleared and remain unpaid.

“CONDITIONS OF STORAGE” Standard terms and conditions of storage issued by the Physical Distribution Group from time to time, which are in strict accordance with the APPLICABLE LAWS AND REGULATIONS, including but not limited to the GOOD DISTRIBUTION PRACTICE and the national laws, regulations or guidance implementing the GOOD DISTRIBUTION PRACTICE.

“EFFECTIVE DATE” means the date specified in Article 15 “Term and Termination”.

“GOOD DISTRIBUTION PRACTICE” means distribution practice as set out in the Guidelines on Good Distribution Practice of Medicinal Products for Human Use in the European Community (94/C 63/03) issued by the European Commission.

“HEALTH AUTHORITIES” means any regulatory authority responsible for regulating the manufacture, marketing, sale and distribution of finished drug products or medicinal products and health care products for human use in the TERRITORY.

“MARKETING AUTHORISATION” means the authorisation granted by the competent HEALTH AUTHORITIES in accordance with the APPLICABLE LAWS AND REGULATIONS which permits the commercialisation of a PRODUCT in the TERRITORY. The term MARKETING AUTHORIZATION includes the approved Summaries of Product Characteristics for the PRODUCTS.

“PERFORMANCE STANDARDS” means key operational standards against which MOVIANTO’s performance will be monitored as set out in SCHEDULE 1.

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“PRODUCTS” means the presentations listed in APPENDIX 1 of certain prescription and non-prescription finished drug products or medicinal products and health care products for human use, and as such APPENDIX may be amended from time to time in accordance with Clause 2.2.

“RELEVANT COSTS” means any new tax or increased/decreased rate of tax or any increase/decrease in the cost of fuel or any increase/decrease in the cost of MOVIANTO’s insurances or increases/decreases in other direct costs which has the effect of increasing or decreasing the costs incurred by MOVIANTO in supplying the Services.

“SERVICES” means the provision by MOVIANTO of warehousing, transportation and distribution services for the PRODUCTS and all related activities, in accordance with the terms of this Agreement, the TECHNICAL AGREEMENT and as otherwise listed in SCHEDULE 3.

“SERVICE FEE” means the remuneration payable by CLIENT to MOVIANTO in respect of the provision of the Services listed in SCHEDULE 3, as set out in APPENDIX 2. Additionally, a one-off fee for IT implementation applies as set out in APPENDIX 2.

“STOCK” means the stock of PRODUCTS located in the WAREHOUSE.

“TECHNICAL INFORMATION” means all documents and materials provided by or on behalf of CLIENT to MOVIANTO as well as all written amendments thereto, including in particular but without limitation, instructions and specifications necessary to store, handle and transport the PRODUCTS, all as referred to in this Agreement. The TECHNICAL INFORMATION includes the TECHNICAL AGREEMENT signed by the Parties on or around the date of this Agreement, which will form part of this Agreement.

“TERRITORY” means the countries listed in SCHEDULE 3.

“WAREHOUSE” means MOVIANTO’s warehouse located at Keltenweg 70, 5342 LP, Oss, Netherlands, where it stores or intends to store the PRODUCTS.

“WORKS” means the works set out on SCHEDULE 2 hereto, which are to be completed by MOVIANTO to CLIENT’s reasonable satisfaction under this Agreement.

1.2 Interpretation

In this Agreement, unless the context requires otherwise:

(a) a reference to a Clause, SCHEDULE or APPENDIX is to a clause of or schedule or appendix to this Agreement (as the case may be) and a reference made in a SCHEDULE or an APPENDIX to a Part or a Paragraph is to a part or a paragraph of that SCHEDULE or APPENDIX.

(b) references to the “AGREEMENT” include the SCHEDULES and APPENDICES, which form part of this AGREEMENT for all purposes.

(c) a reference to a “Party” or to the “Parties” shall be to either or both of CLIENT and MOVIANTO.

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(d) references to the masculine, feminine or neuter gender respectively include the other genders, and references to the singular include the plural (and vice versa).

(e) references to a document are to that document as varied, supplemented or replaced from time to time. and

(f) references to writing shall include any mode of reproducing words in a legible and non-transitory form.

2. Scope of the Agreement

2.1 Before MOVIANTO commences any of the SERVICES, MOVIANTO shall carry out the WORKS at its sole cost and notify CLIENT of the date of completion of the WORKS. Within a reasonable period after completion of the WORKS, CLIENT or its ASSOCIATE shall inspect the WORKS and confirm in writing to MOVIANTO whether or not it considers the WORKS to have been completed in a satisfactory manner. If CLIENT notifies MOVIANTO that the WORKS have not been completed in a satisfactory manner, MOVIANTO shall at its sole cost promptly remedy the WORKS in any manner reasonably recommended by CLIENT, MOVIANTO shall notify CLIENT of the date of completion of any such remedial WORKS and allow a follow-up inspection of the works by CLIENT or it’s ASSOCIATE. If CLIENT notifies MOVIANTO that the WORKS have been completed to its satisfaction, MOVIANTO shall commence the SERVICES as of the EFFECTIVE DATE in accordance with the terms and conditions of this Agreement.

2.2 The parties agree that MOVIANTO shall, at the WAREHOUSE, in accordance with the terms and conditions of this AGREEMENT, provide to CLIENT the Services and perform all related activities as specified hereunder. In providing the Services, MOVIANTO shall at all times comply with the PERFORMANCE STANDARDS set out in SCHEDULE 1 hereto and the TECHNICAL INFORMATION.

2.3 CLIENT, at its sole discretion, may at any time offer to include any ADDITIONAL PRODUCT as a new PRODUCT in APPENDIX 1 and in this Agreement and MOVIANTO shall accept any such inclusion without delay unless it has good and valid reasons to decline CLIENT’S offer. In the event that MOVIANTO wishes to decline CLIENT’S offer, MOVIANTO shall notify CLIENT in writing of the good and valid reasons for declining such offer within ten (10) days of receiving CLIENT’S offer.

2.4 CLIENT, at its sole discretion, may, at any time for whatever reason, unilaterally adjust APPENDIX 1 to remove an individual PRODUCT with not less than one (1) month advance written notice of such partial termination to MOVIANTO. The provisions of Clause 16 (Obligations upon Termination) shall apply mutatis mutandis with respect to such partial termination in relation to such PRODUCT and MOVIANTO shall not be entitled to claim any indemnity, reimbursement or compensation of any kind arising out of or in connection with such partial termination. As soon as practicable after MOVIANTO’s receipt of CLIENT’s notice of partial termination, the Parties will discuss and agree an appropriate reduction of the Service Fee.

2.5 MOVIANTO shall neither sub-contract any of the Services nor move any such Services, in whole or in part, to another site of MOVIANTO or a third party without

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the express prior written consent of CLIENT. Any subcontract shall be on terms and conditions identical to those contained in this Agreement (as amended from time to time) and MOVIANTO shall be fully responsible and liable for the Services performed by its subcontractors and remain fully responsible for the due fulfilment of any and all of its duties and obligations under this Agreement. MOVIANTO shall ensure that the Services provided by its subcontractors fully comply with the APPLICABLE LAWS AND REGULATIONS. All costs connected to and/or resulting from any sub-contracting will be borne by MOVIANTO. A list of approved subcontractors is shown in APPENDIX 6.

2.6 All costs and expenses directly or indirectly connected to MOVIANTO’s provision of the Services under this AGREEMENT, including internal and external costs incurred with respect to subsequent changes in any of these Services, are to be borne by MOVIANTO, unless otherwise specified herein or expressly agreed in writing by both Parties in accordance with Clause 2.6.

2.7 From time to time additional tasks falling outside those envisaged as part of the Services may be required to be undertaken. Prior to undertaking such additional tasks, MOVIANTO shall seek authority from CLIENT and obtain a purchase order or purchase order number from CLIENT. Where appropriate, all additional services provided by MOVIANTO will be subject to the terms and conditions contained in this Agreement. The cost of providing such additional services shall be agreed by the Parties and paid for separately by CLIENT, and such costs shall not form part of the SERVICE FEE.

3. Compliance and Authorisations

3.1 MOVIANTO hereby represents and warrants that at the EFFECTIVE DATE and throughout the term of this AGREEMENT:

(a) it shall have the necessary expertise, personnel, facilities and equipment to perform the SERVICES under this AGREEMENT.

(b) it shall operate and maintain its premises, equipment and procedures in strict compliance with all APPLICABLE LAWS AND REGULATIONS and shall ensure that its employees and any sub-contractors are properly trained in respect thereof, and

(c) it (i) will be in the possession of all governmental or other mandatory authorisations, licences or permits required with regard to the SERVICES under this AGREEMENT, under due observance of the APPLICABLE LAWS AND REGULATIONS, including without limitation all applicable laws and regulations concerning the handling, storage and transportation of controlled medicinal products, and (ii) shall at all times comply with all such authorisations, licences or permits.

MOVIANTO shall promptly notify CLIENT of any and all queries and investigations of the HEALTH AUTHORITIES and/or any other competent authorities concerning its premises, equipment and/or procedures to the extent such queries or investigations are related, either directly or indirectly, to the PRODUCTS or could impact any of the SERVICES under this AGREEMENT. CLIENT shall have sole power and responsibility for responding to such queries or investigations by HEALTH AUTHORITIES and/or any other competent authorities concerning the PRODUCTS or the SERVICES. MOVIANTO shall notify CLIENT immediately, but

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after no later than twenty-four (24) hours, if any HEALTH AUTHORITY or other competent authority communicates with MOVIANTO with respect to the PRODUCTS or the SERVICES or requests permission to or does inspect MOVIANTO WAREHOUSE, other facilities or records in connection with the PRODUCTS or the SERVICES. MOVIANTO shall cooperate with any such inspection and shall deliver promptly to CLIENT all materials, correspondence, statements, forms and records which MOVIANTO receives, obtains or generates pursuant to any such inspection or communications. MOVIANTO shall make its best endeavours to ensure that a representative from CLIENT may participate in any inspection by a HEALTH AUTHORITY or other competent authority that relates to the PRODUCTS or the SERVICES. MOVIANTO shall also provide reports to CLIENT concerning any such inspection. MOVIANTO shall in no circumstances provide any HEALTH AUTHORITY, or other competent authority, with any documentation, including responses to inspection reports, or provide any HEALTH AUTHORITY or other competent authority with any undertakings without the prior written approval of CLIENT.

MOVIANTO shall promptly notify CLIENT in the event that any governmental or other mandatory authorisations, licenses or permits required for the provision of the SERVICES expires or is withdrawn, cancelled, terminated or revoked for any reason.

3.2 Should MOVIANTO for any reason whatsoever, to a material extent, fail to comply with any of its obligations under Clause 3.1, such failure shall be considered as a default of MOVIANTO under Clause 15.2 (a) and CLIENT may terminate this Agreement in accordance with such provision.

4. Warehousing, Finished Drug Products or Medicinal Products Safety, Recall of Products

4.1 Unless otherwise agreed in writing in accordance with Clause 2.4, MOVIANTO will handle and store the PRODUCTS at the WAREHOUSE.

MOVIANTO represents and warrants that it will always make available sufficient handling, storage and transport capacity for the PRODUCTS to permit their uninterrupted and undisturbed marketing and distribution by CLIENT.

4.2 MOVIANTO shall (i) store, handle and transport the PRODUCTS in a safe and orderly manner and take all necessary care to prevent their damage, loss or theft, (ii) assume the entire responsibility for the proper performance of the SERVICES and other related activities under this Agreement and (iii) in all such SERVICES, shall abide by the APPLICABLE LAWS AND REGULATIONS, MARKETING AUTHORISATIONS, the TECHNICAL INFORMATION, any particular instructions communicated to it in writing by CLIENT as an amendment or pending amendment of the TECHNICAL INFORMATION, generally accepted standards of good handling, storage and distribution, as well as binding orders of HEALTH AUTHORITIES and other competent authorities, all as applicable at the relevant time with regard to the activities detailed above.

In particular, with regard to distribution and handling of the PRODUCTS, MOVIANTO will follow the “Physical Distribution Voorwaarden” of the Physical Distribution Group, attached as APPENDIX 3 hereof, and GOOD DISTRIBUTION PRACTICE.

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4.3 Specific conditions have been agreed for certain PRODUCTS requiring specific storage conditions (i.e. temperature, atmospheric humidity or lighting and additional security for controlled finished drug product or medicinal products) and all and any additional costs in relation therewith have been accounted for in the amounts listed in APPENDIX 2 hereof.

4.4 CLIENT, at all times, reserves its title in and remains the owner of the PRODUCTS.

4.5 MOVIANTO shall put in place and maintain at its cost sufficient security at the WAREHOUSE to ensure that none of the PRODUCTS are altered, damaged, tampered with or diverted for abuse prior to distribution to third parties or to CLIENT’s ASSOCIATES. MOVIANTO shall further take appropriate steps to ensure that no falsified finished drug products or medicinal products, as this term is defined in the APPLICABLE LAWS AND REGULATIONS, are stored, transported or distributed together with the PRODUCTS by MOVIANTO as part of the SERVICES.

4.6 MOVIANTO shall keep the PRODUCTS separate from products belonging to other companies (except CLIENT’S ASSOCIATES) and shall clearly identify all PRODUCTS in its books as well as physically as goods belonging to CLIENT or its ASSOCIATES.

MOVIANTO undertakes to inform CLIENT immediately if any third party asserts any claim, right or title to any PRODUCTS and shall assist CLIENT in every respect in protecting its proprietary rights.

4.7 For the duration of this AGREEMENT, MOVIANTO shall maintain insurance cover up to existing industry standards, covering damages for the full value of the WAREHOUSE and equipment against fire, collapse, water damage and theft as well as its potential liabilities under this AGREEMENT. MOVIANTO shall be obliged to follow a reasonable request by CLIENT to immediately send a copy of a valid insurance policy providing the relevant insurance.

4.8 MOVIANTO shall immediately inform CLIENT of any loss or damage of any PRODUCTS and provide all explanations and evidence in due time and will diligently take all steps that are reasonably necessary to assist CLIENT in obtaining from the Parties’ respective insurers coverage of any claim and its complete indemnification.

4.9 MOVIANTO shall, at any time during normal business hours, with pre-notification permit the quality assurance and quality control personnel of CLIENT or CLIENT’S ASSOCIATES to audit the parts of the WAREHOUSE where the PRODUCTS are handled, stored and transported (“auditing”). Such auditing shall include the right to inspect the compliance of MOVIANTO’s SERVICES with the provisions of the APPLICABLE LAWS AND REGULATIONS and this AGREEMENT and to have access to all relevant documentation. MOVIANTO shall give the necessary support and information for this purpose. Furthermore, in any circumstances reasonably deemed by CLIENT to be an emergency, CLIENT and its ASSOCIATES shall be entitled to immediate access to the WAREHOUSE.

4.10 MOVIANTO agrees that it shall implement effective tracing of batches and an effective recall of products procedure (enabling the identification and/or recall of individual products) and on CLIENT’S request it will assist in a recall if at any time CLIENT or the HEALTH AUTHORITIES or other relevant authority considers for any reason that any PRODUCT must be recalled and/or removed.

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5. Replenishment

5.1 CLIENT will solely be responsible for the replenishment of the STOCK and for the determination of the necessary STOCK level.

5.2 CLIENT shall have the PRODUCTS transported Delivered Duty Paid (DDP) the WAREHOUSE (INCOTERMS^® 2010) and shall have a copy of each corresponding shipping notification forwarded to MOVIANTO prior to the delivery of the PRODUCTS.

5.3 To the extent reasonably feasible, all PRODUCTS shall be delivered on pallets of EUR standard, and the containers shall be clearly marked in accordance with the shipping notification.

5.4 Immediately upon delivery of each shipment of PRODUCTS at the WAREHOUSE, MOVIANTO shall perform a careful visual inspection of all incoming PRODUCTS with respect to the correspondence of the PRODUCTS and their quantities with the shipping notification, as well as with respect to damages and defects and MOVIANTO will confirm the number of pallets on the carriers drivers freight documents. Damages, defects, shortages or discrepancies not detected at delivery shall be notified by MOVIANTO to CLIENT in writing without delay, and at the latest within forty-eight (48) hours, after their detection. In case no notification is received by CLIENT within forty-eight (48) hours, the PRODUCTS are assumed to have been received by MOVIANTO in good order and condition.

6. Transport of PRODUCTS, Returns, Back Orders

6.1 MOVIANTO, in accordance with purchase orders received from customer and any additional instructions it may receive from CLIENT, shall be in charge of the transport of PRODUCTS from the STOCK to wholesalers or carriers in the DESIGNATED AREA.

At CLIENT’S specific written instruction MOVIANTO will, furthermore, handle transport to wholesalers located in territories other than the TERRITORY, as well as to other destinations (such as, in particular but without limitation, CLIENT’S offices, manufacturing sites, etc.), at conditions, including financial conditions to be agreed upon by the Parties on a case-by-case basis in accordance with Clause 2.6. It is agreed by the Parties that delivery of PRODUCTS to carriers in the TERRITORY are included in the regular definitions of the Services hereunder, and consequently included in the SERVICE FEE agreed upon in APPENDIX 2 hereof.

6.2 Subject to the procedures to be agreed upon by the Parties in accordance with Clause 6.5, MOVIANTO shall transport all ordered PRODUCTS as expeditiously as reasonably feasible and, unless otherwise instructed by CLIENT, in the sequence of their receipt.

6.3 Unless otherwise instructed by CLIENT, transport of PRODUCTS shall be made Delivered Duty Paid (DDP) the wholesaler’s warehouse (INCOTERMS^® 2010) and MOVIANTO shall, if agreed upon subject to CLIENT’S specific instructions, (i) select the trucks to be used, (ii) arrange for transport and insurance according AVC conditions, and (iii), where applicable, obtain any export licence and other official authorisation and carry out all customs formalities necessary for any exportation of the PRODUCTS. The transport conditions shall be based upon the TECHNICAL INFORMATION for the transportation of the PRODUCTS.

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In particular, in Netherlands MOVIANTO will follow the General Transport Conditions “AVC 2002” (APPENDIX 4).

6.4 Unless otherwise agreed upon between the Parties on a case-by-case basis, all orders shall be received by MOVIANTO at least two working days before the transport date and shall specify:

• the authorized recipient’s name and address,

• the PRODUCT name and Netherlands article number,

• the quantities of PRODUCTS to be transported, and

• where agreed between the Parties, the corresponding batch number.

6.5 All transports to wholesalers or other customers in Netherlands will be made according to procedures to be agreed upon by the Parties, such procedures in principle to include that (i) the PRODUCTS may be transported together with products of other MOVIANTO customers and (ii) deliveries to any specific wholesaler will take place according to MOVIANTO’s weekly delivery schedule for such wholesaler.

Deviations from such procedures may be agreed upon between the parties on a case-by-case basis against additional remuneration for MOVIANTO.

6.6 MOVIANTO undertakes to strictly observe the FTE-FO (first to expire-first out) principle in its stock keeping and stock rotation of the PRODUCTS.

6.7 Under no circumstances shall MOVIANTO transport any PRODUCTS known or suspected to be expired, damaged or defective.

6.8 MOVIANTO shall be in charge of the handling of returns of PRODUCTS from wholesalers to the WAREHOUSE, in strict compliance with any instructions it may receive from CLIENT, including but not limited to CLIENTS Returns Policy, in this respect (including but without limitation, whether any returns shall be accepted from any specific wholesaler).

6.9 Any damaged, defective or expired PRODUCTS shall, at CLIENT’S discretion, either be returned to CLIENT or destroyed by MOVIANTO. In such latter case MOVIANTO shall give CLIENT evidence of the destruction in accordance with the procedures applicable in the TERRITORY. The cost of the return of the PRODUCTS to CLIENT (i.e. transport and insurance charges) respectively their destruction shall borne by CLIENT except where the damage, defect or expiry of the PRODUCTS is due to the negligence or wrongful act(s) of MOVIANTO, its officers, employees or agents, in which case the costs shall be borne by MOVIANTO according conditions in addition to any other claims CLIENT then may have.

6.10 MOVIANTO shall remain responsible for the handling of any back orders. In the event that any back orders are necessary due to the negligence or wrongful acts or omissions of MOVIANTO or its agents, then the cost of handling such back orders shall be borne by MOVIANTO.

7. Accounting and Reporting

7.1 MOVIANTO shall maintain up-to-date records of all PRODUCTS, and shall, without delay, record all movements of and adjustments to the STOCK in its computer system.

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MOVIANTO represents and warrants that all PRODUCT related data stored shall, at any time, (i) on MOVIANTO’s systems be properly secured against any unauthorised access of any third parties, (ii) be accessible to CLIENT when requested, and (iii) give, for each PRODUCT, a complete and accurate picture of all stock movements and adjustments, including all relevant explanations and background information, as well as an inventory balance.

MOVIANTO, at its own cost and expense, shall be in charge of the installation and permanent proper maintenance of MOVIANTO’s computer system.

7.2 Twice a year, at times mutually agreed by the parties, MOVIANTO shall carry out a full inventory count of the STOCK in accordance with local CLIENT procedures and provide to CLIENT the result of each such inventory count. The second inventory count in each year shall be carried out under the joint supervision of the respective auditors for MOVIANTO and CLIENT.

Each Party shall pay for its own auditor’s fees under this Clause 7.2, but otherwise the costs of the inventory count are included in MOVIANTO’s SERVICE FEE under this AGREEMENT.

7.3 CLIENT may request MOVIANTO to carry out additional inventory counts against reimbursement by CLIENT of the related costs.

7.4 At CLIENT’S option a CLIENT representative may be present at any inventory count of the PRODUCTS carried out by MOVIANTO.

8. Remuneration and costs

8.1 MOVIANTO shall be remunerated by CLIENT for its Services on the basis of the SERVICE FEE set out in APPENDIX 2. The SERVICE FEE as laid down in APPENDIX 2 is fixed for a period of one year, and thereafter may not be increased more than once in any twelve (12) month period. A review of the SERVICE FEE and the SERVICES undertaken during the preceding twelve (12) months shall be completed annually before the anniversary of the Effective Date. The SERVICE FEE may be adjusted annually to reflect any increase or decrease in the RELEVANT COSTS in the normal course of business, provided that the RELEVANT COSTS are reasonable.

8.2 MOVIANTO will invoice its services to CLIENT every month in relation to the PRODUCTS transported by and delivered at MOVIANTO during the preceding month.

The invoiced amount shall fall due thirty days after the date of each invoice and be payable by CLIENT by transfer to MOVIANTO’s bank account.

Invoices shall be sent to: CTI Life Sciences Limited Highlands House Basingstoke Road Spencers Wood Reading Berkshire RG7 1NT United Kingdom

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	Or electronically to: ap@cti-lifesciences.com
With a copy to:	Cell Therapeutics, Inc. 3101 Western Ave, Suite 600 Seattle, WA 98121 United States Or electronically to: ap@ctiseattle.com

8.3 With regard to the conditions for payment the “TLN betalingscondities” (APPENDIX 5) will apply, except that written complaints about an invoice shall be received within thirty (30) days after the date of the invoice and not within eight (8) days in Article 1, section 5 of the TLN betalingscondities.

8.4 MOVIANTO shall maintain up-to-date records of all COMMERCIAL DEBT, and shall, without delay, record all payments of and adjustments to the ACCOUNTS RECEIVABLE BALANCE in its computer system. In addition, MOVIANTO shall be in charge of managing COMMERCIAL DEBT, in strict compliance with any instructions it may receive from CLIENT, including but not limited to CLIENTS Credit Policy as referenced in SCHEDULE 3.

MOVIANTO represents and warrants that all COMMERCIAL DEBT related data stored shall, at any time, (i) on MOVIANTO’s systems be properly secured against any unauthorised access of any third parties, (ii) be accessible to CLIENT when requested, and (iii) give, for each COMMERCIAL DEBT, a complete and accurate picture of all movements and adjustments, including all relevant explanations and background information, as well as an ACCOUNTS RECEIVABLE balance.

MOVIANTO, at its own cost and expense, shall be in charge of the installation and permanent proper maintenance of MOVIANTO’s computer system. MOVIANTO may outsource this activity to a third party per Section 2.5.

All invoices will be issued under CLIENT letterhead, with banking information listed on the invoice. Customers will wire funds to CLEINT bank account in the UK.

9. Communication with Agencies; Adverse Event Reporting

9.1 Should any communication regarding the PRODUCTS need to be made by MOVIANTO to the HEALTH AUTHORITIES or other governmental agencies in connection with the SERVICES and/or in due compliance with the APPLICABLE LAWS AND REGULATIONS in the TERRITORY, MOVIANTO shall have the responsibility to consult with CLIENT and seek the CLIENT’S prior written approval concerning the content and tenor prior to such communication and before initiating or responding to the HEALTH AUTHORITIES or other governmental agencies. Such communications shall be made in strict accordance with the provisions of Section 3.1 of this AGREEMENT.

9.2 MOVIANTO shall inform CLIENT immediately (but in any event within twenty four (24) hours after the date of the notice to MOVIANTO) of any adverse event or adverse experience, as these terms are defined in the APPLICABLE LAWS AND REGULATIONS, associated with a PRODUCT that is reported to MOVIANTO or of

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which MOVIANTO or any of its agents are otherwise made aware. Such notification shall be made in writing in a manner reasonably agreed upon by the Parties. Such methods may include without limitation notification by express mail, electronic mail, courier or facsimile. In addition, MOVIANTO shall provide CLIENT with immediate notification by telephone of any fatal or life-threatening serious adverse events associated with a PRODUCT. MOVIANTO shall provide CLIENT with all information known or otherwise available to MOVIANTO on any such serious adverse event.

9.3 CLIENT shall retain responsibility for timely reporting, if required in CLIENT’s sole judgement, to the European Medicines Evaluation Agency (EMEA) or the HEALTH AUTHORITIES of all adverse events or experiences reported to either Party.

10. License

10.1 CLIENT shall make available to MOVIANTO the TECHNICAL INFORMATION necessary for MOVIANTO’s activities under this AGREEMENT and now grants to MOVIANTO a non-exclusive, non-assignable licence to use such TECHNICAL INFORMATION. This licence is solely for the purpose of MOVIANTO performing the Services under this AGREEMENT. To the extent this licence relates to an individual PRODUCT, it shall terminate automatically in relation to the termination of this Agreement in respect of such individual PRODUCT. Otherwise, this licence shall automatically terminate in the event that this AGREEMENT as a whole is terminated for any reason.

10.2 MOVIANTO shall acquire neither any intellectual property rights nor any other proprietary rights to any information, document or material (to include but not limited to electronically stored data) made available to it by CLIENT or by any CLIENT designee under this AGREEMENT.

11. Liability and Indemnification

11.1 Subject to Clause 11.7 below CLIENT agrees to indemnify MOVIANTO, its officers and employees and hold them harmless from and against all losses, damages, costs, claims, demands, judgments and liability of every kind and manner whatsoever, in law or in equity, judicial or administrative, civil or criminal, incurred by reason of a liability to a third party and arising out of (i) CLIENT’S breach of its duties, representations or warranties under this AGREEMENT, (ii) the use of any PRODUCT (i.e. being product liability claims), or (iii) the infringement by any PRODUCT of any intellectual property rights, except, in all three cases (i), (ii) and (iii), to the extent that any such losses, damages, costs, claims, demands, judgements or liability are due to the actions, negligence or wrongful act(s) or omissions of MOVIANTO, its officers, employees or agents, including but not limited failure to comply with the provisions of this AGREEMENT or the APPLICABLE LAWS AND REGULATIONS.

11.2 Subject to Clause 11.7 below MOVIANTO agrees to indemnify CLIENT, its officers and employees and hold them harmless from and against all losses, damages, costs, claims, demands, judgments and liability of every kind and manner whatsoever, in law or in equity, judicial or administrative, civil or criminal, incurred by reason of a liability to a third party and arising out of MOVIANTO’s breach of the APPLICABLE LAWS AND REGULATIONS or its duties, representations or warranties under this AGREEMENT, except to the extent that any such losses, damages, costs, claims, demands, judgments or liability are due to the negligence or wrongful act(s) or omissions of CLIENT, its officers, employees or agents.

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11.3 Liability of MOVIANTO

a) TRANSPORT TRAJECTORY: MOVIANTO accepts liability as carrier for damage to or loss of goods in his charge which have occurred during transport, also in the event it has subcontracted the transport to others.

b) DAMAGE TO GOODS FROM CAUSES OTHER THAN DURING TRANSPORT: MOVIANTO is liable for damage to or loss of goods in his care from the moment of receiving the goods until delivery unless he can prove force majeure as meant by Article 14, and with due regard to the following restrictions and limitations.

c) CONSEQUENTIAL DAMAGE: MOVIANTO is only liable for damage to and loss of goods in his charge and therefore not for immaterial damage, loss of profit, consequential damage, however occurring, including damage caused by delay and damage caused on account of advice from MOVIANTO.

d) LIABILITY LIMIT: Limitation of liability for all warehousing services rendered by Movianto; maximum of ** per damage event and ** maximum per annum. Stock discrepancies in the Warehouse shall be only compensated if they are more than 0,5 % of the annual Throughput (as defined herein) calculated on the Replacement Value (as defined herein). In this Agreement, “Replacement Value” means the basis of compensation defined as 20% of the actual sales value ( of the Products; and “Throughput” means the number of units received in the Warehouse in any contract year plus number of units shipped out of the Warehouse in the relevant contract year under the Service Schedule, divided by two.

e) Limitation of liability for all transport services; liability shall correspond to the liability clauses of the General Conditions of Transport or the CMR. The compensation due by ground carriers for non-compliance with its obligation is limited to an amount of € 3.40 per kilogram, for other damage than that arising from loss of or damage to the goods, such as consequential damage, business stagnation or immaterial damage, the carrier is not liable on the ground of the contract of carriage.

The maximum liability of MOVIANTO to the CLIENT for all losses, claims and damages arising out of this AGREEMENT or the performance of Supplier’s services amounts to ** per damage event up to the maximum amount of ** during any calendar year. Notwithstanding the foregoing, the limitation of liability provisions contained in this Section 11 shall not apply to the extent such damages are caused by MOVIANTO’s gross negligence or willful misconduct.

11.4 Each Party shall inform the other without delay and in writing if any third party claims are raised against it in connection with this AGREEMENT and/or any PRODUCT, and each Party shall upon request therefore provide reasonable assistance and

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co-operation to the other Party in defending any such claims. The Party requesting the co-operation or assistance shall reimburse the other Party for any reasonable out-of-pocket expenses incurred in connection with so co-operating or assisting.

11.5 Each Party shall furthermore promptly notify the other Party of any claims for which it intends to seek indemnification or contribution from the third Party. In such case the other Party shall, as jointly determined by the Parties, have the right to actively participate in the defence of the case and both Parties shall in good faith consult with each other regarding the defence strategy to be employed throughout the case. A Party seeking indemnification or contribution from the other Party cannot settle a case without the written consent of the other Party.

11.6 Each Party will procure and maintain, at its own expense, comprehensive commercial general liability insurance (including contractual liability, product liability, and completed operations) and will evidence such coverage upon the other Party’s request. Notwithstanding the foregoing, CLIENT is entitled to set up a self-insurance arrangement in lieu of commercial insurance policies to cover its potential liabilities under this Agreement.

11.7 Neither Party shall be liable to the other Party in respect of any lost profits or indirect or consequential loss or damage, howsoever caused or incurred.

12. Confidentiality, Restrictions of Use

12.1 MOVIANTO shall keep secret all written, electronically stored and oral information concerning or in whatever way relating to the PRODUCTS and TECHNICAL INFORMATION as well as any other information provided to it by or on behalf of CLIENT and/or its ASSOCIATES in connection with this AGREEMENT, and both Parties shall keep secret all such information concerning the other Party’s business and the terms of this AGREEMENT. Neither Party shall either pass any information received from the other Party or its ASSOCIATES on to third persons or use it for any purposes whatsoever other than those of this AGREEMENT without the prior written consent of the other Party. Both Parties shall reveal such information on a strict need to know basis only to their own employees directly engaged with their activity under this AGREEMENT and shall impose the obligation of secrecy and of non-use on these persons as well.

12.2 The provisions of this Clause 12 shall remain in force for a period ending ten (10) years from the effective date of the termination of this AGREEMENT.

12.3 The obligations set out in this Clause 12 shall not apply to:

(a) information which, through no fault of the recipient or of any persons to whom recipient has been permitted to disclose it, is or will be in the public domain, or

(b) information which at the time of receipt was already known to the recipient without any obligation of confidentiality, or

(c) information which was received by the recipient from a third party having a bona fide right to disclose or make available the same to the recipient without any obligation not to disclose such information, or

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(d) information the recipient can conclusively establish to have been independently developed by or for the recipient without use of the information disclosed by the other Party.

12.4 The obligations of confidentiality set out in this Clause 12 shall not prevent the recipient disclosing such information to any competent authority or court of justice as required by law, including, without limitation, any relevant securities exchange (including but not limited to the SEC or foreign equivalent), subject to the provisions of Section 3.1 of this AGREEMENT. The recipient shall notify the disclosing Party in advance in writing of the information to be disclosed and of the party to whom the disclosure will be made. If the disclosing Party objects to such disclosure by the recipient, the recipient shall provide assistance to the disclosing Party to enable it to defend disclosure as is necessary.

13. Audit

13.1 During the term of this AGREEMENT and for a period of one (1) year after its termination or expiration, CLIENT shall have the right to retain an independent certified public accountant or other expert in the field of storage and transport of medical products, to whom MOVIANTO has no reasonable objection, to audit MOVIANTO in order to determine the correctness of any financial information provided by MOVIANTO under this AGREEMENT, including but not limited to processes and payment related issues. The audit shall be conducted during regular business hours, not more than once each quarter, at MOVIANTO’s place of business. Any costs of audits performed more than once per year shall be mutually agreed upfront between the parties. The certified public accountant shall enter into a customary confidentiality agreement as a condition precedent to such audit and shall only report the correctness or incorrectness of reports made to CLIENT and shall not disclose to CLIENT any other information. The cost of such audit shall be borne by CLIENT if the certified public accountant certifies that the reports are correct in all material respects, whereas in all other cases all reasonable costs of such audit shall be borne by MOVIANTO, without prejudice to any other remedies then available to CLIENT. For purposes of clarification, any and all audits allowed or required under the TECHNICAL AGREEMENT shall be excluded from the audit restrictions discussed above, including limitations on frequency and cost allocation.

13.2 If such audit determines that a payment or refund is due to CLIENT, MOVIANTO shall make such payment or refund to CLIENT within thirty (30) days of the date on which the auditor’s written report is delivered to CLIENT. If the auditor determines that a payment is due to MOVIANTO, CLIENT shall make such payment to MOVIANTO within thirty (30) days of the date on which the auditor’s written report is delivered to CLIENT.

14. Force Majeure

Circumstances or events, which cannot be avoided nor prevented by applying due care and economically appropriate means, in particular acts of God, war, hostilities, terrorism, riot, fire, explosion, accident, flood, sabotage, lack of adequate fuel, power, raw materials, containers, transportation or labour, strike, lock-out or injunction (provided that no Party to this AGREEMENT shall be required to settle a labour dispute against its own best judgement), compliance with governmental laws, regulations or orders, breakage or failure of machinery or apparatus, (hereinafter referred to as “Force Majeure”) and which significantly impair or aggravate the performance of this Agreement, shall suspend an affected Party from performance

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for their duration and to the extent of their effects. The affected Party shall inform the other Party without delay and in any event within five (5) calendar days of the event, about the extent and expected duration of such interfering circumstances or events and shall furnish appropriate evidence of the occurrence. Furthermore, said Party shall use all reasonable endeavours to resume proper performance within an appropriate period of time.

15. Term and Termination

15.1 Subject to CLIENT’S written confirmation that the necessary WORKS have been completed to its satisfaction as described in Clause 2.1, this Agreement shall come into force as from the date of CLIENT’S receipt of a European Wholesale Dealer License by the MHRA and continue for a period of two (2) years. Thereafter, the AGREEMENT shall be automatically renewed for successive one year periods, unless either party gives written notice of their intent to not renew no less than three (3) months prior to such end of year period.

Following the first year of the AGREEMENT the AGREEMENT may be terminated at any time by CLIENT subject to three (3) months’ prior notice given by registered letter with acknowledgment of receipt.

15.2 Notwithstanding any term or other provision herein to the contrary, this Agreement also may be terminated immediately under the following circumstances:

(a) if either Party defaults in the performance of any of its material obligations hereunder and fails to remedy such default within thirty (30) days after notice from the other Party requiring it to do so, provided, however, that if the defaulting Party does cure the default during such notice period, this Agreement shall continue in full force and effect. Termination under this paragraph shall not relieve the defaulting Party from liability for breach of this AGREEMENT.

(b) if either Party shall be or become insolvent, or a petition in bankruptcy or some equivalent shall be filed by or against it, or if either Party shall make any assignment for the benefit of creditors, or a receiver of the property or a substantial portion thereof of either Party shall be appointed, or if either Party shall seek protection under any laws or regulations the effect of which is to suspend or impair the rights of its creditors, then, in any such event and at any time, the other Party may terminate this AGREEMENT, effective immediately, by written notice of such termination. or

(c) if any case of Force Majeure under Clause 14 (Force Majeure) continues for more than sixty (60) days.

15.3 CLIENT may furthermore terminate this AGREEMENT, effective immediately, upon written notice to MOVIANTO in the event of any change in the direct or indirect ownership or MOVIANTO’s business which CLIENT, at its sole discretion, considers prejudicial to, or in conflict with CLIENT’S interests. This provision shall apply whether such change be effected by governmental or private action. MOVIANTO shall provide prompt written notice to CLIENT of any such change.

15.4 The termination of this AGREEMENT for whatever cause shall neither affect any of the rights or obligations of either Party which have accrued until the effective date of

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such termination, nor shall it affect any rights or obligations of either Party under this Agreement which are stated by the Parties to survive such expiration or termination.

15.5 Except in those cases expressly stipulated herein, neither Party shall be entitled to claim any indemnity, reimbursement or compensation of any kind arising out of or in connection with the termination of this AGREEMENT carried out in accordance with the provisions hereof.

16. Obligations upon Termination

16.1 Upon termination of this AGREEMENT, partially or in total, for any reason, MOVIANTO shall immediately cease to use all documents, instructions and information (in whichever format, including but not limited to electronically stored data), including the TECHNICAL INFORMATION, which relate to the PRODUCTS and/or to their handling, storage or distribution and/or to CLIENT or any of CLIENT’S ASSOCIATES and, without delay, return to CLIENT, free of charge, any and all such documents, instructions and information without keeping any copies thereof, except where required by law, and destroy all of MOVIANTO’s internal documents held in whatever format (including any electronically stored data) that contain or effect the TECHNICAL INFORMATION or any other information which relates to the PRODUCTS and/or to their handling, storage or distribution and/or to CLIENT or any of CLIENT’S ASSOCIATES and certify such destruction to CLIENT in a form satisfactory to CLIENT, the certificate to be signed by an MOVIANTO officer.

16.2 CLIENT shall, without delay and in no event later than thirty (30) days after the effective date of the termination, take (or have taken) over the entire then existing STOCK. All handling, freight and insurance charges for the transportation of the STOCK to CLIENT or its designee shall be borne by CLIENT.

16.3 In the event of termination by CLIENT pursuant to Clause 15.2(b), CLIENT shall be entitled to enter the WAREHOUSE immediately for the purpose of removing PRODUCTS within such timescales as CLIENT shall determine.

16.4 MOVIANTO does hereby expressly waive any and all liens and rights of retention it might have with respect to any of the items quoted in this Clause 16, including all liens and rights of retention arising under the conditions set out in the APPENDICES hereto.

17. Final Provisions

17.1 CLIENT may, at any time, assign all or any of its rights and transfer all or any of its obligations under this AGREEMENT to any of its ASSOCIATES. However, in the case of such transfer CLIENT will guarantee any outstanding amounts due to MOVIANTO that have accrued prior to the date of the assignment or transfer. Apart from that, neither Party may assign or transfer any rights or obligations under this Agreement in any way to any third party without the express prior written consent of the other Party, which consent may be withheld in the other Party’s sole discretion. Refusal of the other Party to give such consent shall be final, and the other Party shall not be liable for any payment or indemnification resulting there from. Notwithstanding the foregoing, either Party may assign this AGREEMENT without prior approval in the event of the sale or divestiture of all or substantially all of the assets to which this AGREEMENT relates.

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17.2 If one or more provisions of this AGREEMENT should be or become invalid or ineffective, then the Parties shall substitute valid or effective provisions for such invalid/ineffective ones. The substituting provisions shall in their economic effect so closely resemble the invalid provisions that it can be reasonably assumed that the Parties would have contracted on the basis of those new provisions. If such provisions cannot be agreed upon, then the invalidity of one or more of the provisions of this AGREEMENT shall not affect the validity of this AGREEMENT as a whole, unless the invalid provisions are of such essential importance for this Agreement that it is to be reasonably assumed that the Parties would not have entered into this AGREEMENT without the invalid provisions.

17.3 No delay in exercising or non-exercise by either Party of any of its rights under or in connection with this AGREEMENT shall operate as a waiver or release of that right. Rather, any such waiver or release must be specifically granted in writing signed by the Party granting it.

17.4 This AGREEMENT shall supersede any previous agreements whether written or oral between the Parties relating to the subject matter hereof whether formal contracts or agreements that would be inferred from the Parties’ correspondence and/or conduct.

17.5 Save where expressly specified otherwise in this AGREEMENT no amendment or variation of the terms of this AGREEMENT shall be effective unless it shall be made or confirmed in a written document signed by both Parties.

17.6 The headings are included for convenience only and shall not affect the interpretation or construction of this AGREEMENT.

17.7 Nothing in this AGREEMENT or any document referred to in it or any arrangement contemplated by it shall be construed as creating a partnership or agency between the Parties for any purpose whatsoever and neither Party shall have the power or authority to bind the other Party or impose any obligations on it to the benefit of any third party.

17.8 While not contemplated under this AGREEMENT, any Invention (including patents and patent applications) will be the property of CLIENT. Inventions will be, to the extent permitted by law, works made for hire. CLIENT will have the sole right to determine the treatment of all Inventions. Movianto will promptly disclose all Inventions to CLIENT in writing, execute all factually accurate documents and perform all reasonable acts, at CLIENT’S expense, reasonably necessary to pursue, prosecute, maintain and enforce any patents, patent applications and other rights to the Inventions. For the purposes of this AGREEMENT, the term “Invention(s)” will mean any and all discoveries, inventions, improvements, developments, products, processes, procedures, techniques, formulae, computer programs, drawings, designs, notes, documents, information and materials, whether or not protectable by copyright, patent or trademark or as a trade secret, made, conceived, developed or first reduced to practice by MOVIANTO, alone or with others, in the course of providing the Services to CLIENT.

17.9 All communications, other than day to day operations, relating to this AGREEMENT shall be in the English language in writing and (i) delivered by hand or (ii) sent by registered post to the other Party at the relevant address shown at the start of this AGREEMENT (or such other address as may be notified from time to time in

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accordance with this Clause 17.9 to the other Party). MOVIANTO shall also provide a copy of any such communications to:

Cell Therapeutics, Inc.

3101 Western Ave, Suite 600

Seattle, WA 98121

United States

Attn: Legal Affairs

Any such communication shall take effect upon delivery to the addressee, such delivery having to be proved by the originator of the communication.

17.10 This AGREEMENT shall be governed by and construed in accordance with the substantive laws of Netherlands. All legal concepts in this AGREEMENT are Dutch legal concepts. All disputes arising in connection with this AGREEMENT or further contracts and agreements arising from this AGREEMENT, which cannot be settled amicably, shall be settled by the courts of Utrecht and the Parties agree to the exclusive jurisdiction of such courts.

17.11 The Parties shall work together in good faith to remedy any difficulties which may arise in connection with this AGREEMENT. In the event disputes do arise in connection with this AGREEMENT which the Parties are unable to settle amicably, the Parties agree to submit to the exclusive jurisdiction of the Courts of Amsterdam, Netherlands.

17.12 This Agreement is made in the English language. If for any reason whatsoever this Agreement is translated into any other language, the English text shall prevail in the event of divergence or uncertainty of meaning. The language to be used with regard to the execution, performance or termination of this AGREEMENT shall be English.

17.13 MOVIANTO shall immediately refer to CLIENT any enquiries it receives from a customer in relation to the PRODUCTS and shall not in any event provide a unilateral response to such enquiries.

17.14 CLIENT shall have the right to suspend supplies of the PRODUCTS in the event that in CLIENT’s sole opinion diversion of the PRODUCTS has taken place, is taking place or is threatened.

17.15 In the event of any conflict between the terms of this AGREEMENT or SCHEDULE and any of the Appendices attached hereto, the terms of this AGREEMENT or SCHEDULE shall prevail.

17.16 The following Articles and Clauses shall survive expiry or termination for any reason and shall continue with full force and effect: Article 11 (Liability), Article 12 (Confidentiality, Restrictions of Use), Article 13 (Audit), Article 16 (Obligations on Termination), and Clauses 17.9, 17.10, 17.11, 17.12 and 17.14.

IN WITNESS WHEREOF, the Parties have duly executed this AGREEMENT in three identical counterparts, two for CLIENT and one for MOVIANTO, as of the day and year first above written.

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CTI Life Sciences Limited		Movianto Nederland BV
/s/ Louis A. Bianco		/s/ P.J. Esselaar
Name :	Louis A. Bianco	Name :	P.J. Esselaar
Title :	Director	Title :	Managing Director
Date:		Date:

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SCHEDULE 1

PERFORMANCE STANDARDS

Service	Performance Standard	Target
Receiving and putting away PRODUCTS	PRODUCTS received by 12:00 noon will be booked in the same business day. PRODUCTS received after 12:00 noon will be booked in by 12:00 noon the next business day if all relevant documentation is received by MOVIANTO in a timely manner	99% of pallets
Control of inventory	Routine inventory checks to show no discrepancy between system and physical stock counts calculated by single unit	99.8%
Order processing, pick and pack	Product to be correct item and quantity by line	99,6%

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SCHEDULE 2

THE WORKS

Invoice template

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SCHEDULE 3

THE SERVICES

Receipt, Unloading and Checking

MOVIANTO

• Unloading, counting, visual checking without opening outer cases and putting of stock.

• Recording products, quantities, and lot numbers received, noting visual damages, shortages and overages and inform CLIENT without undue delay.

• Store damaged goods separately in a clean and secure non-saleable location.

• Keying of warehouse receipts into computer system

CLIENT

• Inform on the arrival of the goods at departure in form of a packing list and estimated time of arrival. In electronic way, at least 48 hours in advance

• Deliver products in sufficient quantities during regular working hours

Deliver products for storage properly marked and packaged, including a manifest showing sizes or specific stock keeping units, lot number, storage conditions, expiry date and SHE measures.

Warehousing and Inventory Control

MOVIANTO

• Adhering to the APPLICABLE LAWS AND REGULATIONS, including the GOOD DISTRIBUTION PRACTICES

• Storing of products in a clean and secure environment

• Storing of products in refrigerated (2 - 8 ºC)

• Warehouse temperature control and relative humidity monitoring

• Provide special storage conditions where required, e.g. cytotoxic goods.

• Once a year perform physical counting of products / lot

CLIENT

• Inform MOVIANTO on the storage requirements of products stored and distributed by MOVIANTO. See Appendix 1.

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Manages multilingual call center and customer service department to receive and process orders from customer as if Movianto were CTILS. See below:

1. Customer Order Management

1.1 The profile of the Client’s business forecast is listed as Schedule 5.

1.2 Movianto will provide a multilingual call center and customer service department for order taking, processing and customer interaction in Languages English, German, Dutch and French. Working hours will be from 08:00 – 17:00 CET.

1.3 Movianto will accept the Client or Customer’s orders placed by letter, facsimile, or electronic data interchange but not normally by telephone without written confirmation. These orders may be placed directly by the Client’s Customers.

1.4 Movianto shall, on behalf of the Client, manage the sale of Products to the Customer on the Client’s Terms and Conditions of Sale set out in Schedule 6.

1.5 Movianto shall undertake the checks to ensure that the Customers placing the orders are authorised by Client to receive the Products requested, to support the Client in accordance with the Technical Agreement, for Regulatory purposes.

The Client will provide and maintain an up to date list of its Customers so authorised. The Client will reimburse Movianto for any documented and reasonable costs and expenses arising from orders despatched to Customers who are listed on the Client’s authorised list and yet not authorised to receive.

1.6 Any approaches from potential Customers shall be documented by Movianto and this documentation shall be promptly submitted to the Client for approval. Once approved the Client shall promptly update the list of its authorised Customers to include the new Customer and send the updated list to Movianto.

1.7 The Client may, by written notice to Movianto, limit the total value of Products to be supplied to any Customer in either any calendar month or in any one order. Movianto shall comply with such Client limits from the date one week after receipt of the written notice].

1.8 Movianto will transfer the authorised orders to the Premises, pick and pack them and arrange delivery.

1.9 All products delivered by Movianto and reported by a Customer as defective in accordance with the CUSTOMER TERMS AND CONDITIONS OF SALE -Schedule 6 will be collected and returned back to the Premises for quarantine and inspection or processed in accordance with the Client’s instructions and agreed procedure(s). The returned products will be documented by Movianto to evidence whence they came pending inspection by the Client.

1.10 Movianto will price orders in accordance with the Client’s price and discount schedule and invoice in the name of Client, acting as Logistics Service Providers. For the purposes of this Service title in such Product remains with the Client at all times until the point of delivery to the Customer. The sales prices for the Products to be supplied shall be as determined by the price list (initial version as listed in Appendix 1) or if

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otherwise agreed between the parties written advice of the price to be used for each order. The Client shall give Movianto 10 (ten) Working Days’ notice of any changes in the prices or discounts which require amendment of the price file, at Customer level, by Movianto staff, and if this notice is not given the changed prices shall not be applied until the first order accepted by Movianto 10 (ten) Working Days after the date on which the written notice of the changes was received. All prices shall be exclusive of all applicable value added. Pricing will be in Pounds Sterling (£).

1.11 Movianto shall provide stock status and transaction reports from its systems to the Client in Movianto’s standard formats.

Standard reports shall comprise:

1.11.1 A monthly report of Sales to Customers (this is a component of Self-Billing – see below)

1.11.2 A monthly report of the Client’s Stocks held by product, by batch (lot)

1.11.3 A report of Returns by reason code and Customer

1.11.4 A report of any claims (may be included in the above)

Other formats and reports are available at the Client’s additional cost. Movianto shall submit month end stock and sales reports to the Client in the first three working days of each following month.

A debtor report shall also be provided during the month after the period of transactions.

1.12 Consistent with the Customer Terms and Conditions of Sale (Schedule 6), Movianto will check cleared funds from the Customer in CTI’s bank account no later than the last working day of the month following the invoice date Movianto against the invoices issued. Overdue accounts shall be chased by the Movianto Credit Control department.

1.13 The Client shall retain responsibility for the recovery of Bad Debts.

1.14 Movianto shall prepare monthly statements for each Customer, within 5 (five) Working Days of the last day of the month and prompt late payers when appropriate by telephone and/or letter. In the event that a Customer does not pay in accordance with the Customer Terms and Conditions of sale as set out in Schedule 6 of this Agreement or is in the opinion of Movianto a credit risk, then Movianto shall promptly communicate to the Client such non-payment or credit risk and recommend to the Client that no further supplies are made to that Customer. No Customer order shall be refused by Movianto unless the refusal has first been agreed with the Client and the Client shall at its own risk be able to overrule any recommendation by Movianto provided that the Client provides an instruction to this effect in writing.

1.15 Movianto shall keep sales histories and records together with all supporting documentation (including copies of all Products’ sales invoices to Customers) during the term of this Agreement and shall allow the Client’s authorised representative to inspect during the Working Day, save for any instances where other clients’ data confidentiality would be compromised, and copy the same on giving Movianto reasonable notice of its intention to do so.

1.16 Movianto shall relay to the representatives of the Client all queries or problems raised by Customers about the Products. Movianto shall promptly pass on to the Client all reports it may receive of any defects in any of the Products and of any adverse or unusual reactions resulting from the use of the Products by Clients or final consumers.

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After-sales services are otherwise restricted to the resolution of any transaction queries, the provision of proof of delivery, and performance reviews. For the avoidance of doubt, Movianto shall not, at any time recommend, promote or substitute any product during its order processing or subsequent after-sales support.

1.17 Customer complaints fall into three categories ~ Service, Product and Medical. Movianto will ensure that all types of service complaints are recorded and handled in line with the current Standard Operating Procedure for complaint handling. Customer complaints relating product quality or reports of adverse reaction will be forwarded and immediately notified to the Client.

• Forward technical inquiries to CLIENT

• Transmitting outbound shipment confirmations

• Order collection by telephone, email, mail, EDI, or fax during the normal working hours from 08:00 until 17:00. Cut off times for orders depend on Carrier pick-up times.

• Checks to ensure that the Authorised Customers placing orders are authorised under the APPLICABLE LAWS AND REGULATIONS to receive the Products ordered.

• Handling of customer inquiries

• Triages pharmacovigilance or medical related calls and forwards to the client determined pharmacovigilance CRO call center.

CLIENT

• Provide script for receiving orders at Movianto’s call center and customer service department.

• Customer authorization

• Orders sent in batches by EDI to Movianto at 10:00 (80% of orders) and 14:00 (20% of orders)

• Manages pharmacovigilance calls.

Distribution

MOVIANTO

• Picking, packing, labelling and routing function

• Picking orders after the first expiry - first out principle

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• Picking and packaging of orders within 2-8C areas.

• Providing for the generation and inclusion of packing list and address label with if necessary special notifications

• Loading shipments onto outgoing trucks.

Transportation

MOVIANTO

• Transport shipments to customers from the Movianto distribution center in Oss, the Netherlands.

• Obtaining proofs-of-delivery and tracking and tracing shipments

Lot Number and Expiry Date Control

MOVIANTO

• Tracking of orders and product receipt by lot number and expiry date.

• Supporting product recall procedures

Returned Goods Processing

MOVIANTO

• Receiving of returned goods in segregated secure and refrigerated areas

• Providing documentation of returns received.

• Contacting CLIENT to obtain disposition instructions

• Arranging the destruction of returned products if required at the expense of CLIENT.

• Managing return of product into stock, where appropriate

Return & Recall

MOVIANTO

• Inform CLIENT on quality complaints immediately.

CLIENT

• Receive, examine and treat complaints of its customers.

• Answering quality complaints and initiation of recalls in 14 days

Product Quality Assurance (QA)

MOVIANTO

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• Receiving of products into quarantine status

• Managing release of product to saleable status on computer system

CLIENT

• Manage control over Q/A hold and release of product

• Be fully and solely responsible for ensuring that the products comply with all the APPLICABLE LAWS AND REGULATIONS.

• Handle all discussions with regulatory agencies regarding manufacturing defects, health, safety, labelling, or advertising issues related to any product and be solely responsible for deciding the necessity, scope and procedures for product recall.

Reporting

The CLIENT will receive reports from MOVIANTO as outlined in APPENDIX 2

CREDIT MANAGEMENT & DEBT COLLECTION

1. Set up of new DEBTOR in computer system

The CLIENT will explicitly authorize MOVIANTO to set up a DEBTOR in the computer system. Prior to this authorization MOVIANTO will not deliver any PRODUCT to the DEBTOR The following information is provided by the CLIENT to MOVIANTO in order to set up a DEBTOR.

• Invoice address

• VAT number

• Phone number

• Fax number

• Email address of accounts payable department

• Contact person in accounts payable department

• Choice of DEBTOR to receive invoice in .pdf, .csv or .xml

• Bank account, including IBAN & SWIFT

• Payment terms

• Credit limit

• Sales person details(optional, in case of invoice dispute follow up)

2. Invoicing

MOVIANTO offers the DEBTOR the choice to receive the invoice for the GOODS per mail or per e-mail. The CLIENT provides MOVIANTO with the following information in order to set up the invoice in accordance to the legal requirements:

• CLIENT address of invoicing entity

• CLIENT vat-number of invoicing entity

• Bank account to be paid in, including IBAN & SWIFT

• General conditions to add to invoice

• CLIENT logo

• Optional: Commercial messaging on invoice

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• Optional: Co-branding with MOVIANTO

a. Invoicing ‘digital’:

i. The CLIENT invoices are sent per email to the contact of the DEBTOR within 48 hours after the delivery of the GOODS to the DEBTOR.

ii. The invoices can be sent to the DEBTOR in name of the CLIENT. An outgoing email-address is then to be provided to MOVIANTO.

b. Invoicing ‘mail’:

i. The CLIENT invoices are sent per mail to the contact of the DEBTOR within 48 hours after the delivery of the GOODS to the DEBTOR from MOVIANTO’s mail address.

ii. The CLIENT provides MOVIANTO with sufficient envelopes to ensure a timely billing. In case these are not provided, MOVIANTO will use its own stationary in order to avoid non-compliance to this agreement.

MOVIANTO will add to the invoice all necessary information in order ensure timely and correct payments, such as reference, payment terms, etc.

3. Payments

a. The CLIENT will open a bank account in the CLIENT’s name, specifically and only for the debt collection of the invoices.

b. The CLIENT will provide to MOVIANTO viewing rights on this account through ISABEL 6.0. MOVIANTO uses the ISABEL software to download the payment in CODA and import this on its debt collection system.

c. The transfers from the CLIENTS account to its operational accounts is taken care of by the CLIENT.

Debt Collection

d. MOVIANTO will represent CLIENT in the debt collection process. Therefore the DEBTOR will not realize he/she is in contact with a third party, MOVIANTO. A telephone and fax number will be provided by the CLIENT to MOVIANTO which will be used for debt collection purposes. In case, such numbers cannot be provided, MOVIANTO will provide these numbers.

e. Under no circumstances MOVIANTO becomes owner of the debt. Therefore cannot be held liable for the debt that has not been collected at the end of the process agreed between the CLIENT and MOVIANTO. However MOVIANTO will assist the CLIENT in order to collect the debt in full.

f. The ‘standard process’ set up of the debt collection is as follow:

i. On the expiry date +1 day a first reminder (herinnering) is being sent

ii. On the expiry date + 15 days a first telephone conversation is held with the DEBTOR contact person provided by CLIENT

iii. On the expiry date +30 day a warning (waarschuwing) is being sent

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iv. On the expiry date + 45 days a first telephone conversation is held with the DEBTOR contact person provided by CLIENT

v. On the expiry date +60 day a final notice (ingebrekestelling) is being sent

vi. On the expiry date +75 day MOVIANTO will propose to the CLIENT to stop delivering although the credit limit is not exceeded. The CLIENT will need to communicate its decision. Furthermore MOVIANTO will propose to hand over the outstanding debt to lawyer in order collect the outstanding debt.

g. Debt collection ‘digital’

i. The CLIENT reminders are sent per email to the contact of the DEBTOR instantly on the agreed delays according to the standard debt collection process or any process agreed with the CLIENT.

h. Debt collection ‘mail’

i. The CLIENT reminders are sent per fax to the fax number of the DEBTOR instantly on the agreed delays according to the standard debt collection process or any process agreed with the CLIENT. In case a fax-number is not provided The CLIENT reminders are sent per mail to the contact of the DEBTOR within 24 hours after the expiry of a delay to the standard debt collection process or any process agreed with the CLIENT

i. Changes to the ‘standard process’

i. The CLIENT can require different delay dates as described in the ‘standard process’. This is not considered a change to the ‘standard process’. However in case an additional action is required by the CLIENT from MOVIANTO, this will be considered as an ‘extra’-action to the ‘standard process’.

j. Traceability of actions

i. MOVIANTO uses a software for this process. The CLIENT will have viewer rights on this software in order to follow the actions taken by MOVIANTO towards the DEBTORS of the CLIENT

4. Invoice dispute handling

In case an invoice is being disputed the DEBTOR. The debt collection process will immediately stop. MOVIANTO will ask the CLIENT to settle the dispute with the DEBTOR.

The act of sending the invoice, however in dispute, will be considered as a payable action to MOVIANTO.

However MOVIANTO provides a service in which it takes care of this process for the CLIENT. MOVIANTO will contact the CLIENTS salesperson in order to evaluate the dispute together with the SALESPERSON. An adequate follow up will be given to dispute.

i. On the first date a written dispute will be provided to the salesperson of the CLIENT

ii. On the date + 7 days a first telephone conversation is held with the salesperson of the CLIENT

iii. On the date +14 a reminder is being sent to the sales person & his supervisor

iv. The last 2 actions will reoccur until the dispute is solved

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SCHEDULE 4

TERRITORY

EU Countries	Major Language
Austria	German
Belgium	French/Dutch/German
Bulgaria	Bulgarian
Cyprus	Greek
Czech Republic	Czech
Denmark	Danish
Estonia	Estonian
Finland	Finnish (Suomi)
France	French
Germany	German
Greece	Greek
Hungary	Hungarian
Ireland	English
Italy	Italian
Latvia	Latvian
Lithuania	Lithuanian
Luxembourg	Luxembourgish
Malta	Maltese
Netherlands	Dutch
Poland	Polish
Portugal	Portuguese
Romania	Romanian
Slovakia	Slovak
Slovenia	Slovenian
Spain	Spanish
Sweden	Swedish
United Kingdom	English

Centralized Procedure
Norway	Norwegian
Iceland	Icelandic
Switzerland	German/French/Italian

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The following countries are planned for initial Pixuvri^® commercial launch :

EU Countries	Country Language	Language Customer Service	Quarter
Austria	German	German	**
Denmark	Danish	English	**
Finland	Finnish (Suomi)	English	**
Germany	German	German	**
Ireland	English	English	**
Netherlands	Dutch	Dutch	**
Sweden	Swedish	English	**

Centralized Procedure
Norway	Norwegian (Norsk)	English	**

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SCHEDULE 5

CLIENT’S INITIAL NON-BINDING BUSINESS FORECAST

Country	2012			2013			2014
	# Vials	# SKU	Estimated # Orders	# Vials	# SKU	Estimated # Orders	# Vials	# SKU	Estimated # Orders
Germany	1,980	1	**	9,504	2	**	11,405	3	**
Austria	180	1	**	864	2	**	1,037	2	**
Finland	144	1	**	691	2	**	829	2	**
Ireland	144	1	**	691	2	**	829	2	**
Denmark	144	1	**	691	2	**	829	2	**
Sweden	216	1	**	1,037	2	**	1,244	2	**
Norway	108	1	**	518	2	**	622	2	**
Netherlands	288	1	**	1,382	2	**	1,659	2	**
France	0	0	**	936	1	**	1,123	2	**
UK	0	0	**	864	1	**	1,037	2	**
Italy	0	0	**	1,728	1	**	2,074	2	**
Spain	0	0	**	648	1	**	778	2	**
Total	3,204	8	**	19,555	20	**	23,466	25	**

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SCHEDULE 6

CLIENT’S TERMS AND CONDITIONS OF SALE

6.1 Definitions and Interpretation

In this Schedule, unless the context otherwise requires, the following expressions shall have the meanings set out opposite them:

“Seller” means CTI Life Sciences Limited (the Client of Movianto)

“Customer” means the person who accepts a quotation of the Seller for the sale of Goods or whose order for the Goods is accepted by the Seller.

“Terms and Conditions of Sale” means the standard Terms and Conditions of Sale set out in this document and (unless the context otherwise requires) includes any special terms and conditions agreed in writing between the Customer and the Seller.

“Goods” means the product which will be ordered and purchased by Customer under these Terms and Conditions of Sale.

“Order” means the contract by the purchase and sale of the Goods.

“Working day” means any day save a Saturday, Sunday or a day falling on a bank holiday.

The headings in these Terms and Conditions of Sale are for convenience only and shall not affect their interpretation.

6.2. Basis of the Sale

6.2.1 The Seller shall sell and the Customer shall purchase the Goods in accordance with any quotation of the Seller which is accepted by the Customer, or any order of the Customer which is accepted by the Seller, subject in either case to these Conditions, which shall govern the Order to the exclusion of any other terms and conditions subject to which any such quotation is accepted or purported to be accepted, or any such order is made or purported to be made, by the Customer.

6.2.2 No variation to these Conditions shall be binding unless agreed in writing between the authorised representatives of the Customer and the Seller.

6.3 Orders

6.3.1 The quantity and description of the Goods shall be those set out in the Seller’s quotation (if accepted by the Customer) or the Customer’s order (if accepted by the Seller).

6.3.2 The Seller shall be entitled to cancel the Order in respect of all or part only of the Goods by giving notice to the Customer at any time prior to delivery, in which event the Seller shall have no liability to the Customer for any loss (including loss of profit), costs (including the cost of labour), damaged, charged and expenses incurred by the Customer as a result of the cancellation.

6.4 Price of the Goods

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6.4.1 All orders will be invoiced at the prices current at the date of dispatch and are subject to alteration without notice. Prices shown are exclusive of Value Added Tax which will be charged at the standard rate applicable at the date of invoicing. The Seller reserved the right to amend prices to those ruling at the date of dispatch and to amend any errors or omissions. Prices are applicable in the United Kingdom only.

6.5 Terms of Payment

6.5.1 All accounts are STRICTLY NET and become due under these Terms and Conditions of Sale on receipt of invoice and shall be payable such that the Seller shall have received cleared funds no later than 30 days from the invoice date. The time of receipt of cleared funds shall be of the essence of the contract between the Seller and Customer. Without prejudice to any other right or remedy that may be available to the Seller, the Seller shall be entitled to charge interest on a daily basis, at the rate of 2.5% per month or part month, on all amounts not paid in accordance with these terms. Interest will be compounded on a calendar month basis.

6.6 Delivery

6.6.1 Acceptance of any Order is subject to supplies of the Goods being available. The Seller reserves the right to deliver the Order in whole or in part and the Customer shall honour all invoices presented in respect of such deliveries in accordance with Section 5 of these Terms and Conditions of Sale.

6.6.2 Where the Goods are to be delivered in instalments, each delivery shall constitute a separate contract and failure by the Seller to delivery any one or more of the instalments in accordance with these Terms and Conditions of Sale or any claim by the Customer in respect of one or more instalments shall not entitle the Customer to treat the Order as a whole as repudiated.

6.6.3 The cost of delivery will normally be paid by the Seller, but the Seller reserves the right to select the means whereby the Goods are forwarded to the Customer. If delivery is made by a special carrier or more quickly than Movianto’s standard provision at the request of the Customer the Seller reserves the right to make an additional charge.

6.6.4 Any dates quoted for delivery of the Goods are approximate only and the Seller shall not be liable for any delay in delivery of the Goods howsoever caused. Time for delivery shall not be of the essence unless previously agreed by the Seller in writing.

6.6.5 A Customer shall themselves or by their duly authorised representative sign the delivery note as an acknowledgement of full delivery. On delivery to the address nominated by the Customer the Seller shall be entitled to assume that any signature given is that of such a duly authorised representative.

6.7 Risk and Property

6.7.1 Risk of damage to or loss of the Goods shall pass to the Customer on delivery to the Customer’s designated point of delivery or, if the Customer wrongfully fails to take delivery of the Goods, the time when the Seller has tendered delivery of the Goods

6.7.2 Notwithstanding delivery and the passing of risk in the Goods, or any other provision of these Terms and Conditions of Sale, the property in the Goods shall not pass to the Customer until the Seller has received in cash or cleared funds payment in full of the price of

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the Goods and all other Goods agreed to be sold by the Seller to the Customer for which payment is then due.

6.7.3 Until such time as the property in the Goods passes to the Customer, the Customer shall hold the Goods as the Seller’s fiduciary agent and bailee, and shall keep the Goods separate from those of the Customer and third parties and properly stored, protected and insured and identified as the Seller’s property. Until that time the Customer shall be entitled to resell or use the Goods in the ordinary course of its business but shall account to the Seller for the proceeds of sale or otherwise of the Goods, whether tangible or intangible, including insurance proceeds, and shall keep all such proceeds separate from any monies or property of the Customer and third parties and, in the case of tangible proceeds, properly stored, protected and insured.

6.7.4 Until such time as the property in the Goods passes to the Customer (and provided the Goods are still in existence and have not been resold), the Seller shall be entitled at any time to require the Customer to deliver up the Goods to the Seller and, if the Customer fails to do so forthwith, to enter upon any premises of the Customer or any third party where the Goods are stored and repossess the Goods.

6.7.5 The Customer shall not be entitled to pledge or in any way charge by way of security for any indebtedness any of the Goods which remain the property of the Seller, but if the Customer does so all monies owing by the Customer to the Seller shall (without prejudice to any other right or remedy of the Seller) forthwith become due and payable.

6.8 Damages, Shortages or Loss in Transit

6.8.1 Any claim by the Customer:

6.8.1.1 which is based on delivery of allegedly faulty Goods must be notified immediately by telephone to the Customer Service Helpline;

6.8.1.2 which is based on any damage during transit shall be notified to the Seller and the carrier in writing within two (2) working days from the date of delivery;

6.8.1.3 which is based on any loss or shortage shall be notified to the Seller and the carrier in writing within two (2) working days from the date of delivery.

6.8.2 If the Customer does not notify the Seller accordingly the Customer shall not be entitled to reject the Goods and the Seller shall have no liability for such fault, damage, loss or shortage, and the Customer shall be bound to pay the price as if the Goods had been delivered in accordance with the Order.

6.8.3 Where any valid claim in respect of any of the Goods which is based on any fault, damage, loss or shortage is notified to the Seller in accordance with these Terms and Conditions of Sale, the Seller shall be entitled to replace the Goods (or the part in questions) free of charge or, at the Seller’s sole discretion, refund to the Customer the price of the Goods (or a proportionate part of the price), but the Seller shall have no further liability to the Customer. In these instances the Customer must retain all damaged Goods and/or packaging for inspection and/or collection by the Seller.

6.8.4 The Seller shall not be liable to the Customer or be deemed to be in breach of the Order by reason of any delay in performing, or any failure to perform, any of the Seller’s obligations in relation to the Goods, if the delay or failure was due to any cause beyond the

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Seller’s reasonable control. Without prejudice to the generality of the foregoing, the following shall be regarded as causes beyond the Seller’s reasonable control:

Act of God, explosion, flood, tempest, fire or accident;

War or threat of war, sabotage, insurrection, civil disturbance or requisition;

Acts, restrictions, regulations, by-laws, prohibitions or measures of any kind on the part of any governmental, parliamentary or local authority;

Import or export regulations or embargoes;

Strikes, lock-outs or other industrial actions or trade disputes (whether involving employees of the Seller or of a third party);

Difficulties in obtaining raw materials, labour, fuel, parts or machinery;

Power failure or breakdown in machinery;

Failure due to delay in the obtaining of any governmental or other permission for the sale, storage or transportation of the Goods.

6.9 Returns

6.9.1 Requests to return Goods must be made within three (3) working days of receipt. All requested returns must be authorised in advance by the Seller’s Customer Service office. Items requiring temperature controlled storage will require a valid proof of correct storage of Goods prior to any agreement to return. However, in the event that the product licence holder does not warrant the efficacy of the Goods, credits will not be issued in any circumstance, regardless of the existence of Customer temperature controlled records. For the avoidance of doubt temperature controlled Goods must be checked and refused on delivery if necessary. Once Goods are accepted (even in the case of manifest error by the Seller), credit will not be issued.

6.9.2 All Goods for return will be collected by the Seller or their nominated sub-contractor, collection will be attempted a maximum of three (3) times and it is the Customer’s responsibility to ensure Goods are ready for collection. After the third attempt the return will be cancelled and full payment for the Goods will be required.

6.9.3 Notwithstanding that a return is authorised by the Seller the Seller may subsequently refuse to accept the return of Goods if:-

They are not of the same batch as that supplied in the Order.

They are not in sealed original packaging.

They are in the sole opinion of the Seller unfit for resale.

Any unauthorised Goods returned or any Goods returned by other means than those designated in 9.2 will be destroyed and no credit will be issued.

6.10 Insolvency of the Customer

6.10.1 This clause applies if:

6.10.1.1 The Customer makes any voluntary arrangement with its creditors or becomes subject to an administration order or (being an individual or firm) becomes bankrupt or (being a company) goes into liquidation (otherwise than for the purposes of amalgamation or reconstruction): or

6.10.1.2 The holder of a security interest takes possession, or a receiver is appointed, of any of the property or assets of the Customer: or

6.10.1.3 The Customer ceases, or threatens to cease, to carry on business: or

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6.10.1.4 The Seller reasonably apprehends that any of the events mentioned above is about to occur in relation to the Customer and notifies the Customer accordingly.

6.10.2 If this clause applies then, without prejudice to any other right or remedy available to the Seller, the Seller shall be entitled to cancel the Order or suspend any further deliveries under the Order without any liability to the Customer, and if the Goods have been delivered but not paid for the price shall become immediately due and payable notwithstanding any previous agreement or arrangement to the contrary.

6.11 Proper Law, Jurisdiction, Severability and Waiver

6.11.1 These Terms and Conditions of Sale of sale shall be governed by English law and the Seller and the Customer shall both submit to the exclusive jurisdiction of the English Courts.

6.11.2 The invalidity or unenforceability of any provision of these conditions shall not affect the validity or enforceability of any other provision which shall remain in full force and effect.

6.11.3 The failure of the Seller to enforce any right or provision in these Terms and Conditions of Sale shall not constitute a waiver of that right or provision.

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APPENDICES:

APPENDIX 1: CLIENT pharmaceutical products

APPENDIX 2: Service Fee

APPENDIX 3: Physical Distribution Conditions

APPENDIX 4: General Transport Conditions “AVC 2002”

APPENDIX 5: TLN betalingscondities

APPENDIX 6: Approved Subcontractors MOVIANTO

APPENDIX 7: CLIENT Contact List

APPENDIX 8: MOVIANTO Nederland Contact List

APPENDIX 9: Functional Specifications

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APPENDIX 1:

CLIENT PHARMACEUTICAL PRODUCTS

Description of products

Product	Generic Substance	Product Code	Country Code	Quality Status	Storage condition	Transport condition	Special Information (ADR, CD, Cytotoxic, etc)	Normal holding amount	Initial Price	MSDS provided to MOVIANTO
Pixuvri	Not Applicable	EU/1/12/764/001	TBD	EC Approved	2-8C	2-8C*	Cytotoxic	TBD	TBD	CTI will provide MSDS

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APPENDIX 2:

SERVICE FEE

Warehouse Services

	Fixed monthly Fee
# orders per Month	Warehousing Service	Customer Service (EN, DE, FR, NL)	Additional EU language
**	**	**	**
**	**	**	**
**	**	**	**
**	**	**	**
**	**	**	**
**	**	**	**
**	**	**	**
**	**	**	**

Returns Processing
Return Fee	*	*
Destruction Charges	*	*
Emergency Orders
Per Emergency Order Fee	*	*

Transport Services
Distribution - Benelux	**
Distribution - Rest of EU	**
**

Excluded

**

**

**

**

**

Conditions
AVC conditions	Transport by road in the Netherlands
CMR conditions	Transport by road outside the Netherlands
Dutch Forwarding conditions	Transport by air or sea
Physical Distribution conditions	For storage and handling activities
TLN conditions	For payment of our services
(For all conditions the most recent version is applicable)
One-Time fee for IT implementation

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Business Facts
User Requirements will be written by Client? (YES|NO)	YES
Functional Specifications will be written by Movianto?	YES
Project Charter necessary?	NO
If Reports are necessary, please choose. (Mark with “X”)	Stock Level
	Delivery
	Despatch
Web access to the Reporting Platform necessary		NO
Technical Facts
Is the connection to the Client already in place (only for CRs)		NO
Which kind of technical connection is preferred? (Mark with “X”)	JMS or IBM MQ
	HTTPS
	SOAP
	SFTP	X
	EDIFACT
Which is the incoming Format? (Mark with “X”)
Movianto GBO structure
XML(NS) Format		X
IDOC XML(NS) Format - Movianto Standard
XML(NS) format based on SAP IDOCs
Fixed length - Movianto Standard
Fixed length or tagged delimited format (CSV)		X
EDIFACT Standard
How complex is the Mapping, and the business rules? - Please choice		LOW
Changes on the GBO model necessary - If yes how many GBOs are involved? (Referring to the actual GBO documentation)		0
Unit tests with different test cases are necessary?		YES
Test plans are written by the Client?		YES
Integration tests are fully processed and coordinated by the Client and the Business Unit? (YES|NO)		YES
User tests are fully processed and coordinated by the Client and the Business Unit?		YES
Additional Computer System Validation (CSV) necessary?		NO
Number of connected Movianto countries		1

Interfaces:	Active
Delivery		0
Despatch	X	1
Invoice	X	1
ASN		0
Goods Receipt	X	1
Stock Level	X	1
Batch Release (Batch Status Change)		0
Business Partner Master		0
Article Master		0

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Returns	X	1
		5

Remarks: The effort was increased, because CTI wants to have XML and csv files for all interfaces   Also additional effort to create requested pdf files for the financial reports in NL

Summarization effort
	Effort (MD)	Daily			Costs
Development and testing Prince	26		**			**
Project Management Prince	2		**			**
Computer System Validation Prince	0					—	€
Effort Movianto Prince	28		Sum			**
	Units
Movianto Prince Product fee	0					—	€
Effort Business Units	**					—	€
Effort Movianto Prince and BU	**
Safety margin	0		0	%

Remarks:

Costs in total **        

APPENDIX 3:

PHYSICAL DISTRIBUTION

CONDITIONS

Filed with the District Court in Amsterdam

on September 1st, 2000.

Registered under number 177/2000

Filed with the District Court in Rotterdam

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on September 1st, 2000.

Registered under number 116/2000

Physical distribution Articles

Article	1.	Definitions
	2.	Scope of Action
	3.	Employees and Independent Contractors
	4.	The Physical Distributor’s Obligations
	5.	Consequences in the Case of Non-Compliance of Obligations of the Physical Distributor
	6.	Obligations of the Principal
	7.	Consequences of Principal’s Non-Compliance with His Obligations
	8.	Liability of the Physical Distributor
	9.	The Principal’s Liability
	10.	Claims Lapse and Expiry
	11.	Terms of Payment
	12.	Securities
	13.	Competent Judge
	14.	Recommended Quotation Title

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PHYSICAL DISTRIBUTION

CONDITIONS

(PD-Conditions)

ARTICLE 1 DEFINITIONS

These conditions use principal terms which are defined as follows:

1. Physical Distribution

All operations such as transport, freight forwarding, unloading, stocking, storage, discharge, loading, stock control, assembly, processing of orders, preparation for dispatch for shipping, invoicing, information exchange and management with regard to goods, subject to agreement between principal and physical distributor.

2. Physical Distribution Agreement

The agreement whereby the physical distributor undertakes for the principal the performance of physical distribution.

3. Physical Distributor

The provider of services who has entered into an agreement with the principal and has thus committed himself to performing physical distribution.

4. PD-Conditions

The Physical Distribution Conditions under discussion.

5. Transportation Procedure

The part of the implementation of the physical distribution agreement whereby goods are on board a vehicle of transport in order to be transported by it. The procedure does not include loading and unloading from these vehicles of transport.

6. Circumstances beyond control

Circumstances which could not have been avoided by a careful physical distributor and of which he could not have prevented the consequences. Fire, explosion and the consequences thereof shall always be deemed to be caused by circumstances beyond control.

7. Acceptance of goods

The point in time at which the goods have been physically handed over into the care of the physical distributor in order to perform the agreed work.

8. Delivery

The actual time when the goods are placed at the principal’s or at the disposal of the person entitled to the goods, after the agreed work has been performed.

9. Carrier’s liability

The liability resulting from contracts, statutory regulations and the conditions under discussion, applicable to (transnational) transport by road, rail, on (inland) waterways, by sea or combined transport. If and insofar as the above contracts, laws and statutory regulations and conditions omit certain liabilities, the PD-Conditions under discussion apply.

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10. Freight forwarding

Entering into one or more transportation agreements with a carrier on behalf of the principal, or laying down a stipulation in such (a) transportation agreement(s) on behalf of the principal.

11. Stock Discrepancy

An inexplicable discrepancy between the physical stock and the stock as it should be according to the stock records of the physical distributor and the principal.

12. Working Days

All calendar days, with the exception of Saturdays, Sundays, and generally acknowledged Christian and public holidays.

ARTICLE 2 SCOPE OF ACTION

General

1. The PD-Conditions govern all offers made, agreements entered into by the physical distributor, and the legal and actual actions undertaken for implementation of certain activities, in as far as the PD-Conditions are not contrary to compulsory law.

2. Deviations from these conditions are only valid if and insofar as they were specifically agreed between both parties.

3. Unless explicitly agreed otherwise, the applicability of conditions stipulated by the principal is precluded.

4. If the principal and the physical distributor have agreed to exchange data electronically, these conditions and also the General Conditions for Electronic Communication (Algemene Voorwaarden voor Elektronisch Berichtenverkeer), latest version, as filed with the District Courts in Amsterdam and Rotterdam by the Transport Foundation Address, are applicable.

Transport

5. Besides Treaties, Conventions, Laws and statutory regulations applicable to the various transportation modalities, the following rules apply to the various types of transportation indicated, taking the above into account:

• National transport by road

The General Transportation Conditions 1983 (Algemene Vervoer Condities)

• Transport by rail

The stipulations of the transportation document

• Transport on inland waterways

The ‘Bevrachtingsvoorwaarden’ 1991, filed with the District Courts in Amsterdam and Rotterdam, latest version filed

• Transport by air

The standard IATA Transportation Conditions, as stated on the reverse of the standard IATA air bill, as well as the conditions referred to on the reverse

• Combined transport

For each part of the transport the rules of law applicable to that specific part, as well as art. 8.40 up to and including 8:52 Civil Code.

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Freight forwarding

6. Should the physical distributor undertake freight forwarding, articles 60 up to and including 73 of Book 8 of the Civil Code are applicable, as are the Dutch Freight Forwarding Conditions, as filed with the District Courts in Amsterdam, Arnhem, Breda and Rotterdam on 2 March, 1992, of the latest version filed.

ARTICLE 3 EMPLOYEES AND INDEPENDENT CONTRACTORS

1. The physical distributor is entitled to deploy independent contractors when implementing the agreement. The physical distributor is responsible for actions undertaken and any negligence caused by the independent contractors during the performance of work for which they have been deployed by the physical distributor, in the same way as he is responsible for his own employees.

2. It is, however, explicitly stipulated that the physical distributor shall not be liable for any damage, caused intentionally of by implied gross negligence on the part of his employees or independent contractors.

3. If the above employees or independent contractors are held liable with respect to the work for which they were deployed by the physical distributor which does not fall within the scope of the agreement, it is stipulated on their behalf that they can refer to all stipulations on exclusion or limitation of liability as incorporated in the conditions under discussion.

4. Any legal action with regard to liability, irrespective of the reasons, can only be taken by the principal within the scope of the agreement entered into with the physical distributor.

ARTICLE 4 THE PHYSICAL DISTRIBUTOR’S OBLIGATIONS

The physical distributor is obliged to:

1. Accept the agreed goods in the specified place, time and manner, accompanied by a transportation document and other documents issued by the principal.

2. Bear responsibility for loading and unloading of the goods.

3. Ensure that storage and handling of goods take place in explicitly agreed locations.

4. Take all necessary measures at the principal’s expense with respect to the goods, including those not resulting directly from the physical distribution, and prior to proceeding further with the actions, and where possible consulting the principal.

5. Insure against his liability resulting from the PD-agreement upon the principal’s request.

6. Insure the goods, also stating the coverage required, upon written request from the principal and on behalf of both parties, whereby the right of recovery is withheld, and to provide the principal with a copy of the policy or a copy of an insurance certificate.

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7. Admit the principal and persons designated by him to the storage locations of the goods, if:

• The above takes place in the presence of the physical distributor or any person designated by him, and if informed of this intent in advance.

• The above is in accordance with the house rules of the physical distributor.

8. Perform additional work at rates agreed in consultation with the principal.

9. Request instructions from the principal prior to taking delivery of goods which are visibly damaged. Should it not be possible to obtain instructions in time, the physical distributor is entitled to refuse to accept delivery of the damaged goods.

10. Take responsibility for the materials deployed by him in implementing the physical distribution agreement.

11. Deliver goods in the condition in which they were received, of in the condition mutually agreed.

12. Observe confidentiality towards third parties with respect to facts and data known to him on the basis of the physical distribution agreement.

ARTICLE 5 CONSEQUENCES IN THE CASE OF NON-COMPLIANCE OF OBLIGATIONS OF THE PHYSICAL DISTRIBUTOR

1. If the physical distributor does not meet his obligations as stated in article 4, paragraphs 4, 5, 6, 7 and 8, the principal is entitled to terminate the physical distribution agreement, without losing his entitlement to payment for damages to the goods, after setting a deadline for the physical distributor in writing, and if after expiry of that date the physical distributor has failed to meet his obligations. If the length of the period has not specifically been stipulated in the PD-agreement, a period of thirty calendar days applies.

2. If the physical distributor has not met his obligations as stated in article 4, paragraph 11, article 8 is applicable.

3. The principal, respectively the recipient of the goods, should inform the physical distributor immediately in writing of any visible damage at the time of delivery; damage that is not immediately visible, should be reported in writing to the physical distributor as soon as possible, no later than 7 days after delivery.

4. If the physical distributor does not meet his obligations as stated in article 4, paragraph 9, on request of the principal, the damaged goods will be returned to the sender at the expense of the physical distributor.

ARTICLE 6 OBLIGATIONS OF THE PRINCIPAL

The principal is obliged to:

1. Provide the physical distributor on time with all the relevant information on the goods or the handling thereof, unless he may reasonably assume that the physical distributor already possesses this information of should possess this information. The principal guarantees that the information provided by him is correct.

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2. Place the relevant goods in the specified place, time and manner at the disposal of the physical distributor, accompanied by the corresponding documents and/or documentation and all other forms required by law.

3. Reimburse any additional expenses incurred by the physical distributor for additional work and/or deviating circumstances, which do not fall within the scope of the agreed rate for the physical distribution.

4. Indemnify the physical distributor upon his first request against claims instituted by third parties which do not fall within the scope of the agreement for damages of financial disadvantages, related in any way with the implementation of the PD-agreement by the physical distributor himself, his employees of independent contractors.

5. Be responsible for the goods and materials placed at the physical distributor’s disposal.

6. On termination of the physical distribution agreement, to take delivery of those goods still in the possession of the physical distributor no later than the last working day of the agreement, after payment of all outstanding amounts of future dues. For the amounts outstanding after termination of the physical distribution agreement, the principal may limit himself to providing sufficient security.

7. Observe confidentiality towards third parties with regard to facts and data known to him due to the Physical Distribution agreement.

ARTICLE 7 CONSEQUENCES OF PRINCIPAL’S NON-COMPLIANCE WITH HIS OBLIGATIONS

1. If the principal does not meet his obligations as stated in article 6, the physical distributor is entitled to terminate the agreement of physical distribution, without losing the right to payment of damages suffered, provided he has notified the principal in writing of his obligations and receives no reaction on expiry of the deadline set. If the exploitation of his enterprise is disturbed incommen-surately by setting the deadline, the physical distributor may also proceed to terminate the agreement, without observing the deadline.

Termination is executed by written notification and the agreement for physical distribution is terminated on receipt of this notification.

2. If the principal does not meet his obligations, as stated in article 6, paragraph 6, article 17 General Transportation Conditions (AVC) is applicable.

ARTICLE 8 LIABILITY OF THE PHYSICAL DISTRIBUTOR

1. Transportation procedure. The physical distributor accepts carrier liability for damages incurred to goods entrusted to him during the transportation procedure, even if he subcontracts the transportation to others. The above is valid unless the physical distributor has explicitly and previously expressed that he is not acting as a carrier with regard to the transport procedures, but as a forwarding agent: in that case his liability is governed by articles 8:60 up to and including 8:73 Civil Code, and by the Dutch Shipping and Forwarding Conditions.

2. Damage to goods, not incurred during transport. The physical distributor is liable for damages incurred to and loss of goods entrusted to his care from the moment of

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receipt until delivery, unless he can prove circumstances beyond his control as stated in article 1, paragraph 5.

3. Consequential damage. The physical distributor is only liable for damage to or loss of the goods entrusted to his care, and therefor not for immaterial damage, or lost profits, consequential damage, irrespective of how incurred, including damage due to delay and damage based on advice offered by the physical distributor.

4. Open-Air Storage. The physical distributor is not liable for damage to goods, insofar as the damage is a result of special risks connected with open-air storage requested by the principal.

5. Limitation of Liability. Excluding his own wilful misconduct of gross negligence, the physical distributor is under no circumstances liable for an amount exceeding Dfl 250,000 for one incident or a series of incidents due to the same cause. Provided that damage, devaluation of loss of goods falling within the scope of the order is involved, the liability is limited to Dfl 7.50 per kilogram of damaged of lost weight, with a maximum of Dfl 250,000.

6. Discrepancies in Stock. Possible stock discrepancies should become evident from stock taking, which should be performed at least once a calendar year, either at the end of the year, or at the termination of the agreement. Possible deficits and surpluses are balanced against each other.

In the case of discrepancies in stock the physical distributor can only be held liable, if the deficits (shortages) exceed possible surpluses by a number of units, kilograms or litres, which is greater than one per cent of the total of goods handled by the physical distributor on an annual basis, which is the subject of the physical distribution agreement.

Needless to say it is explicitly agreed that the conditions under discussion also govern the physical distributor’s liability concerning discrepancies in stock, including the limits of liability as stated in article 8, paragraph 5.

ARTICLE 9 THE PRINCIPAL’S LIABILITY

1. The principal is liable for all damages incurred by means of or connected with the goods entrusted to the physical distributor, e.g. the type of packaging thereof, such as damage connected with hazardous goods.

2. The principal is liable for damages caused by persons permitted to the physical distributor’s premises on the principal’s authorisation.

3. The principal is also liable for all expenses, damages, safe-guarding interests, fines, penalties and all impoundment’s, including damages incurred through either failing to clear customs documents, or failing to clear these on time, including circumstances where the clearing of the documents was impaired or delayed by submission of the goods with inappropriate documentation, of which are the result of, or are in any way related to damage for which the physical distributor cannot be held liable.

ARTICLE 10 CLAIMS LAPSE AND EXPIRY

1. Any claim made against the physical distributor, among which claims on account of reimbursement, lapses after a period of twelve months, and expires after a period of eighteen months.

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2. The lapse or expiry begins from the date following that on which the goods were delivered or should have been delivered, or for lack of such a date, on the date following the date that the claim originated.

In any case the lapse or expiry begins on the date following the date on which the agreement between the parties is terminated.

ARTICLE 11 TERMS OF PAYMENT

1. All amounts owed to the physical distributor by the principal, irrespective of the basis, should be paid, within a specified period of in the absence of an agreed period, within fourteen days after date of invoice.

2. If the principal should fail to pay an amount owed within the specified period of in the absence of a specified period within fourteen days after the date of invoice, he is obliged to pay an interest of 4% on an annual basis above the discount rate for promissory notes of the ‘Nederlandsche Bank’, beginning on the date that these payments were due up to and including the date of payment.

3. The physical distributor is entitled to bill the principal for any necessary extrajudicial and judicial expenses incurred for the collection of debts, as stated in paragraph 1. The extrajudicial costs are owed from the moment that the principal, after having been declared in default according to article 6:82 Civil Code, and a third party has been assigned to collect the debts.

4. An appeal for debt settlement (compensation) concerning requests for payment resulting from the physical distribution agreement, or other payment requests for other goods related costs cannot be permitted.

5. In any case all amounts as stated in paragraph 1 of this article will be claimable immediately and, deviating from article 11 paragraph 4, will be eligible for compensation if:

a) The principal’s petition for bankruptcy is being filed, the principal applies for a suspension of payment of loses free disposal of his assets in any way.

b) The principal:

1) Offers his creditors a settlement.

2) Is in default with meeting any obligation towards the physical distributor.

3) Discontinues his business or, in the case of a corporate body of company, this is dissolved.

ARTICLE 12 SECURITIES

1. The physical distributor has a right of retention against any claims for surrender of funds, goods and documents under his supervision with regard to the physical distribution.

2. With regard to the principal or the consignee the physical distributor is entitled to exercise his right of retention on what is due to him or will be owed to him by the principal or consignee irrespective on which account. He may also exercise his right of retention for goods for which reimbursement is due.

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3. The physical distributor may also exercise his right of retention as stated in paragraph 2 on outstanding payments due to him by the principal with regard to previous agreements for physical distribution.

4. The physical distributor may also exercise his right of retention on a commission entitlement with regard to reimbursement, for which he does not need to accept a security.

5. If a disagreement arises concerning the amount payable, or if a recalculation, which cannot take place immediately, is necessary to determine the final amount, the party demanding delivery is obliged to pay the amount mutually agreed and to offer security for the payment of the disputed amount or which is yet to be determined.

6. On all goods, documents and funds which the physical distributor has or will have under his control for any reason and destination, a right of lien is established as stated in article 3:236 Civil Code for all claims against the principal or the owner.

7. The sale of any collateral takes place in accordance with the law or privately, if an agreement on this issue was reached.

8. The authority to sell as stated in the above paragraph implies that the goods in his possession may be sold at the expense of the principal in accordance with articles 249 ff. Civil Code and to pay himself all amounts owed by the principal from the proceeds, this applies if the principal fails to settle the amounts, owed by him to the physical distributor, of if the principal has given the physical distributor good reason to anticipate that the payment obligations will not be met.

9. The physical distributor may, if so requested, have the mortgaged goods replaced with another equivalent security based solely on his own judgement.

ARTICLE 13 COMPETENT JUDGE

1. All agreements under the physical distribution conditions are subject to Dutch law.

2. All disputes arising from or in connection with the agreement are subject to arbitration in Amsterdam or Rotterdam, in accordance with the TAMARA regulations (obtainable from the Chambers of Commerce in Amsterdam and Rotterdam, and the TAMARA Foundation, P.O. Box 4222, 3006 AE Rotterdam).

3. Notwithstanding the stipulations made in this article in paragraph 2, the physical distributor is entitled to present claims with regard to outstanding amounts not disputed in writing by the principal within four weeks after expiry date of the invoice(s), to an ordinary judge in Amsterdam, whose exclusive authority with the exception of lodging an appeal, is herewith explicitly agreed by the parties.

ARTICLE 14 RECOMMENDED QUOTATION TITLE

The conditions under discussion may be quoted as the ‘Physical Distribution Conditions 1996’ and were deposited with the District Courts in Amsterdam and Rotterdam on 1 February, 1996.

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In the case of differences between the Dutch text and translations into any other language, the Dutch text prevails.

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APPENDIX 4:

Algemene Vervoercondities 2002 (AVC 2002)

General Conditions Of Transport 2002

Article 1 Definitions

In these conditions:

1. ‘Contract of carriage’ means the contract by which the carrier commits himself opposite the sender to carry goods by road.

2. ‘Sender’ means the contractual opposite party of the carrier. Mentioning a sender in the consignment note does not automatically mean that the sender so mentioned is the contractual opposite party of the carrier.

3. ‘Consignee’ means the person who by virtue of the contract of carriage has right, opposite the carrier, to delivery of the goods.

4. The ‘consignment note’ means the document drawn up in three original copies, one of which (evidence of receipt) is destined to the sender, the second one of which (evidence of delivery) is destined to the carrier, and the third one of which is destined to the consignee.

5. ‘Assisting servants and agents’ means employees of the carrier as well as persons whose services the carrier uses for the completion of the contract of carriage.

6. ‘Force major’ means circumstances in so far as a diligent carrier has been unable to avoid and in so far as such a carrier has been unable to prevent the consequences thereof.

7. ‘Damage caused by delay’ means damage to property/capital arising from delay in delivering goods.

8. ‘Written’ or ‘in writing’ means what it says or by electronic means.

9. ‘BW’ means Burgerlijk Wetboek (Dutch Civil Code).

10. ‘CMR’ means Convention on the Contract for the International Carriage of Goods by Road (CMR) (Geneva, 19 May 1956), as supplemented by the 1978 Protocol.

11. ‘Algemene Veerboot- en Beurtvaartcondities’ means the same (in translation: General Ferry Service and Barge Service Conditions), latest version, as deposited by sVa / Stichting Vervoeradres at the registry (griffie) of the district court of justice (arrondissementsrechtbank) at Amsterdam and at Rotterdam.

12. ‘Algemene Opslagvoorwaarden’ means the same (in translation: General Storage Conditions), latest version, as deposited by sVa / Stichting Vervoeradres at the registry (griffie) of the district court of justice (arrondissementsrechtbank) at Amsterdam and at Rotterdam.

13. ‘Stack-on transport’ means carriage of goods by means of a vehicle (most often, but not necessarily always a lorry), which in turn is carried in or on some other vehicle or transport means (such as often a ship or a railway car). For best understanding the technique, the reader is referred to art. 2 CMR.

Article 2 Electronic messages

1. If data, including those relating to the consignment note, are exchanged electronically, parties shall not dispute the admissibility of electronic messages as evidence in the event of a mutual conflict.

2. Electronic messages have the same force of evidence as written paper ones, unless such messages have not been saved and recorded in the format as agreed between the parties and at the agreed security level and in the agreed manner.

Article 3 Scope of application

The Algemene Vervoercondities apply to the contract of carriage of goods by road; if CMR applies, then the Algemene Vervoercondities apply supplementarily where CMR is silent.

Article 4 Obligations of the sender; notice of termination of the contract of carriage

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1. The sender is obliged:

(a) concerning the goods and the treatment of same, timely to supply to the carrier all data and information as he is able to or ought to be able to, and of which he knows or ought to know that such data and information are important to the carrier, unless he may assume that the carrier knows them;

(b) to make the contract goods available to the carrier at the agreed location and time and in the agreed manner, accompanied by the consigment note as required by article 5 and by any further documents as required by law from the sender;

(c) to address clearly and adequately each package to be carried and, in so far as reasonably practicable, to affix or append the required information and address to the package or its packaging in such manner that under normal circumstances it will retain its legibility until the end of the carriage. The sender may agree in writing with the carrier that addresses on the packages are substituted by a mark showing figures, letters or other symbols;

(d) to mention in the consignment note the total weight of the goods to be carried;

(e) to load and to stow the goods as agreed in or on the vehicle, and to have them unloaded, unless parties agree otherwise, or unless some other obligations follow from the nature of the intended carriage, considering the goods to be carried and the vehicle as made available.

2. The sender is not allowed to back out of his obligations mentioned in para 1 a, b, c, and d for whatever circumstance he may invoke and the sender is obliged to compensate the carrier for the damage arising from the non-compliance with the obligations mentioned.

3. Notwithstanding para 2 here before the carrier may give notice of termination of the contract without preceding summons to comply, if the sender did not fulfil his obligations mentioned in para 1 a and b; however the carrier may do so only after putting the sender in writing under an ultimate deadline and if the sender has not yet fulfilled his obligation by the expiry of that deadline. If by putting such a deadline the course of operation of the business of the carrier would be unreasonably disturbed, then the carrier may terminate the contract without granting a deadline as mentioned. The sender may likewise terminate the contract, if he did not fulfil his obligation as mentioned in para 1 b. Termination is effected by written notice and takes effect on the moment of receipt of same. After termination the sender is indebted to the carrier for 75 percent of the agreed freight without being held liable for further compensation. If no freight has been agreed, the applicable freight will be as per the law, respectively as per custom, respectively in fairness.

4. The carrier may also give notice of termination of the contract, in case of defective loading or stowing or in case of overcharging, but not until the sender has been put in the position to undo the defect or the overcharging. If the sender refuses to undo the defective loading and/or stowing or the overcharging, the carrier may either give notice of termination of the contract, or undo himself the defects and/or the overcharging; in both cases the sender is obliged to pay the carrier an amount of € 500,—, unless the carrier proves that the damages so suffered are in excess of that amount; para 3 does not apply.

5. The sender must repay to the carrier any fine imposed to him owing to overcharging, unless the carrier has fallen short in fulfilling his obligations as in art.9 para 1 and 5 or the carrier has not given notice of termination of the contract of carriage on the ground of the previous paragraph, without prejudice to his right to invoke mala fides of the sender.

6. Notwithstanding the other paragraphs of this article the sender must compensate to the carrier for damage which he has suffered in so far as the damage has arisen from the circumstance that the carriage of the goods has been or will be prohibited or restricted by public authority; however, this liability does not obtain if the sender proves that the carrier was or could have reasonably been aware of the prohibition or restriction at the time of the contract of carriage being concluded.

Article 5 The consignment note

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1. When making the goods available the sender is obliged to hand a consignment note to the carrier which states that these AVC 2002 apply to the contract of carriage concluded.

2. The sender is obliged to complete the consignment note entirely and conform to the truth and following directions for completion, and when making the goods available to the carrier he warrants the correctness and completeness of the data supplied by him.

3. The carrier is obliged to clearly make himself known as carrier in the consignment note presented by the sender and to sign it and to hand it back to the sender. If the carrier so requires, the sender is obliged to sign the consignment note. The signature may be printed or substituted by a stampprint or any other mark of the origin.

4. The consignment note may also be made out in the format of electronic messages in accordance with the format and security level as agreed between the parties and in accordance with the manner of forwarding, saving and recording as agreed between the parties.

Article 6 Value of the consignment note as evidence

1. When receiving the goods the carrier is obliged to check the correctness of the enumeration of the goods in the consignment note as well as the apparent good condition of the goods and their packaging, and in case of deviation to make a note of that on the consignment note. The obligation does not obtain if in the judgement of the carrier this would delay the carriage considerably.

2. The consignment note is prima facie evidence, subject to evidence to the contrary, of the conditions of the contract of carriage and the parties to the contract of carriage, and of the receipt of the goods and their packaging in apparent good condition, and of the weight and number of the goods. If the carrier has no reasonable means to check the correctness of the entries meant in para 1, then the consignment note is no evidence of the entries.

Article 7 Freight payment

1. The sender is obliged to pay the freight and further costs which burden the goods at the moment of handing over the consignment note or of the goods having been received by the carrier.

2. If freight payable at destination has been agreed, the consignee is obliged to pay the freight, the costs due owing to other reasons relating to the carriage and further costs burdening the goods on delivery of the goods by the carrier; if the consignee did not pay these upon the first reminder, he and the sender are severally obliged to pay. If, in case of a consignment on the condition freight payable at destination, the sender has mentioned in the consignment note that no delivery may be performed without payment of the freight, the costs due owing to other reasons relating to the carriage and further costs burdening the goods, the carrier, if no payment is made, must ask the sender for further instructions which he is obliged to follow up, in so far as reasonably possible, against compensation of costs and damage and possibly payment of a reasonable reward, unless these costs have arisen by his own fault.

3. The carrier has the right to charge all inevitable extra-judicial and judicial expenses made to collect the freight and other amounts, as mentioned in para’s 1 and 2, to the one who is debtor of the freight and other costs. The extra-legal collection expenses are due as from the moment when the debtor fails to pay and the claim has been referred to a third party for collection.

4. The freight, the costs due owing to other reasons relating to the carriage and further costs burdening the goods are due also if the goods are not delivered at destination or only partly, damaged or delayed.

5. An appeal to set off claims to pay freight, costs due owing to other reasons relating to the carriage and further costs burdening the goods against claims on some other account is not permitted.

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6. If the sender has not fulfilled his obligations mentioned in the present article, then the carrier is entitled to suspend departure of the vehicle, and in this event the damage arising from it are considered as costs burdening the goods.

Article 8 Instructions of the sender

1. The sender is entitled to change the place where the goods are made available, to designate himself or somebody else as consignee, to change a given indication of the consignee as well as to give orders concerning delivery or to change the place of delivery, if these instructions do not impede the normal operation of the business of the carrier.

2. Instructions may given also after receipt of the goods by the carrier.

3. The sender is obliged to compensate the carrier for the damage and costs caused by instructions being followed up. If the vehicle has moved to a place which had not been agreed previously in consequence of the instructions given, then the sender is obliged, except for paying compensation for damage suffered and expenses made, also to pay a reasonable reward for this purpose.

4. The right to give instructions is extinguished in proportion in which the consignee accepts the goods at the place of delivery or the consignee claims compensation from the carrier because the latter does not deliver the goods.

Article 9 Obligations of the carrier

1. The carrier is obliged to accept the goods agreed at the place and time and in the manner agreed as well as to communicate the loading capacity of the vehicle to the sender, unless the sender is likely to be aware of this.

2. The carrier is obliged to deliver at destination the goods received for carriage in the condition in which he has received them.

3. The carrier is obliged to deliver the goods received for carriage within a reasonable time lapse; if a period of delivery has been agreed in writing delivery must be done within this period.

4. If the carrier does not fulfill the obligation mentioned in para 1, the two parties may give notice of termination of the contract in respect of the goods not yet accepted by the carrier. However, the sender may do so only after having put the carrier under a deadline in writing and the carrier has not fulfilled his obligation at the expiry of it. Notice of termination is given by a written communication to the other party and the contract terminates at the moment of receipt of the communication. After termination the carrier is obliged to compensate the sender for the damage which he has suffered as a result of the termination. This compensation, however, cannot amount to more than twice the freight and the sender is due no freight.

5. The carrier is obliged to check the loading, stowing and possible overcharging undertaken by or on behalf of the sender if and in so far as circumstances permit to do so. If the carrier judges the loading and stowing to be defective, he is obliged, notwithstanding the stipulation in article 4 para 4, to make a remark of this in the consignment note. If he is not able or in the position to fulfil his obligation to check, he may make a remark to the effect in the consignment note.

6. If delivery to house has been agreed, the carrier must carry the goods at the door of the address mentioned in the consignment note or at the door of an address which in stead of the one in the consignment note the sender – in keeping with article 8 – has given.

Article 10 Liability of the carrier

1. Except in case of force major the carrier is liable for damage to or loss of the goods and for damage owing to delay in delivery in so far as the carrier has not fulfilled the obligations mentioned in article 9, para 2 and 3.

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2. For acts and omissions of his assisting agents and servants, the carrier is liable in the way as for his own acts and omissions.

3. The carrier cannot relieve himself of his liability by invoking the defective condition of the vehicle or of the equipment of which he makes use unless this has been made available to him by the sender, the consignee or the receiver. The notion equipment does not include a ship or a railcar in or on which is the vehicle.

Article 11 Special risks

Notwithstanding article 10, the carrier, who did not fulfil his obligations as in article 9 para 2 and 3, is – in spite of this – not liable for the damage arising from this, in so far as the non-compliance is the result of the special risks bound to one or more of the following circumstances:

(a) the carriage of the goods in an open unsheathed vehicle, if this has been explicitly agreed and specified in the consignment note;

(b) absence of or defective condition of packing of the goods which considering their nature or the manner of carriage should have been sufficiently packed;

(c) handling, loading, stowing or unloading of the goods by the sender, the consignee or persons acting for the account of the sender or the consignee;

(d) the nature of certain commodities itself which owing to causes connected with this nature are exposed to total or partial loss or to damage, particularly through spontaneous inflammation, explosion, melting, breakage, corrosion, decay, desiccation, leakage, normal reduction of quality or the action of moth or vermin;

(e) heat, cold, temperature variations or humidity of the air, but only if it has not been agreed that the carriage would be performed by means of a vehicle especially equipped to protect the goods from the effects of such conditions;

(f) insufficiency or inadequacy of the addresses, figures, letters or marks of the packages;

(g) the fact of carriage of a live animal.

Article 12 Presumption of exonerating circumstances

1. If the carrier proves that, considering the circumstances of the case, the non-compliance with his obligations following article 9 para’s 2 and 3 may have been a consequence of one or more of the special risks enumerated in article 11, it is presumed that the non-compliance was such a consequence indeed. However, the person who opposite the carrier is entitled to the goods may prove that this non-compliance was not wholly or partly caused by one of these special risks.

2. The presumption mentioned here before does not apply in the event mentioned in article 11 (a), if there is an abnormal shortage or an abnormally big loss of packages.

3. If, in accordance with what the parties had agreed, the carriage is performed by means of a vehicle especially equipped to protect the goods from the effects of heat, cold, temperature variations or humidity of the air, the carrier may for the purpose of exoneration of his liability caused by this effects invoke the benefit of article 11 (d) only if he proves that all measures had been taken, which he was obliged to take considering the circumstances, with respect to the choice, the maintenance, and the use of such equipment and that he acted in compliance with the special instructions meant in the 5th paragraph.

4. The carrier may only invoke the benefit of article 11 (g), if he proves that all measures had been taken which he was normally obliged to take, considering the circumstances and that he had acted in compliance with the special instructions meant in the 5th paragraph.

5. The special instructions meant in the 3rd and 4th paragraphs of this article must have been given to the carrier before the start of the carriage and must have been explicitly accepted by him and must be specified in the consignment note if one has been issued for the carriage concerned. The single specification of them in the consignment note constitutes no evidence in this event.

Article 13 Compensation

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1. The compensation due by the carrier on the ground of non-compliance with his obligation as in article 9 para 2 is limited to an amount of € 3.40 per kilogram; for other damage than that arising from loss of or damage to the goods, such as consequential damage, business stagnation or immaterial damage, the carrier is not liable on the ground of the contract of carriage.

2. The number of kilograms as basis for the calculation of the amount mentioned in para 1 is the weight of the damaged or not delivered object as specified in the consignment note.

3. If the carrier is liable because he did not deliver within the reasonable period mentioned in article 9 para 3, the compensation for delay in delivery is limited to once the freight; if the period mentioned in article 9 para 3 has been agreed in writing, the compensation is limited to twice the freight.

4. The expenses for expertise research, for salvage and other costs which have been spent to establish and realise the value of the damaged or lost goods and of those delivered with delay are considered as diminishment of value.

5. If the carrier is liable because of non-compliance with his obligation stemming from the articles 8:1115 para 2 and 8:118 para 3 BW, or the articles 6 para 1, 19 para 4, 21 or 25 of these conditions, a compensation due by the carrier on this account shall not exceed the compensation which he would be due in case of total loss of the goods concerned.

Article 14 Intention to cause damage and conscious recklessness

An act or an omission by whomever, except the carrier himself, done either with the intention to cause damage, or recklessly and in awareness that this damage was likely to follow from it, does not deprive the carrier of his right of appealing to any exoneration or limitation of his liability.

Article 15 Notice of damage

1. If the goods are delivered by the carrier showing apparent damage or shortage and the consignee does not, on receipt of the goods or immediately thereafter, communicate to the carrier a reservation in writing, specifying the general nature of the damage or the shortage, then the carrier is presumed to have delivered the goods in the same condition as in which he has received them.

2. If the damage or the shortage are not apparent and the consignee has not, within one week after acceptance of the goods, communicated to the carrier a reservation in writing, specifying the general nature of the damage or the shortage, then the carrier is likewise presumed to have delivered the goods in the same condition as in which he has received them.

3. If the goods are not delivered within a reasonable or an agreed period and the consignee has not, within one week after acceptance of the goods, communicated to the carrier a reservation in writing, specifying that the goods have not been delivered within this period, then the carrier is presumed to have delivered the goods within this period.

Article 16 Right to claim

Both the sender and the consignee have the right opposite the carrier of claiming delivery of the goods in accordance with the obligations of the carrier.

Article 17 Cash on delivery (COD)

1. Parties may agree that the goods will burdened by a COD amount which, however, shall not exceed the invoice value of the goods. In that case the carrier may deliver the goods only after preceding payment of the COD amount in cash, unless the sender has authorised the carrier to accept some other form of payment.

2. If after notice of arrival the consignee does not appear to pay the COD amount in accordance with the form of payment as prescribed by the sender to the carrier, then the carrier must ask the sender for further instructions. The costs connected with asking for

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instructions are for account of the sender. The carrier must follow up the instructions given to him, in so far as this is reasonably possible, against compensation of costs and possibly a reasonable reward, unless these costs have arisen from his fault. If the sender gives instructions to the effect that delivery must be undertaken in devotion of previously given instructions relating to payment, then the former ones must be given in writing to the carrier. In absence of instructions the stipulations of article 21 apply in similar manner.

3. The carrier is obliged after delivery of a COD consignment and transfer of the amount to him to remit the COD amount without delay but in any event within two weeks to the sender or to have it turned over to his bank or giro account.

4. The period of two weeks mentioned in para 3 starts on the day of delivery of the goods.

5. The consignee who at the time of delivery knows that the goods are burdened by a COD amount is obliged to pay to the carrier the amount which the latter is due to the sender.

6. If the goods have been delivered without the COD amount having been cashed in advance, the carrier is obliged to compensate the sender for the damage to the maximum of the COD amount, unless he proves that there was no fault on his part or on the part of his employees. This obligation does not affect his right of recourse against the consignee.

7. The COD fee due is for the account of the sender.

8. All claims against the carrier stemming from a COD condition are limited to one year, counting from the commencement of the day following the day when the goods were delivered or ought to have been delivered.

Article 18 Reservations of the carrier

In application of the present conditions the carrier reserves the right:

(a) to carry the goods by means of the vehicles which are appropriate in his judgement and to keep them if necessary in such vehicles, storage rooms or places as he thinks fit, irrespective of whether these vehicles, storage rooms of places belong to the carrier or third parties;

(b) to have the free choice of the itinerary for carriage, and likewise to deviate from the customary itinerary. He is also entitled to call on places as he thinks fit for the operation of his enterprise.

Article 19 Prevention after receipt

1. If upon receipt of the goods by the carrier the carriage cannot reasonably or within a reasonable delay commence, continue or be completed, the carrier is obliged to communicate this to the sender. Both carrier and sender have then the right to give notice of termination of the contract.

2. Giving notice of termination shall be done by a communication in writing to the other party and the contract then terminates on the moment of receipt of this communication.

3. The carrier is not obliged to effect further carriage to the place of destination and is entitled to unload the goods and store those at a place fit for the purpose; the sender is entitled to take possession of the goods. The expenses made with respect to the goods in connection with the termination are for account of the sender, under reservation of para 4.

4. Except for force major the carrier is obliged to compensate the sender for the damage which he has suffered as a result of the termination of the contract.

Article 20 Stack-on transport, through transport

1. If part of the carriage, either or not after transhipment of the goods, is performed by inland waterways, the liability of the carrier for this part is defined by the articles 9 and 13 of the Algemene Veerboot- en Beurtvaartcondities.

2. If, after delivery of the goods which he has carried, the carrier commits himself to have the goods carried onwards, he does so as forwarder and his liability in this capacity is then limited to € 3.40 per kilogram of the goods damaged or lost; no further compensation for whatever damage shall be due.

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Article 21 Storage in case of the consignee not showing up

1. If, after notice of arrival of the goods, the consignee does not show up, if he does not begin taking delivery of the goods, if he does not continue regularly and with proper speed taking delivery of the goods, if he refuses to accept the goods or to sign for receipt, the carrier may store the goods for account and risk of the sender, respecting reasonable diligence, in a way and place of his determination, if necessary also in the parked vehicle in which the goods were carried; the carrier is obliged to inform the sender.

2. While respecting para 1, the carrier may also proceed to storage or parking, if establishing security as in article 23 para 5 is refused, or if a dispute arises over the amount or the nature of the security to be established.

3. Except in case of seizure, the goods may be sold publicly or privately for account of the sender without need of any judicial permission, but only after expiry of one week after a notice in writing by registered mail to the sender of the intention to sell.

4. The sale may be effected without respect of any delay and without preceding notice if the goods are perishable or storage may be detrimental or give rise to damage or danger for the vicinity. If no preceding notice was given, the carrier is obliged to inform the sender of the sale afterwards.

5. With regard to live stock the delay meant in para 3 amounts three days, subject to the right of the carrier to proceed to the sale without respecting any delay and without preceding notice if the condition of the live stock so warrants. If no preceding notice was given, the carrier is obliged to inform the sender of the sale afterwards.

6. The carrier keeps the revenue of the goods sold, after deduction of the amount of a possible COD and a fee due to the carrier in connection therewith and of all which is due to the carrier in connection with the goods sold, as freight as well as the costs or storage and parking as other costs and damages, available to the sender during six months following the acceptance of the goods for carriage, at the expiry of which delay he shall put the amount so kept available in judicial custody.

Article 22 Storage before, during and after carriage

If sender and carrier agree that the carrier will store the goods before or during the carriage as agreed, or will do so on completion of the carriage, such storage is effected under application of the Algemene Opslagvoorwaarden, pursuant to which sender and carrier are respectively considered the person who gives (something) into custody and the custodian.

Article 23 Right of lien

1. The carrier has a right of lien on goods and documents in his possession in connection with the contract of carriage against any person who demands delivery of same. This right does not fall to him if, at the moment of receipt of the goods for carriage, he had reason to doubt the right of the sender to make the goods available for carriage to him.

2. The right of lien applies likewise to what burdens the goods by way of COD as well as to the COD fee to which he is entitled, in regard to which he is not obliged to accept security.

3. The carriage may also exercise the right of lien against the sender for reason of what is yet due to him in connection with previous contracts of carriage.

4. Likewise, the carrier may exercise the right of lien against the consignee who in this capacity became a party to previous contracts of carriage for reason of what is yet due to him in connection with these contracts.

5. If when settling the invoice a dispute arises over the amount due or if there is need for a calculation to be made for the determination of what is due that cannot be made quickly, then the one who demands delivery is obliged to pay forthwith the part which the parties agree is due and to put up security for the part in dispute or the amount of which has not yet been fixed.

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Article 24 Right of pawn

1. All the goods, documents and currency values in possession of the carrier in connection with the contract of carriage serve him as pawn for all claims which he has against the sender.

2. Except for the cases in which the sender is in a state of bankruptcy or in which he has been granted suspension of payment or in which he has been declared subject to a debt reorganisation scheme for natural persons, the carrier has never the right to sell the objects in pawn without permission by the court of justice in accordance with art.3:248 para 2 BW.

Article 25 Lost goods

If the goods have not been delivered within thirty days from the day when they were accepted for carriage and if it is not known where they are, the goods will be considered as lost. If, within one year after the carrier has paid compensation for non-delivery of the goods to the person who was entitled to delivery of same, these goods or some of them appear to be (again) in possession of the carrier, the latter is obliged to communicate in writing this circumstance to the sender or the consignee, whichever has expressed the wish to this effect in writing, and then the sender respectively the consignee has the right during thirty days from receipt of such communication to demand as yet delivery of these goods against reimbursement of the compensation he has received. The same applies if the carrier has paid no compensation for non-delivery, subject however to the period of one year to start from the day after the one when the goods ought to have been delivered. If the sender or the consignee respectively does not avail himself of this right, article 21 applies.

Article 26 Safeguarding; Himalaya clause

1. The sender who has failed to meet whatever obligation which the law or these conditions impose on him is obliged to safeguard the carrier against all damages which he might suffer as a result of this non-compliance when he is held liable by a third party on account of the carriage of the goods.

2. When assisting servants and agents of the carrier are held liable on account of the carriage of the goods, these persons may invoke each liability limitation and/or exoneration which the carrier can invoke on the basis of these conditions or any other legal or contractual rule.

Article 27 Interest for delay

Parties are due legal interest according to art. 6:119 BW on an amount due.

Article 28 Limitation

1. All judicial claims based on or related to the contract of carriage are limited to one year.

2. In so far as a carrier seeks recourse against a person whose services the carrier has used in completing the contract of carriage to recoup what the carrier is due to the sender or the consignee a new limitation period of three months begins from the moment as stipulated in art. 8:1720 para 1 BW.

Article 29 Arbitration

All disputes arising between the parties in connection with the present contract of carriage may be solved in accordance with the Reglement of the Stichting Arbitrage voor Logistiek (rules of the foundation arbitration in logistics), domiciling at The Hague, the Netherlands.

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APPENDIX 5:

TRANSPORT EN LOGISTIEK NEDERLAND

GENERAL CONDITIONS OF PAYMENT

Concerning payments of transport, storage and other logistic activities, entrusted to the carrier, as filed with the registry of the district court (Arrondissementsrechtbank) of The Hague on 1 October 1993, filenumber 238.

ARTICLE 1 PAYMENT

1. Carriage rate and further costs that affect the price of the goods are payable at the moment when the sender / consignor either hands out the consignment note to the carrier or at the moment when the carrier accepts the contract of carriage.

2. If the goods are consigned ‘carriage forward’, the consignee has to pay the carriage rate and the costs, which are due for other reasons with regard to the transport as well as further costs that affect the price of the goods, at the moment of delivery; in the event the consignee has not paid these costs at first demand the sender / consignor remains severally liable for payment.

3. If the carrier – except in such cases where the goods are consigned ‘carriage forward’ at the request of the sender / consignor charges the consignee or a third party with the carriage rate and the costs, which are due for other reasons with regard to the transport as well as further costs that affect the price of the goods in relation to the executed transport, the sender / consignor remains chargeable for payment of these costs, if the consignee or third party has not paid the costs at first demand.

4. If the carrier sends an invoice, the debtor is obliged to pay the carriage rate within fourteen days after date of invoice.

5. Invoices are considered as being accepted and found in order by the debtor, when the carrier has not received a written complaint within 8 days after date of invoice.

6. If the debtor is in default, the carrier is entitled to the legal interest as well as all amounts overdue to him.

7. Possible payments will first be deducted from the legal interest and then from the other amounts overdue to him.

ARTICLE 2 COMPENSATION

The sender / consignor shall not compensate costs, which the carrier charges him by virtue of any contract concluded with him, unless the carrier has consented to the claim in writing.

ARTICLE 3 COLLECTION

1. In default of payment by the debtor the carrier can proceed to collection of all necessary judicial and extra judicial costs. Extra judicial costs, with a minimum of 15% of the amounts overdue, are chargeable from the moment the debtor is in default and the claim has been passed on.

2. As for the extent of the extra judicial costs, the expenses of the lawyer, bailiff or collecting agency in charge are regarded as proof.

ARTICLE 4 RETENTION LIENS

1. The carrier shall have a retention lien with regard to goods and documents which he holds in his possession in order to fulfil the contract against anyone who demands their delivery. However, the carrier can not execute this lien against a third party, if he, at the

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moment of collection of the goods, had doubts about the sender’s / consignor’s right towards this third party to present the goods for transport.

2. The carrier shall have a retention lien against the sender / consignor or the consignee with regard to goods, money and documents for the charges which are or will become payable to him as a result of the transport of the goods.

3. The carrier shall also have the retention lien with regard to goods which are sent cash on delivery.

4. The carrier shall have the retention lien, as defined under conditions 4.2. and 4.3. hereof as well with regard to goods that are in his charge in connection with previous transports.

5. As long as the goods have not reached their place of destination, the carrier is entitled to request from the sender / consignor that security be given for the carriage and all claims which he has or will get at the expense of the sender / consignor, as well as the right to postpone the departure of the vehicle or to suspend a going transport until his request to give security has been granted.

6. The carrier shall not in any circumstance be liable for possible damage, occurring as a result of postponement or suspension as mentioned under condition 4.5. hereof.

ARTICLE 5 RIGHT OF DISTRAINT

1. All goods, documents and money the carrier has or will get as a result of whatever reason or for whatever means, can serve him as a right of distraint for all claims which he has or will get at the expense of the sender / consignor.

2. In case of non-settlement of the claim, the security can be sold in public or privately, prevailing consensus has been reached after the carrier has gained authority to sell.

ARTICLE 6 REPLACING SECURITY / POSTPONEMENT OF PAYMENT

1. Towards the carrier the debtor can never appeal to any postponement of payment, which he has been granted for previous deliveries either explicitly or inexplicitly and which surpasses the term of 14 days.

2. In case the sender / consignor or a third party, acting on behalf of the sender / consignor, pays an irrevocable bank guarantee, which has been accepted by the carrier for claims mentioned under the conditions 4.5. (suspension) and article 5.1. (distraint) hereof, all carrier’s claims, arising from the conditions 4 (retention lien and suspension) and 5 (right of distraint) will expire.

ARTICLE 7 CHANGE OF ADDRESS

1. The sender / consignor is obliged to keep the carrier informed about the address, where he can be contacted.

2. The carrier shall not in any circumstance be liable for any damage, resulting from the sender’s / consignor’s non-compliance with the obligation of article 7.1.

ARTICLE 8

These general conditions can be quoted as “Transport en Logistiek Nederland general conditions of payment”.

Transport en Logistiek Nederland

Plein van de Verenigde Naties 15

2719 EG Zoetermeer

Postal address:

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P.O. Box 3008, 2700 KS Zoetermeer

Transport en Logistiek Nederland likes to point out that this is a translation of the original text, as filed with the registry of the district court (Arrondissementsrechtbank) of the Hague on 1 October 1993, filenumber 238. Only the original Dutch text is binding.

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APPENDIX 6:

APPROVED SUBCONTRACTORS MOVIANTO

Name and address of Sub-Contractor	Registered address	Product/service description
Movianto Belgium NV	Industrielaan 27 9320 Aalst Belgium	Transport Supplier
Movianto Transport Solutions Limited	The Morewood Centre Wallis Way Bedford MK42 0PE United Kingdom	Transport Supplier
TNT Express Nederland B.V.	Meidoornkade 14 3992 AE Houten The Netherlands	Transport Supplier
United Parcel Service Nederland BV	Deccaweg 16 1042 AD Amsterdam The Netherlands	Transport Supplier
C&J Credit Services Credico Group	Molenaarsstraat 23 B-9000 Gent Belgium	Credit Services iController iBiller

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APPENDIX 7:

CLIENT CONTACT LIST

TITLE	NAME	TELEPHONE Office	TELEPHONE (MOBILE) Out of Office	EMAIL ADDRESS
VP Tech Dev., Manufacturing & Supply Chain	Benir Ruano	+1 206 272 4485	+1 206 384 8104	bruano@ctiseattle.com
Sr. Supply Chain Planner	Wahab Zemouri	+1 206 272 4476	+1 206 335 0585	wzemouri@ctiseattle.com
Emergency Number 24/7/65		00 + 44 + 800-088-5356

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APPENDIX 8:

MOVIANTO NEDERLAND CONTACT LIST

TITLE	NAME	TELEPHONE Office	TELEPHONE Out of Office	EMAIL ADDRESS
Qualified Person	Floris van Haselen	+31 412-406 433	mobile +31 612 140 307	floris.vanhaselen@movianto.com
Managing Director	Patrick Esselaar	+31 412 406 420	mobile +31 654 977 407	patrick.esselaar@movianto.com
Operations Manager	Mark Kleijn	+31 412 406 421	home +31 486 464 335 mobile +31 646 346 455	mark.kleijn@movianto.com
Finance Manager	Dries Snaet	+32 9 242 89 63	mobile +32 479 29 34 60	dries.snaet@movianto.com
ICT Manager	Pieter Aernoudt	+32 9 242 89 64	mobile +32 476 78 94 90	pieter.aernoudt@movianto.com
EMERGENCY NUMBER 24/7/365		+31 412 406 429

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APPENDIX 9: FUNCTIONAL SPECIFICATIONS

Functional Specification (FS)

CTI Life Sciences Limited (CTILS)

Document #:	Form SOP_4	Creation Date:	03/08/2012
Revision #:	1.6	Supersedes:	1.5

Approval Signatures:

Author	R. Selinka Movianto Prince team
		Date	Signature
Review	C. Sieber Prince team	Date	Signature
Approved	CTILS	Date	Signature

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TABLE OF CONTENTS

1	Introduction			71
2	Overview			71
3	Realization of User Requirements			71
4	Functional Specifications			72
	4.1	Interfaces		73
		4.1.1	Report: AR detail aging	73
		4.1.2	Report: AR reconciliation trial balance	73
		4.1.3	Report: Cash receipt report	74
		4.1.4	Report: Credit note report	75
		4.1.5	Interface: Goods Receipt XML and CSV format	75
		4.1.6	Interface: Sales report (invoice) XML and CSV format	76
		4.1.7	Interface: Deliveries (Despatch Confirmation) XML and CSV format	77
		4.1.8	Interface: Inventory (Stock Level) XML and CSV format	78
		4.1.9	Interface: Inventory Returns XML and CSV format	78
	4.2	Infrastructure		80
	4.3	Organization		80
	4.4	Regulatory		80
5	Glossary			81
6	References			81
7	Revision History			81

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1. Introduction

CTI will be a new client for the business in the Netherlands.

2. Overview

N/A

3. Realization of User Requirements

The requirements from CTI are described in the file: overview CTI reports.xls.

An overview is also provided:

Report name	Type of report	Data needed	How will it be made available to CTI?
AR Detail aging	Financial	As specified in 4.1.1.1	Email
AR Reconciliation_Trial Balance	Financial	As specified in 4.1.2.1	Email
Cash Receipt	Financial	As specified in 4.1.3.1	Email
Credit note report	Financial	As specified in 4.1.4.1	Email
Goods receipt	Inventory	As specified in 4.1.5.1	Interface (XML/CSV) via sFTP
Sales Report (Invoice)	Sales report	As specified in 4.1.6.1	Interface (XML/CSV) via sFTP
Deliveries (Despatch Confirmation)	Inventory	As specified in 4.1.7.1	Interface (XML/CSV) via sFTP
Inventory (Stock level)	Inventory	As specified in 4.1.8.1	Interface (XML/CSV) via sFTP
Inventory Returns	Inventory	As specified in 4.1.9.1	Interface (XML/CSV) via sFTP

Note:

Customer database to be provided by a third party as agreed in writing by the parties.

GoLive has to be in the week of the 10^th of September 2012

XML files from October, 10^th 2012

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4. Functional Specifications

Financial report files will be provided as “csv”-files, tagged delimited with a “;” (semicolon) and the appropriate filename and sent out per mail (addresses provided by CTI).

All interface files will be sent as XML files, also with an appropriate filename, send out via sFTP.

The “csv” files are needed for the GoLive date – Sept 10^th 2012. XML files are needed for October 10^th 2012.

Only the financial reports (AR detail, AR reconciliation, Cash receipt, and Credit note) need to be emailed. The emailed financial reports (AR detail, AR reconciliation, Cash receipt, and Credit note) need to be in both “csv” and PDF format. The delivery emails for the financial reports are:

Commercial@ctiseattle.com with SLeesman@ctiseattle.com as a backup.

For an interim time (solution), we agreed that Movianto will send only csv-files (also for the interfaces) from Movianto via sFTP to CTI.

For the interface files, we need both XML and “csv” formats to be delivered via sFTP. The delivery of the “csv” files will not stop after the XML interface files are in place.

It might be the case that the XML files will look different to the csv files send out during the interim time.

The timestamp is defined as follows: YYYYMMDDHHMMSSSS

Example: 2012080609482321

This will be used to have a specific key for the file names.

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4.1 Interfaces

4.1.1 Report: AR detail aging

Filename: ARdetail_YYYYMMDDHHMMSSSS.csv, ARdetail_YYYYMMDDHHMMSSSS.pdf

Scheduled: Weekly, additionally on monthly basis on the first day of the next month. The monthly basis report should include only data for the previous month.

Mail: Addresses will be provided by CTI

4.1.1.1 Outgoing data

Elements:

• Customer name

• Business Area

• Customer Number

• Country

• Postal code

• City

• Street

• Currency

• Invoice number

• Invoice date

• Due date

• Terms of payment

• Total AR Outstanding

• AR Current

• 001 - 030 OVERDUE

• 031 - 060 OVERDUE

• 061 - 090 OVERDUE

• 091 - 180 OVERDUE

• 181 - 360 OVERDUE

• 361 - XX OVERDUE

• Total Overdue

• Customer % of Overdue

• Customer % of Total Outstanding

• DSO per invoice date

• Totals (AR Outstanding , AR Current, 001 - 030 OVERDUE, 031 - 060 OVERDUE, 061 - 090 OVERDUE, 091 - 180 OVERDUE, 181 - 360 OVERDUE, 361 - XX OVERDUE, Customer % of Overdue, Customer % of Total Outstanding)

The report will be provided by the finance tool of Movianto NL and will be sent via mail.

4.1.2 Report: AR reconciliation trial balance

Filename: ARrecon_YYYYMMDDHHMMSSSS.csv, ARrecon_YYYYMMDDHHMMSSSS.pdf

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Scheduled: Monthly on the first day of the next month. The monthly basis report should include only data for the previous month.

Mail: Addresses will be provided by CTI

4.1.2.1 Outgoing data

Elements:

• Account

• Accounting description

• BalCarFor-y                             description: Balance for the year

• BalCarFor-m                            description: Balance for the month

• Debit

• Credit

• Month balance

• Cum. balance                         description: Cumulative balance

• Totals (Credit, Debit, Month balance, Cum. balance)

The report will be provided by the finance tool of Movianto NL and will be sent via mail

4.1.3 Report: Cash receipt report

Filename: Cash_YYYYMMDDHHMMSSSS.csv, Cash_YYYYMMDDHHMMSSSS.pdf

Scheduled: Weekly, additionally on monthly basis on the first day of the next month. The monthly basis report should include only data for the previous month.

Mail:

4.1.3.1 Outgoing data

Elements:

• Receipt Number

• Card Code

• Card Name

• Address

• Doc Date

• Invoice number

• Bank code

• Bank account

• Payment reference

• Amount

• Currency

• Totals (Amount)

The report will be provided by the finance tool of Movianto NL and will be sent via mail.

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4.1.4 Report: Credit note report

Filename: CNR_YYYYMMDDHHMMSSSS.csv, CNR_YYYYMMDDHHMMSSSS.pdf

Scheduled: Weekly additionally on monthly basis on the first day of the next month. The monthly basis report should include only data for the previous month.

4.1.4.1 Outgoing data

Elements:

• Year

• Month

• Week

• Client code

• Client name

• Doc number

• Doc status

• Picking date

• Reference

• Interfaced

• Card Code

• Card Name

• StreetS

• Zip CodeS

• CountryS

• StreetB

• Zip CodeB

• CountryB

• Item Code

• Item Name

• Total records

The report will be provided by the finance tool of Movianto NL and will be sent via mail

4.1.5 Interface: Goods Receipt XML and CSV format

Filename: GR_YYYYMMDDHHMMSSSS.xml, GR_YYYYMMDDHHMMSSSS.csv

Scheduled: Daily 11pm CET

4.1.5.1 Outgoing data

Elements:

• Year

• Month

• Day

• Client code

• Client name

• ASN number

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• Document date

• Item code (SKU)

• Item description

• Quantity (units)

• Quality Status (released (available), on hold (blocked), rejected, quarantine)

• Batch number

• Expiry date

• Warehouse code

• Total quantity (units) of all lines (footer section)

The data will be sent via the existing standard interface from NL to Prince. Prince will create the report and send the files to CTI using the established sFTP connection between Prince and CTI.

4.1.6 Interface: Sales report (invoice) XML and CSV format

Filename: SALE_YYYYMMDDHHMMSSSS.xml, SALE_YYYYMMDDHHMMSSSS.csv

Scheduled: Daily 11pm CET

4.1.6.1 Outgoing data

Elements:

• Year

• Month

• Day

• Client code

• Client name

• Invoice number

• Order number

• Bill To Name

• Bill To Street

• Bill To Zip code

• Bill To city

• Bill To country

• Item code (SKU)

• Item Name

• Quantity (units)

• Line price (quantity * unit price)

• Total quantity (units) of all lines (footer section)

The data will be sent via the existing standard interface from NL to Prince. Prince will create the report and send the files to CTI using the established sFTP connection between Prince and CTI.

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4.1.7 Interface: Deliveries (Despatch Confirmation) XML and CSV format

Filename: DESP_YYYYMMDDHHMMSSSS.xml, DESP_YYYYMMDDHHMMSSSS.csv

Scheduled: Daily 11pm CET

4.1.7.1 Outgoing data

Elements:

• Year

• Month

• Day

• Client code

• Client name

• Order Number

• Dispatch date

• ShipTo Name

• ShipTo Street

• ShipTo Zip code

• ShipTo city

• ShipTo country

• Item code (SKU)

• Item Name

• Quantity ordered

• Quantity shipped (units)

• Batch

• Total quantity (units) of all lines (footer section)

The data will be sent via the existing standard interface from NL to Prince. Prince will create the report and send the files to CTI using the established sFTP connection between Prince and CTI.

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4.1.8 Interface: Inventory (Stock Level) XML and CSV format

Filename: SL_YYYYMMDDHHMMSSSS.xml, SL_YYYYMMDDHHMMSSSS.csv

Scheduled: Daily 11pm CET

4.1.8.1 Outgoing data

Elements:

• Year

• Month

• Day

• Item code (SKU)

• Item description

• Batch

• Expiry date

• Quantity

• Quality Status

• Total quantity (units) of all lines (footer section)

4.1.9 Interface: Inventory Returns XML and CSV format

Filename: RET_YYYYMMDDHHMMSSSS.xml, RET_YYYYMMDDHHMMSSSS.csv

Scheduled: Daily 11pm CET

4.1.9.1 Outgoing data

Elements:

• Year

• Month

• Day

• Client code

• Client name

• Item code (SKU)

• Item Name

• Expiry date

• Description

• Confirmation of full custody (shipped to)

• Contact information from customer (returning)

• Conformation of storage conditions

• Confirmation of shipping conditions

• Quantity Returned

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• Batch

• Total quantity (units) of all lines (footer section)

The data will be sent via the existing standard interface from NL to Prince. Prince will create the report and send the files to CTI using the established sFTP connection between Prince and CTI.

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4.2 Infrastructure

FS ID	Functional Specification	Reference
FST-10
FST-20

Technical communication

The communication between CTI and Movianto will be based on sFTP:

Prod:

http://sftp.celltherapeutics.com

Domain:              sftp.celltherapeutics.com

Movianto acts as a client

For security reasons, CTI has imported the Movianto key – tested and it is working fine.

Test:

See Prod

4.3 Organization

Contacts

• Powell, Brian [bpowell@ctiseattle.com]

Senior Network Administrator (only for sFTP)

• Lester, Deborah [dlester@ctiseattle.com]

Director, Information Technology

• Stoychev, Stamen [sstoychev@ctiseattle.com]

Sr. Systems Analyst, IT (content)

• Straub, Philipp [philipp.straub@movianto.com]

IT Admin Movianto Prince

• Nebel, Jan [jan.nebel@movianto.com]

EKAM Movianto

• Sieber, Cordula [cordula.sieber@movianto.com]

IT Project Lead Movianto Prince

• Aernoudt, Pieter [Pieter.Aernoudt@movianto.com]

IT responsible in the Netherlands

4.4 Regulatory

N/A

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5. Glossary

N/A

6. References

N/A

7. Revision History

Revision #	Creation Date	Author	Comments
0.9	30/07/2012	Robert Selinka	New Document
1.0	31/07/2012	Cordula Sieber	Review
1.1	03/08/2012	Robert Selinka	Review on all comments in the call with CTI
1.2	06/08/2012	Cordula Sieber	Review
1.3	06/08/2012	Ruano Benir	Review with comments
1.4	07/08/2012	R. Selinka J. Nebel P: Aernoudt Stoychev, Stamen Lester, Deborah	Review and adjustments on the specs in the telco
1.5	07/08/2012	Stoychev, Stamen	Added csv and pdf reqs for reports and interfaces
1.6	08/08/2012	Nebel	Changed table

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EX-31.1

EXHIBIT 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, James A. Bianco, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Cell Therapeutics, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated: November 1, 2012	By:	/s/ James A. Bianco, M.D.
		James A. Bianco, M.D.
		President and Chief Executive Officer

EX-31.2

EXHIBIT 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Louis A. Bianco, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Cell Therapeutics, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated: November 1, 2012	By:	/s/ Louis A. Bianco
		Louis A. Bianco
		Executive Vice President, Finance and Administration

EX-32

EXHIBIT 32

CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER

PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, James A. Bianco, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, in my capacity as an officer of Cell Therapeutics, Inc., that, to my knowledge, the Quarterly Report of Cell Therapeutics, Inc. on Form 10-Q for the fiscal quarter ended September 30, 2012 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in such Quarterly Report on Form 10-Q fairly presents in all material respects the financial condition and results of operations of Cell Therapeutics, Inc.

A signed original of this written statement required by Section 906 has been provided to Cell Therapeutics, Inc. and will be retained by Cell Therapeutics, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

Dated: November 1, 2012	By:	/s/ James A. Bianco, M.D
		James A. Bianco, M.D.
		President and Chief Executive Officer

I, Louis A. Bianco, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, in my capacity as an officer of Cell Therapeutics, Inc., that, to my knowledge, the Quarterly Report of Cell Therapeutics, Inc. on Form 10-Q for the fiscal quarter ended September 30, 2012 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in such Quarterly Report on Form 10-Q fairly presents in all material respects the financial condition and results of operations of Cell Therapeutics, Inc.

A signed original of this written statement required by Section 906 has been provided to Cell Therapeutics, Inc. and will be retained by Cell Therapeutics, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

Dated: November 1, 2012	By:	/s/ Louis A. Bianco
		Louis A. Bianco
		Executive Vice President, Finance and Administration

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Summary of Share-Based Compensation Expense (Detail) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Share-based compensation expense	$ 1,016	$ 780	$ 6,084	$ 2,320
Research and development
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Share-based compensation expense	363	206	1,379	839
Selling, general and administrative
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Share-based compensation expense	$ 653	$ 574	$ 4,705	$ 1,481

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Lease Agreements

9 Months Ended

Sep. 30, 2012

Lease Agreements

3. Lease Agreements

During 2005, we reduced our workforce in the United States and Europe. In conjunction with this reduction in force, we vacated a portion of our laboratory and office facilities and recorded excess facilities charges. Charges for excess facilities relate to our lease obligation for excess laboratory and office space in the United States that we vacated as a result of the restructuring plan. We recorded these restructuring charges when we ceased using this space. During 2010, we recorded an additional liability of $1.5 million for excess facilities under an operating lease upon vacating a portion of our corporate office space.

The following table summarizes the changes in the liability for excess facilities during the period ended September 30, 2012 (in thousands):

	2005 Activities			2010 Activities			Total Excess Facilities Liability
Balance at December 31, 2011	$	215		$	530		$	745
Adjustments		(32	)		(62	)		(94	)
Payments		(183	)		(468	)		(651	)
Balance at September 30, 2012	$	—		$	—		$	—

As of September 30, 2012, we have a $1.9 million receivable balance included in prepaid expenses and other current assets related to incentives for leasehold improvements and rent reimbursement under the terms of our operating lease for office space entered into January 2012. In addition, we have approximately $5.0 million in deferred rent recorded as of September 30, 2012, of which $0.4 million is included in current portion of long-term obligations and $4.6 million is included in long-term obligations, less current portion.

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Preferred Stock - Additional Information (Detail) (USD $)	3 Months Ended		9 Months Ended			1 Months Ended			9 Months Ended	1 Months Ended		1 Months Ended	3 Months Ended	9 Months Ended	1 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011	Dec. 31, 2011	Jan. 31, 2012 Series 14 Preferred Stock	Dec. 31, 2011 Series 14 Preferred Stock	May 31, 2012 Series 15-1 Preferred Stock	Sep. 30, 2012 Series 15-1 Preferred Stock	Sep. 30, 2012 Series 15-1 Warrant	May 31, 2012 Series 15-1 Warrant	Jul. 31, 2012 Series 15-2 Preferred Stock	Sep. 30, 2012 Series 15-2 Preferred Stock	Sep. 30, 2012 Series 15-2 Preferred Stock	Sep. 30, 2012 Series 15-2 Warrants	Jul. 31, 2012 Series 15-2 Warrants
Class of Stock [Line Items]
Shares issued							20,000	20,000				15,000
Preferred Stock, Shares Outstanding	0		0		10,000		10,000
Shares of Preferred Stock converted into common stock						10,000		20,000
Issuance of common stock upon conversion of convertible securities						1,700,000		4,000,000				5,000,000
Warrants issued											2,700,000					3,400,000
Proceeds from issuance of preferred stock and warrants								$ 20,000,000				$ 15,000,000
Issuance costs								1,300,000				800,000
Preferred stock, initial stated value	$ 1,000		$ 1,000		$ 1,000			$ 1,000				$ 1,000
Preferred stock, description of liquidation preference								Each share of our Series 15-1 preferred stock was entitled to a liquidation preference equal to the initial stated value of $1,000 per share of Series 15-1 preferred stock, plus any accrued and unpaid dividends before the holders of our common stock or any other junior securities receive any payments upon such liquidation.				Each share of our Series 15-2 Preferred Stock was entitled to a liquidation preference equal to the initial stated value of $1,000 per share of Series 15-2 Preferred Stock, plus any accrued and unpaid dividends before the holders of our common stock or any other junior securities receive any payments upon such liquidation.
Preferred stock, initial conversion price								$ 5.00				$ 2.97475
Preferred stock conversion blocker provision								9.99%				9.99%
Dividends and deemed dividend on preferred stock	5,014,000	13,023,000	13,472,000	49,817,000					8,500,000				5,000,000	5,000,000
Warrant, exercise price											5.46					3.0672
Warrant, expiration period											5 years
Estimated fair value of warrant										5,400,000	10,300,000					7,200,000
Number of warrants exchanged										1,300,000
Warrant exchange value										$ 5,000,000					$ 7,400,000
Number of shares issued upon exchange of warrant										2,800,000					2,900,000
Fair value assumptions, market price of common stock										$ 4.55
Fair value assumptions, expected term										5 years
Fair value assumptions, volatility rate										135.00%
Fair value assumptions, risk-free rate										0.60%

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Reverse Stock Split - Additional Information (Detail) (USD $)	1 Months Ended
	Sep. 02, 2012	May 15, 2011
Stockholders Equity Note [Line Items]
Reverse stock split	In August 2012, our Board of Directors approved a one-for-five reverse stock split and, on September 2, 2012, the reverse stock split became effective, which we refer to as the September Split. As a result of the September Split, every five shares of our authorized and outstanding common stock were converted into one authorized and outstanding share of common stock and every five shares of our authorized preferred stock were converted into one authorized share of preferred stock;
Reverse stock split	0.2000	0.1667
Fractional share payment	$ 0.435

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Acquisitions - Additional Information (Detail) (USD $)	9 Months Ended			1 Months Ended
	Sep. 30, 2012	Sep. 30, 2012 Assets of S*BIO Pte Ltd.	May 31, 2012 Assets of S*BIO Pte Ltd.	Jun. 30, 2012 Assets of S*BIO Pte Ltd. Series 16 Preferred Stock	May 31, 2012 Assets of S*BIO Pte Ltd. Series 16 Preferred Stock	Sep. 30, 2012 Assets of S*BIO Pte Ltd. Maximum
Research and Development Assets Acquired Other than Through Business Combination [Line Items]
Asset acquisition, cash			$ 15,000,000
Asset acquisition, shares					15,000
Preferred stock, conversion price				$ 5.95
Preferred stock conversion blocker provision				19.99%
Issuance of common stock upon conversion of convertible securities				2,500,000
Asset acquisition purchase price allocation in process research and development	29,108,000	29,108,000
Potential milestone payments						$ 132,500,000

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Initial Purchase Consideration (Detail) (Assets of S*BIO Pte Ltd., USD $)	May 31, 2012
Assets of S*BIO Pte Ltd.
Asset Acquisition [Line Items]
Cash	$ 15,000,000
Fair value of Series 16 Preferred Stock	11,344,000
Transaction costs	2,764,000
Total initial purchase consideration	$ 29,108,000

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Other Comprehensive Income (Loss)

9 Months Ended

Sep. 30, 2012

Other Comprehensive Income (Loss)

2. Other Comprehensive Income (Loss)

Total accumulated other comprehensive income (loss) consisted of the following (in thousands):

	Net Unrealized Loss on Securities Available-for-sale			Foreign Currency Translation Adjustments			Accumulated Other Comprehensive Income (Loss)
December 31, 2011	$	(165	)	$	(7,870	)	$	(8,035	)
Current period other comprehensive income (loss)		(28	)		71			43
September 30, 2012	$	(193	)	$	(7,799	)	$	(7,992	)

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Subsequent Events Additional Information (Detail) (USD $) In Millions, except Share data, unless otherwise specified			1 Months Ended
	Sep. 30, 2012	Dec. 31, 2011	Oct. 31, 2012 Subsequent Event Series 17 Preferred Stock
Subsequent Events [Line Items]
Shares issued			60,000
Proceed from issuance of preferred stock			$ 60.0
Preferred stock, stated value	$ 1,000	$ 1,000	$ 1,000
Preferred stock, initial conversion price			$ 1.40
Preferred stock conversion blocker provision			9.99%
Preferred stock conversion blocker maximum			19.99%
Preferred stock converted to common stock share			48,325
Issuance of common stock upon conversion of convertible securities			34,500,000
Preferred stock, description of liquidation preference			Each share of Series 17 Preferred Stock is entitled to a liquidation preference equal to the stated value of $1,000 per share plus any accrued and unpaid dividends before the holders of our common stock or any other junior securities receive any payments upon such liquidation.

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Condensed Consolidated Balance Sheets (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Dec. 31, 2011
Current assets:
Cash and cash equivalents	$ 14,289	$ 47,052
Prepaid expenses and other current assets	5,487	4,023
Total current assets	19,776	51,075
Property and equipment, net	7,734	3,604
Other assets	8,665	7,560
Total assets	36,175	62,239
Current liabilities:
Accounts payable	11,936	5,750
Accrued expenses	9,067	11,064
Warrant liability	5,445
Current portion of long-term obligations	393	970
Total current liabilities	26,841	17,784
Long-term obligations, less current portion	5,768	2,985
Total liabilities	32,609	20,769
Commitments and contingencies
Common stock purchase warrants	13,461	13,461
Preferred stock, no par value:
Authorized shares - 333,333 Series 14 Preferred Stock, $1,000 stated value, 20,000 shares designated, 0 and 10,000 shares issued and outstanding at September 30, 2012 and December 31, 2011, respectively		6,736
Common stock, no par value:
Authorized shares - 150,000,000 and 76,666,666 at September 30, 2012 and December 31, 2011, respectively Issued and outstanding shares - 62,270,179 and 40,613,545 at September 30, 2012 and December 31, 2011, respectively	1,810,035	1,744,801
Accumulated other comprehensive loss	(7,992)	(8,035)
Accumulated deficit	(1,811,030)	(1,714,785)
Total CTI shareholders' equity (deficit)	(8,987)	28,717
Noncontrolling interest	(908)	(708)
Total shareholders' equity (deficit)	(9,895)	28,009
Total liabilities and shareholders' equity (deficit)	$ 36,175	$ 62,239

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Condensed Consolidated Statements Of Cash Flows (unaudited) (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011
Operating activities
Net loss	$ (82,773)	$ (53,393)
Adjustments to reconcile net loss to net cash used in operating activities:
Acquired in-process research and development	29,108
Equity-based compensation expense	6,084	2,320
Depreciation and amortization	1,745	1,748
Provision for VAT assessments	(2,118)
Noncash interest expense		436
Noncontrolling interest	(200)	(179)
Other	(195)	(242)
Changes in operating assets and liabilities:
Prepaid expenses and other current assets	(1,308)	(644)
Other assets	(874)	(2,604)
Accounts payable	2,207	(335)
Accrued expenses	(1,895)	(757)
Other liabilities	4,462	(1,140)
Total adjustments	37,016	(1,397)
Net cash used in operating activities	(45,757)	(54,790)
Investing activities
Cash paid for acquisition of assets of S*BIO Pte Ltd.	(17,764)
Cash paid for purchases of property and equipment	(1,966)	(1,974)
Proceeds from the sales of property and equipment		27
Net cash used in investing activities	(19,730)	(1,947)
Financing activities
Cash paid for repayment of 7.5% convertible senior notes		(10,250)
Cash paid for repurchase of shares in connection with taxes on restricted stock vesting	(77)	(342)
Other	(25)	(23)
Net cash provided by financing activities	32,609	79,239
Effect of exchange rate changes on cash and cash equivalents	115	61
Net increase (decrease) in cash and cash equivalents	(32,763)	22,563
Cash and cash equivalents at beginning of period	47,052	22,649
Cash and cash equivalents at end of period	14,289	45,212
Supplemental disclosure of cash flow information
Cash paid during the period for interest obligations	10	705
Cash paid for taxes
Supplemental disclosure of noncash financing and investing activities
Issuance of common stock upon exercise or exchange of common stock purchase warrants	12,351	17,485
Redemption of Series 8 and 10 preferred stock		36,638
Series 8 preferred stock, additional investment right and warrants
Financing activities
Proceeds from issuance of equity, net of issuance costs		23,213
Series 10 preferred stock, additional investment right and warrants
Financing activities
Proceeds from issuance of equity, net of issuance costs		23,530
Series 12 preferred Stock and Warrants
Financing activities
Proceeds from issuance of equity, net of issuance costs		14,962
Series 13 preferred stock and Warrants
Financing activities
Proceeds from issuance of equity, net of issuance costs		28,149
Series 15 Preferred Stock And Warrants
Financing activities
Proceeds from issuance of equity, net of issuance costs	32,928
Series 9 preferred Stock
Supplemental disclosure of noncash financing and investing activities
Conversion of preferred stock to common stock		25,000
Issuance of preferred stock		25,000
Series 11 preferred Stock
Supplemental disclosure of noncash financing and investing activities
Conversion of preferred stock to common stock		24,957
Issuance of preferred stock		24,957
Series 12 preferred Stock
Supplemental disclosure of noncash financing and investing activities
Conversion of preferred stock to common stock		10,647
Series 13 preferred Stock
Supplemental disclosure of noncash financing and investing activities
Conversion of preferred stock to common stock		19,077
Series 14 Preferred Stock
Financing activities
Cash paid for transaction costs	(170)
Supplemental disclosure of noncash financing and investing activities
Conversion of preferred stock to common stock	6,736
Series 15 preferred stock
Supplemental disclosure of noncash financing and investing activities
Conversion of preferred stock to common stock	15,442
Series 16 Preferred Stock
Financing activities
Cash paid for transaction costs	(47)
Supplemental disclosure of noncash financing and investing activities
Conversion of preferred stock to common stock	11,240
Issuance of Series 16 preferred stock for acquisition of assets of S*BIO Pte Ltd.	$ 11,344

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Total Accumulated Other Comprehensive Income (Loss) (Detail) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Accumulated Other Comprehensive Income (Loss) [Line Items]
Beginning balance			$ (8,035)
Current period other comprehensive income (loss)	(73)	596	43	(277)
Ending balance	(7,992)		(7,992)
Net Unrealized Gain (Loss) on Securities Available-for-sale
Accumulated Other Comprehensive Income (Loss) [Line Items]
Beginning balance			(165)
Current period other comprehensive income (loss)			(28)
Ending balance	(193)		(193)
Foreign Currency Translation Adjustments
Accumulated Other Comprehensive Income (Loss) [Line Items]
Beginning balance			(7,870)
Current period other comprehensive income (loss)			71
Ending balance	$ (7,799)		$ (7,799)

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Changes in Liability for Excess Facilities (Detail) (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Sep. 30, 2012
Restructuring Cost and Reserve [Line Items]
Beginning balance	$ 745
Adjustments	(94)
Payments	(651)
2005 Activities
Restructuring Cost and Reserve [Line Items]
Beginning balance	215
Adjustments	(32)
Payments	(183)
2010 Activities
Restructuring Cost and Reserve [Line Items]
Beginning balance	530
Adjustments	(62)
Payments	$ (468)

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Description of Business and Summary of Significant Accounting Policies

9 Months Ended

Sep. 30, 2012

Description of Business and Summary of Significant Accounting Policies

1. Description of Business and Summary of Significant Accounting Policies

Description of Business

Cell Therapeutics, Inc., also referred to in this Quarterly Report on Form 10-Q as CTI, the Company, we, us or our, focuses on the development, acquisition and commercialization of drugs for the treatment of cancer, an area with significant market opportunity that we believe is not adequately served by existing therapies. All of our current product candidates, including Pixuvri™ (pixantrone dimaleate), or Pixuvri, pacritinib, OPAXIO™ (paclitaxel poliglumex), or OPAXIO, tosedostat and brostallicin are under development.

We operate in a highly regulated and competitive environment. The manufacturing and marketing of pharmaceutical products require approval from, and are subject to ongoing oversight by, the Food and Drug Administration, or the FDA, in the United States, by the European Medicines Agency, or EMA, in the European Union, or EU, and by comparable agencies in other countries. Obtaining approval for a new therapeutic product is uncertain, may take many years and may involve the expenditure of substantial resources.

Basis of Presentation

The accompanying unaudited financial information of CTI as of September 30, 2012 and for the three and nine months ended September 30, 2012 and 2011 has been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Quarterly Report on Form 10-Q and Article 10 of Regulation S-X. In the opinion of management, such financial information includes all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation of our financial position at such date and the operating results and cash flows for such periods. Operating results for the three and nine months ended September 30, 2012 are not necessarily indicative of the results that may be expected for the entire year.

Certain information and footnote disclosure normally included in financial statements prepared in accordance with generally accepted accounting principles have been omitted pursuant to the rules of the U.S. Securities and Exchange Commission, or the SEC. These unaudited financial statements and related notes should be read in conjunction with our audited annual financial statements for the year ended December 31, 2011 included in our Annual Report on Form 10-K filed with the SEC on March 8, 2012.

The condensed consolidated balance sheet at December 31, 2011 has been derived from the audited financial statements at that date, but does not include all of the information and footnotes required by generally accepted accounting principles in the United States for complete financial statements.

Principles of Consolidation

The accompanying condensed consolidated financial statements include the accounts of CTI and its wholly-owned subsidiaries, which include Systems Medicine LLC, or SM, and CTI Life Sciences Limited. CTI Life Sciences Limited opened a branch in Italy in December 2009. We also retain ownership of our branch, Cell Therapeutics Inc. – Sede Secondaria, or CTI (Europe); however, we ceased operations related to this branch in September 2009. In addition, CTI Commercial LLC, a wholly-owned subsidiary, was included in the condensed consolidated financial statements until dissolution in March 2012.

As of September 30, 2012, we also had a 67% interest in our majority-owned subsidiary, Aequus Biopharma, Inc., or Aequus. In accordance with the Financial Accounting Standards Board, or FASB, Accounting Standards Codification, or ASC, 810, Consolidation, the noncontrolling interest in Aequus is reported below net loss in noncontrolling interest in the condensed consolidated statement of operations and condensed consolidated statements of comprehensive loss and shown as a component of equity in the condensed consolidated balance sheet.

All intercompany transactions and balances are eliminated in consolidation.

Reverse Stock Splits

On May 15, 2011 and September 2, 2012, we effected a one-for-six and one-for-five reverse stock split, respectively, or the May Split and September Split, respectively. Unless otherwise noted, all impacted amounts included in the condensed consolidated financial statements and notes thereto have been retroactively adjusted for the May Split and September Split. Unless otherwise noted, impacted amounts include shares of common stock authorized and outstanding, share issuances, shares underlying preferred stock, convertible notes, warrants and stock options, shares reserved and loss per share. Additionally, the May Split and September Split impacted preferred stock authorized (but not outstanding because there were no shares of preferred stock outstanding as of the time of the applicable reverse stock split).

Liquidity

The accompanying condensed consolidated financial statements have been prepared assuming that we will continue as a going concern, which contemplates realization of assets and the satisfaction of liabilities in the normal course of business for the twelve-month period following the date of these condensed consolidated financial statements. However, we have incurred net losses since inception and expect to generate losses for the next few years primarily due to research and development costs for Pixuvri, pacritinib, OPAXIO, tosedostat and brostallicin.

Our available cash and cash equivalents were $14.3 million as of September 30, 2012. Subsequent to period end, we received $60.0 million in gross proceeds, before deducting underwriting discounts and commissions and other offering costs, from the issuance of our Series 17 convertible preferred stock, or Series 17 Preferred Stock. See Note 9, Subsequent Events for additional information. At our currently planned spending rate, we believe that our financial resources, in addition to the expected receipts from European Pixuvri sales, will be sufficient to fund our operations for the next fifteen (15) months. Changes in manufacturing, clinical trial expenses, and expansion of our sales and marketing organization in Europe, may consume capital resources earlier than planned. Additionally, we may not receive the country reimbursement rates in Europe for Pixuvri that we currently assume in planning for 2013.

We expect we will need to raise additional funds and are currently exploring alternative sources of equity or debt financing. We may seek to raise such capital through public or private equity financings, partnerships, joint ventures, disposition of assets, debt financings or restructurings, bank borrowings or other sources of financing. Our board of directors may issue shares depending on our financial needs and market opportunities, if deemed to be in the best interest of the shareholders. However, additional funding may not be available on favorable terms or at all. If additional funds are raised by issuing equity securities, substantial dilution to existing shareholders may result. If we fail to obtain additional capital when needed, we may be required to delay, scale back, or eliminate some or all of our research and development programs and may be forced to cease operations, liquidate our assets and possibly seek bankruptcy protection.

Value Added Tax Receivable

Our European operations are subject to a value added tax, or VAT, which is usually applied to all goods and services purchased and sold throughout Europe. The VAT receivable is approximately $5.0 million as of September 30, 2012 and December 31, 2011, respectively, of which $4.8 million and $4.7 million is included in other assets and $0.2 million and $0.3 million is included in prepaid expenses and other current assets as of September 30, 2012 and December 31, 2011, respectively. This receivable balance primarily relates to our Italian operations and typically has a three-year collection period. We review our VAT receivable balance for impairment whenever events or changes in circumstances indicate the carrying amount might not be recoverable.

Acquired in-process research and development

Costs to acquire in-process research and development, projects and technologies which had no alternative future use and which had not reached technological feasibility are expensed as incurred.

Net Loss per Share

Basic net income (loss) per common share is calculated based on the net income (loss) attributable to common shareholders divided by the weighted average number of shares outstanding for the period excluding any dilutive effects of options, warrants, unvested share awards and convertible securities. Diluted net income (loss) per common share assumes the conversion of all dilutive convertible securities, such as convertible debt and convertible preferred stock using the if-converted method, and assumes the exercise or vesting of other dilutive securities, such as options, warrants and share awards using the treasury stock method. As of September 30, 2012 and 2011, options, warrants, unvested share awards, unvested share rights and convertible debt securities aggregating 9.6 million and 5.7 million common share equivalents, respectively, prior to the application of the as-if converted method for convertible securities and the treasury stock method for other dilutive securities, such as options and warrants, are not included in the calculation of diluted net loss per share as they are anti-dilutive.

Fair Value Measurement

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. Fair value measurements are based on a three-tier hierarchy that prioritizes the inputs used to measure fair value. There are three levels of inputs used to measure fair value with Level 1 having the highest priority and Level 3 having the lowest:

Level 1 – Observable inputs, such as unadjusted quoted prices in active markets for identical assets or liabilities.

Level 2 – Observable inputs other than Level 1 inputs, such as quoted prices for similar assets or liabilities, or other inputs that are observable directly or indirectly.

Level 3 – Unobservable inputs that are supported by little or no market activity, requiring an entity to develop its own assumptions.

If the inputs used to measure the financial assets and liabilities fall within more than one level described above, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument.

Recently Adopted Accounting Standards

In May 2011, the FASB issued guidance to enhance fair value measurement and disclosure requirements and provide a common framework between U.S. GAAP and IFRS. This guidance was effective for interim and annual periods beginning on or after December 15, 2011, with early adoption prohibited. The adoption of this guidance on January 1, 2012 did not have a material impact on our condensed consolidated financial statements.

In June 2011, the FASB issued guidance amending the presentation requirements for comprehensive income. For public entities, this guidance was effective for fiscal years, and interim periods within those years, beginning after December 15, 2011, with early adoption permitted. Subsequently, in December 2011, the FASB deferred the effective date of the portion of the June 2011 accounting standards update requiring separate presentation of reclassifications out of accumulated other comprehensive income. Upon adoption on January 1, 2012, we had the option to report total comprehensive income, including components of net income and components of other comprehensive income, as a single continuous statement or in two separate but consecutive statements. We elected to present comprehensive income in two separate but consecutive statements as part of the condensed consolidated financial statements included in this Quarterly Report on Form 10-Q.

Reclassifications

Certain prior year items have been reclassified to conform to current year presentation.

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Condensed Consolidated Balance Sheets (Parenthetical) (USD $)	Sep. 30, 2012	Dec. 31, 2011
Preferred stock, no par value
Preferred Stock, Authorized shares	333,333	333,333
Series 14 Preferred Stock, stated value	$ 1,000	$ 1,000
Series 14 Preferred Stock, shares designated	20,000	20,000
Series 14 Preferred Stock, shares issued and outstanding	0	10,000
Common stock, no par value
Common Stock, Authorized shares	150,000,000	76,666,666
Common Stock, Issued shares	62,270,179	40,613,545
Common Stock, outstanding shares	62,270,179	40,613,545

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Other Comprehensive Income (Loss) (Tables)

9 Months Ended

Sep. 30, 2012

Total Accumulated Other Comprehensive Income (Loss)

Total accumulated other comprehensive income (loss) consisted of the following (in thousands):

	Net Unrealized Loss on Securities Available-for-sale			Foreign Currency Translation Adjustments			Accumulated Other Comprehensive Income (Loss)
December 31, 2011	$	(165	)	$	(7,870	)	$	(8,035	)
Current period other comprehensive income (loss)		(28	)		71			43
September 30, 2012	$	(193	)	$	(7,799	)	$	(7,992	)

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Document and Entity Information	9 Months Ended
	Sep. 30, 2012	Oct. 25, 2012
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Sep. 30, 2012
Document Fiscal Year Focus	2012
Document Fiscal Period Focus	Q3
Trading Symbol	CTIC
Entity Registrant Name	CELL THERAPEUTICS INC
Entity Central Index Key	0000891293
Current Fiscal Year End Date	--12-31
Entity Filer Category	Accelerated Filer
Entity Common Stock, Shares Outstanding		96,992,513

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Lease Agreements (Tables)

9 Months Ended

Sep. 30, 2012

Changes in Liability for Excess Facilities

The following table summarizes the changes in the liability for excess facilities during the period ended September 30, 2012 (in thousands):

	2005 Activities			2010 Activities			Total Excess Facilities Liability
Balance at December 31, 2011	$	215		$	530		$	745
Adjustments		(32	)		(62	)		(94	)
Payments		(183	)		(468	)		(651	)
Balance at September 30, 2012	$	—		$	—		$	—

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Condensed Consolidated Statements Of Operations (unaudited) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Operating expenses:
Research and development	$ 6,951	$ 7,530	$ 24,080	$ 26,982
Selling, general and administrative	7,763	7,760	29,024	25,297
Acquired in-process research and development			29,108
Total operating expenses	14,714	15,290	82,212	52,279
Loss from operations	(14,714)	(15,290)	(82,212)	(52,279)
Other income (expense):
Investment and other income (expense), net	(270)	(14)	(179)	(67)
Interest expense	(43)	(161)	(51)	(734)
Amortization of debt discount and issuance costs		(129)		(436)
Foreign exchange gain (loss)	216	(1,133)	(96)	(56)
Settlement expense	(435)		(435)
Other income (expense), net	(532)	(1,437)	(761)	(1,293)
Net loss before noncontrolling interest	(15,246)	(16,727)	(82,973)	(53,572)
Noncontrolling interest	57	65	200	179
Net loss attributable to CTI	(15,189)	(16,662)	(82,773)	(53,393)
Dividends and deemed dividends on preferred stock	(5,014)	(13,023)	(13,472)	(49,817)
Net loss attributable to CTI common shareholders	$ (20,203)	$ (29,685)	$ (96,245)	$ (103,210)
Basic and diluted net loss per common share	$ (0.38)	$ (0.80)	$ (2.12)	$ (3.11)
Shares used in calculation of basic and diluted net loss per common share	52,921	36,999	45,442	33,145

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Reverse Stock Split

9 Months Ended

Sep. 30, 2012

Reverse Stock Split

6. Reverse Stock Split

In August 2012, our Board of Directors approved a one-for-five reverse stock split and, on September 2, 2012, the reverse stock split became effective, which we refer to as the September Split. As a result of the September Split, every five shares of our authorized and outstanding common stock were converted into one authorized and outstanding share of common stock and every five shares of our authorized preferred stock were converted into one authorized share of preferred stock; there were no shares of preferred stock outstanding so there was no impact. No fractional shares were issued in the September Split. In lieu of fractional shares, shareholders received cash at a rate of approximately $0.435 per whole pre-split share. The September Split affected all of the holders of our common stock pro rata and did not materially affect any shareholder’s percentage of ownership interest. Any shares of our common stock or shares underlying options and warrants were proportionately reduced and the exercise price of any warrants or options were proportionately increased in accordance with the terms of the related agreements. Unless otherwise noted, all impacted amounts included in the condensed consolidated financial statements and notes thereto have been retroactively adjusted for the September Split.

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Commitments and Contingencies

9 Months Ended

Sep. 30, 2012

Commitments and Contingencies

5. Commitments and Contingencies

On August 3, 2009, Sicor—Società Corticosteroidi S.r.l., or Sicor, filed a lawsuit in the Court of Milan to obtain the Court’s assessment that we were bound to source a chemical compound, whose chemical name is BBR2778, from Sicor according to the terms of a supply agreement executed between Sicor and Novuspharma on October 4, 2002. We assert that the supply agreement in question was properly terminated and that we have no further obligation to comply with its terms. At the hearing of October 11, 2012, the parties informed the court about the ongoing negotiations pending between them and asked to postpone the case. Sicor alleges that the agreement was not terminated according to its terms. At the request of the parties, the court extended the final hearing until March 21, 2013. No estimate of a loss, if any, can be made at this time in the event that we do not prevail.

On December 10, 2009, CONSOB sent us a notice claiming, among other things, violation of the provisions of Section 114, paragraph 1 of the Italian Legislative Decree no. 58/98 due to the asserted late disclosure of the contents of the opinion expressed by Stonefield Josephson, Inc., an independent registered public accounting firm, with respect to our 2008 financial statements. The sanctions established by Section 193, paragraph 1 of the Italian Legislative Decree no. 58/98 for such violations could require us to pay a pecuniary administrative sanction amounting to between $6,000 and $643,000 upon conversion from euros on September 30, 2012.

The Italian Tax Authority, or the ITA, issued notices of assessment to CTI (Europe) based on the ITA’s audit of CTI (Europe)’s VAT returns for the years 2003, 2005, 2006 and 2007. The ITA audits concluded that CTI (Europe) did not collect and remit VAT on certain invoices issued to non-Italian clients for services performed by CTI (Europe). We believe that the services invoiced were non-VAT taxable consultancy services and that the VAT returns are correct as originally filed. We are vigorously defending ourselves against the assessments both on procedural grounds and on the merits of the case. We have a reserve in the amount of $1.3 million upon conversion from euros as of September 30, 2012, of which $1.1 million is included in long-term obligations, less current portion and $0.2 million of the reserve is accounted for as an offset to our VAT receivable included in other assets. If the final decision of the lower tax courts (i.e. the Provincial Tax Court or the Regional Tax Court) or of the Supreme Court is unfavorable to us, we may incur approximately $10.8 million upon conversion from euros on September 30, 2012 in additional losses for VAT assessed, penalties and interest, plus collection fees, notification expenses and additional interest for the period lapsed between the date in which the assessments were issued and the date of effective payment.

On June 16, 2012, Craig W. Philips, then President of Cell Therapeutics, Inc., delivered notice of his intention to resign as President of the Company, effective July 16, 2012. Mr. Philips’ departure was the result of a perceived diminution of responsibilities. The parties finalized a settlement agreement in October 2012, and the Company has accrued approximately $0.4 million as of September 30, 2012.

In addition to the contingencies discussed above, we are from time to time subject to legal proceedings and claims arising in the ordinary course of business, some of which may be covered in whole or in part by insurance.

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Lease Agreements - Additional Information (Detail) (USD $)				12 Months Ended
	Sep. 30, 2012	Dec. 31, 2011	Sep. 30, 2012 Lease Incentive Receivable	Dec. 31, 2010 2010 Activities
Restructuring Cost and Reserve [Line Items]
Excess facilities charge				$ 1,500,000
Prepaid expenses and other current assets	5,487,000	4,023,000	1,900,000
Deferred rent credit	5,000,000
Deferred rent credit, current	400,000
Deferred rent credit, noncurrent	$ 4,600,000

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Share-based Compensation Expense (Tables)

9 Months Ended

Sep. 30, 2012

Summary of Share-Based Compensation Expense

The following table summarizes share-based compensation expense for the three and nine months ended September 30, 2012 and 2011, which was allocated as follows (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2012		2011		2012		2011
Research and development	$	363	$	206	$	1,379	$	839
Selling, general and administrative		653		574		4,705		1,481
Total share-based compensation expense	$	1,016	$	780	$	6,084	$	2,320

Share-Based Compensation Expense by Types of Awards

For the three and nine months ended September 30, 2012 and 2011, we incurred share-based compensation expense due to the following types of awards (in thousands):

	Three Months Ended September 30,					Nine Months Ended September 30,
	2012			2011		2012		2011
2012-2014 performance awards	$	(111	)	$	—	$	2,158	$	—
Restricted stock		996			753		3,635		2,243
Options		131			27		291		77
Total share-based compensation expense	$	1,016		$	780	$	6,084	$	2,320

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Subsequent Events

9 Months Ended

Sep. 30, 2012

Subsequent Events

9. Subsequent Events

In October 2012, we entered into an underwriting agreement relating to the issuance and sale of 60,000 shares of our Series 17 Preferred Stock for gross proceeds of $60.0 million, before deducting underwriting commissions and discounts and other offering costs. Each share of Series 17 Preferred Stock is entitled to a liquidation preference equal to the stated value of $1,000 per share plus any accrued and unpaid dividends before the holders of our common stock or any other junior securities receive any payments upon such liquidation. The holders of the Series 17 Preferred Stock are entitled to receive dividends equal to and in the same form as dividends actually paid on shares of common stock or other junior securities, as and if such dividends are paid. The Series 17 Preferred Stock is convertible into common stock, at the option of the holder, at an initial conversion price of $1.40 per share. The Series 17 Preferred Stock is subject to a 9.99% blocker provision; provided, however, that in the event of an automatic conversion, the maximum conversion threshold will increase to 19.99% effective from the 90th day after the original issuance date of the Series 17 Preferred Stock, without any further action on the part of a holder. The Series 17 Preferred Stock has no voting rights on general corporate matters. As of October 25, 2012, 48,325 shares of the Series 17 preferred stock have been converted into 34.5 million shares of our common stock.

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Preferred Stock

9 Months Ended

Sep. 30, 2012

Preferred Stock

7. Preferred Stock

Prior to the effective date of the September Split (see Note 6, Reverse Stock Splits), we completed the preferred stock transactions described in this Note 7, Preferred Stock. All of the outstanding shares of the preferred stock issued in these transactions converted to common stock prior to the effective date of the September Split. Accordingly, for purposes of the descriptions of these transactions included in this Note 7, Preferred Stock, the number of shares of preferred stock issued and the initial stated value of shares of preferred stock issued are not adjusted to reflect the September Split. However, the number of shares of common stock issued upon conversion of the preferred stock, the conversion price of common stock issued upon conversion, the exercise prices of warrants issued and the number of shares of common stock issued or issuable upon exercise of the warrants in these transactions are adjusted to reflect the September Split.

Series 14 Preferred Stock

In December 2011, we issued 20,000 shares of our Series 14 convertible preferred stock, or Series 14 Preferred Stock. As of December 31, 2011, 10,000 shares of Series 14 Preferred Stock remained outstanding. In January 2012, the remaining 10,000 shares of Series 14 Preferred Stock automatically converted into 1.7 million shares of our common stock pursuant to the terms of the Series 14 Preferred Stock.

Series 15-1 Preferred Stock

In May 2012, we issued 20,000 shares of our Series 15 convertible preferred stock, or Series 15-1 Preferred Stock, and a warrant to purchase up to 2.7 million shares of our common stock, or Series 15-1 Warrant, for gross proceeds of $20.0 million. Issuance costs related to this transaction were approximately $1.3 million.

Each share of our Series 15-1 Preferred Stock was entitled to a liquidation preference equal to the initial stated value of $1,000 per share of Series 15-1 Preferred Stock, plus any accrued and unpaid dividends before the holders of our common stock or any other junior securities receive any payments upon such liquidation. The Series 15-1 Preferred Stock was not entitled to dividends except to share in any dividends actually paid on our common stock or any pari passu or junior securities. The Series 15-1 Preferred Stock was converted into our common stock, at the option of the holder, at a conversion price of $5.00 per share, subject to a 9.99% blocker provision. The Series 15-1 Preferred Stock had no voting rights except as otherwise expressly provided in our amended and restated articles of incorporation or as otherwise required by law. For the nine months ended September 30, 2012, we recognized $8.5 million in dividends and deemed dividends on preferred stock related to the beneficial conversion feature on our Series 15-1 Preferred Stock. In May 2012, all 20,000 shares of our Series 15-1 Preferred Stock were converted into 4.0 million shares of our common stock.

The Series 15-1 Warrant has an exercise price of $5.46 per share of our common stock, was exercisable immediately on the date of issuance and expires five years from the date of issuance. If the price per share of our common stock is less than the exercise price of the warrant at any time while the warrant is outstanding, the warrant may be exchanged for shares of our common stock based on an exchange value, or the Exchange Value, derived from a specified Black-Scholes value formula, subject to certain limitations. We may elect to pay all or some of such Exchange Value in cash upon exchange by the holder. Since the warrant did not meet the additional considerations necessary for equity classification in the applicable authoritative guidance, we determined the warrant is a liability instrument that is marked to fair value with changes in fair value recognized through earnings at each reporting period. Upon issuance, we estimated the fair value of the Series 15-1 Warrant to be approximately $10.3 million. In September 2012, the holder elected to exchange a portion of the Series 15-1 Warrant to purchase 1.3 million shares with an Exchange Value of $5.0 million. The Company elected to issue 2.8 million shares as payment for the Exchange Value.

The fair value of the remaining portion of the Series 15-1 Warrant was approximately $5.4 million as of September 30, 2012. We classified the Series 15-1 Warrant as Level 2 in the fair value hierarchy as the significant inputs used in determining fair value are considered observable market data. Since the exercise price exceeded the market price of our common stock on September 30, 2012, the remaining portion of the Series 15-1 Warrant outstanding was exchangeable for an amount equal to the Exchange Value. The fair value of the Series 15-1 Warrant approximated the Exchange Value, which applied the following assumptions: (i) market price of our common stock of $4.55, (ii) an expected term of 5 years, (iii) volatility of 135%, (iv) no dividend yield, and (v) a risk-free rate of 0.6%. Assumptions (i) through (iv) are specified in the terms of the warrant agreement. The risk-free interest rate used in the Black-Scholes formula is based on the implied yield currently available for U.S. Treasury securities at maturity with an equivalent term.

Series 15-2 Preferred Stock

In July 2012, we issued 15,000 shares of our Series 15 convertible preferred stock, or Series 15-2 Preferred Stock, and a warrant to purchase up to 3.4 million shares of our common stock, or Series 15-2 Warrant, for gross proceeds of $15.0 million. Issuance costs related to this transaction were approximately $0.8 million. For the three and nine months ended September 30, 2012, we recognized $5.0 million in dividends and deemed dividends on preferred stock related to the beneficial conversion feature on our Series 15-2 Preferred Stock.

Each share of our Series 15-2 Preferred Stock was entitled to a liquidation preference equal to the initial stated value of $1,000 per share of Series 15-2 Preferred Stock, plus any accrued and unpaid dividends before the holders of our common stock or any other junior securities receive any payments upon such liquidation. The Series 15-2 Preferred Stock was converted into 5.0 million shares of our common stock, at the option of the holder, at a conversion price of $2.97475 per share, subject to a 9.99% blocker provision.

The Series 15-2 Warrant had substantially the same features as the Series 15-1 Warrant described above, with the exception of the exercise price of $3.0672 per share of common stock and expires five years from the date of issuance. Upon issuance, we estimated the fair value of the warrant to be approximately $7.2 million. In September 2012, the holder elected to exchange the Series 15-2 Warrant for shares of our common stock with an Exchange Value of $7.4 million. We elected to issue 2.9 million shares of common stock to the holder as payment for the Exchange Value of the Series 15-2 Warrant.

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Acquisitions

9 Months Ended

Sep. 30, 2012

Acquisitions

8. Acquisitions

In April 2012, we entered into an asset purchase agreement with S*BIO Pte Ltd., or S*BIO, to acquire all right, title and interest in, and assume certain liabilities relating to, certain intellectual property and other assets related to compounds SB1518 (also referred to as “pacritinib”) and SB1578, or the Seller Compounds, which inhibit Janus Kinase 2, commonly referred to as JAK2. In consideration of the assets and rights acquired under the agreement, we made a payment of $15.0 million in cash and issued 15,000 shares of Series 16 convertible preferred stock, or Series 16 Preferred Stock, to S*BIO at the closing in May 2012. Each share of Series 16 preferred stock had a stated value of $1,000 per share and was convertible into shares of our common stock at an initial conversion price of $5.95 per share, subject to certain adjustments and a 19.99% blocker provision. All outstanding shares of Series 16 Preferred Stock were automatically converted into 2.5 million shares of our common stock in June 2012.

The total initial purchase consideration was as follows (in thousands):

Cash	$	15,000
Fair value of Series 16 Preferred Stock		11,344
Transaction costs		2,764
Total initial purchase consideration	$	29,108

The transaction was treated as an asset acquisition as it was determined that the assets acquired did not meet the definition of a business. We determined that the acquired assets can only be economically used for the specific and intended purpose and have no alternative future use after taking into consideration further research and development, regulatory and marketing approval efforts required in order to reach technological feasibility. Accordingly, the entire initial purchase consideration of $29.1 million was immediately expensed to acquired in-process research and development for the nine months ended September 30, 2012. The contingent consideration arrangement as discussed below will be recognized when the contingency is resolved and the consideration is paid or becomes payable.

As part of the consideration, S*BIO also has a contingent right to certain milestone payments from us up to an aggregate amount of $132.5 million if certain U.S., E.U. and Japanese regulatory approvals are obtained or if certain worldwide net sales thresholds are met in connection with any pharmaceutical product containing or comprising any Seller Compound for use for specific diseases, infections or other conditions. In addition, S*BIO will also be entitled to receive royalty payments from us at incremental rates in the low, single digits based on certain worldwide net sales thresholds on a product-by-product and country-by-country basis.

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Description of Business and Summary of Significant Accounting Policies (Policies)

9 Months Ended

Sep. 30, 2012

Description of Business

Description of Business

Cell Therapeutics, Inc., also referred to in this Quarterly Report on Form 10-Q as CTI, the Company, we, us or our, focuses on the development, acquisition and commercialization of drugs for the treatment of cancer, an area with significant market opportunity that we believe is not adequately served by existing therapies. All of our current product candidates, including Pixuvri™ (pixantrone dimaleate), or Pixuvri, pacritinib, OPAXIO™ (paclitaxel poliglumex), or OPAXIO, tosedostat and brostallicin are under development.

We operate in a highly regulated and competitive environment. The manufacturing and marketing of pharmaceutical products require approval from, and are subject to ongoing oversight by, the Food and Drug Administration, or the FDA, in the United States, by the European Medicines Agency, or EMA, in the European Union, or EU, and by comparable agencies in other countries. Obtaining approval for a new therapeutic product is uncertain, may take many years and may involve the expenditure of substantial resources.

Basis of Presentation

Basis of Presentation

The accompanying unaudited financial information of CTI as of September 30, 2012 and for the three and nine months ended September 30, 2012 and 2011 has been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Quarterly Report on Form 10-Q and Article 10 of Regulation S-X. In the opinion of management, such financial information includes all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation of our financial position at such date and the operating results and cash flows for such periods. Operating results for the three and nine months ended September 30, 2012 are not necessarily indicative of the results that may be expected for the entire year.

Certain information and footnote disclosure normally included in financial statements prepared in accordance with generally accepted accounting principles have been omitted pursuant to the rules of the U.S. Securities and Exchange Commission, or the SEC. These unaudited financial statements and related notes should be read in conjunction with our audited annual financial statements for the year ended December 31, 2011 included in our Annual Report on Form 10-K filed with the SEC on March 8, 2012.

The condensed consolidated balance sheet at December 31, 2011 has been derived from the audited financial statements at that date, but does not include all of the information and footnotes required by generally accepted accounting principles in the United States for complete financial statements.

Principles of Consolidation

Principles of Consolidation

The accompanying condensed consolidated financial statements include the accounts of CTI and its wholly-owned subsidiaries, which include Systems Medicine LLC, or SM, and CTI Life Sciences Limited. CTI Life Sciences Limited opened a branch in Italy in December 2009. We also retain ownership of our branch, Cell Therapeutics Inc. – Sede Secondaria, or CTI (Europe); however, we ceased operations related to this branch in September 2009. In addition, CTI Commercial LLC, a wholly-owned subsidiary, was included in the condensed consolidated financial statements until dissolution in March 2012.

As of September 30, 2012, we also had a 67% interest in our majority-owned subsidiary, Aequus Biopharma, Inc., or Aequus. In accordance with the Financial Accounting Standards Board, or FASB, Accounting Standards Codification, or ASC, 810, Consolidation, the noncontrolling interest in Aequus is reported below net loss in noncontrolling interest in the condensed consolidated statement of operations and condensed consolidated statements of comprehensive loss and shown as a component of equity in the condensed consolidated balance sheet.

All intercompany transactions and balances are eliminated in consolidation.

Reverse Stock-Split

Reverse Stock Splits

On May 15, 2011 and September 2, 2012, we effected a one-for-six and one-for-five reverse stock split, respectively, or the May Split and September Split, respectively. Unless otherwise noted, all impacted amounts included in the condensed consolidated financial statements and notes thereto have been retroactively adjusted for the May Split and September Split. Unless otherwise noted, impacted amounts include shares of common stock authorized and outstanding, share issuances, shares underlying preferred stock, convertible notes, warrants and stock options, shares reserved and loss per share. Additionally, the May Split and September Split impacted preferred stock authorized (but not outstanding because there were no shares of preferred stock outstanding as of the time of the applicable reverse stock split).

Liquidity

Liquidity

The accompanying condensed consolidated financial statements have been prepared assuming that we will continue as a going concern, which contemplates realization of assets and the satisfaction of liabilities in the normal course of business for the twelve-month period following the date of these condensed consolidated financial statements. However, we have incurred net losses since inception and expect to generate losses for the next few years primarily due to research and development costs for Pixuvri, pacritinib, OPAXIO, tosedostat and brostallicin.

Our available cash and cash equivalents were $14.3 million as of September 30, 2012. Subsequent to period end, we received $60.0 million in gross proceeds, before deducting underwriting discounts and commissions and other offering costs, from the issuance of our Series 17 convertible preferred stock, or Series 17 Preferred Stock. See Note 9, Subsequent Events for additional information. At our currently planned spending rate, we believe that our financial resources, in addition to the expected receipts from European Pixuvri sales, will be sufficient to fund our operations for the next fifteen (15) months. Changes in manufacturing, clinical trial expenses, and expansion of our sales and marketing organization in Europe, may consume capital resources earlier than planned. Additionally, we may not receive the country reimbursement rates in Europe for Pixuvri that we currently assume in planning for 2013.

We expect we will need to raise additional funds and are currently exploring alternative sources of equity or debt financing. We may seek to raise such capital through public or private equity financings, partnerships, joint ventures, disposition of assets, debt financings or restructurings, bank borrowings or other sources of financing. Our board of directors may issue shares depending on our financial needs and market opportunities, if deemed to be in the best interest of the shareholders. However, additional funding may not be available on favorable terms or at all. If additional funds are raised by issuing equity securities, substantial dilution to existing shareholders may result. If we fail to obtain additional capital when needed, we may be required to delay, scale back, or eliminate some or all of our research and development programs and may be forced to cease operations, liquidate our assets and possibly seek bankruptcy protection.

Value Added Tax Receivable

Value Added Tax Receivable

Our European operations are subject to a value added tax, or VAT, which is usually applied to all goods and services purchased and sold throughout Europe. The VAT receivable is approximately $5.0 million as of September 30, 2012 and December 31, 2011, respectively, of which $4.8 million and $4.7 million is included in other assets and $0.2 million and $0.3 million is included in prepaid expenses and other current assets as of September 30, 2012 and December 31, 2011, respectively. This receivable balance primarily relates to our Italian operations and typically has a three-year collection period. We review our VAT receivable balance for impairment whenever events or changes in circumstances indicate the carrying amount might not be recoverable.

Acquired In-Process Research and Development

Acquired in-process research and development

Costs to acquire in-process research and development, projects and technologies which had no alternative future use and which had not reached technological feasibility are expensed as incurred.

Net Loss per Share

Net Loss per Share

Basic net income (loss) per common share is calculated based on the net income (loss) attributable to common shareholders divided by the weighted average number of shares outstanding for the period excluding any dilutive effects of options, warrants, unvested share awards and convertible securities. Diluted net income (loss) per common share assumes the conversion of all dilutive convertible securities, such as convertible debt and convertible preferred stock using the if-converted method, and assumes the exercise or vesting of other dilutive securities, such as options, warrants and share awards using the treasury stock method. As of September 30, 2012 and 2011, options, warrants, unvested share awards, unvested share rights and convertible debt securities aggregating 9.6 million and 5.7 million common share equivalents, respectively, prior to the application of the as-if converted method for convertible securities and the treasury stock method for other dilutive securities, such as options and warrants, are not included in the calculation of diluted net loss per share as they are anti-dilutive.

Fair Value Measurement

Fair Value Measurement

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. Fair value measurements are based on a three-tier hierarchy that prioritizes the inputs used to measure fair value. There are three levels of inputs used to measure fair value with Level 1 having the highest priority and Level 3 having the lowest:

Level 1 – Observable inputs, such as unadjusted quoted prices in active markets for identical assets or liabilities.

Level 2 – Observable inputs other than Level 1 inputs, such as quoted prices for similar assets or liabilities, or other inputs that are observable directly or indirectly.

Level 3 – Unobservable inputs that are supported by little or no market activity, requiring an entity to develop its own assumptions.

If the inputs used to measure the financial assets and liabilities fall within more than one level described above, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument.

Recently Adopted Accounting Standards

Recently Adopted Accounting Standards

In May 2011, the FASB issued guidance to enhance fair value measurement and disclosure requirements and provide a common framework between U.S. GAAP and IFRS. This guidance was effective for interim and annual periods beginning on or after December 15, 2011, with early adoption prohibited. The adoption of this guidance on January 1, 2012 did not have a material impact on our condensed consolidated financial statements.

In June 2011, the FASB issued guidance amending the presentation requirements for comprehensive income. For public entities, this guidance was effective for fiscal years, and interim periods within those years, beginning after December 15, 2011, with early adoption permitted. Subsequently, in December 2011, the FASB deferred the effective date of the portion of the June 2011 accounting standards update requiring separate presentation of reclassifications out of accumulated other comprehensive income. Upon adoption on January 1, 2012, we had the option to report total comprehensive income, including components of net income and components of other comprehensive income, as a single continuous statement or in two separate but consecutive statements. We elected to present comprehensive income in two separate but consecutive statements as part of the condensed consolidated financial statements included in this Quarterly Report on Form 10-Q.

Reclassifications

Reclassifications

Certain prior year items have been reclassified to conform to current year presentation.

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Description of Business and Summary of Significant Accounting Policies - Additional Information (Detail) (USD $) Share data in Millions, unless otherwise specified	1 Months Ended		9 Months Ended				1 Months Ended
	Sep. 02, 2012	May 15, 2011	Sep. 30, 2012	Sep. 30, 2011	Dec. 31, 2011	Dec. 31, 2010	Oct. 31, 2012 Subsequent Event Series 17 Preferred Stock	Sep. 30, 2012 Other Assets	Dec. 31, 2011 Other Assets	Sep. 30, 2012 Prepaid Expenses and Other Current Assets	Dec. 31, 2011 Prepaid Expenses and Other Current Assets	Sep. 30, 2012 Aequus Biopharma, Inc
Description Of Business And Significant Accounting Policies [Line Items]
Interest in majority-owned subsidiary												67.00%
Reverse stock split ratio	0.2000	0.1667
Cash and cash equivalents			$ 14,289,000	$ 45,212,000	$ 47,052,000	$ 22,649,000
Proceeds from issuance Series 17 convertible preferred stock							60,000,000
VAT receivable			$ 5,000,000		$ 5,000,000			$ 4,800,000	$ 4,700,000	$ 200,000	$ 300,000
VAT receivable, collection period			3 years
Anti-dilutive shares not included in calculation of diluted net loss per share			9.6	5.7

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Share-Based Compensation Expense by Types of Awards (Detail) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based compensation expense	$ 1,016	$ 780	$ 6,084	$ 2,320
December 2012-2014 performance awards
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based compensation expense	(111)		2,158
Restricted stock
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based compensation expense	996	753	3,635	2,243
Options
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based compensation expense	$ 131	$ 27	$ 291	$ 77

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Condensed Consolidated Statements Of Comprehensive Loss (unaudited) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Net loss before noncontrolling interest	$ (15,246)	$ (16,727)	$ (82,973)	$ (53,572)
Other comprehensive income (loss):
Foreign currency translation adjustments	(121)	703	71	(73)
Net unrealized gain (loss) on securities available-for-sale	48	(107)	(28)	(204)
Other comprehensive income (loss)	(73)	596	43	(277)
Comprehensive loss	(15,319)	(16,131)	(82,930)	(53,849)
Comprehensive loss attributable to noncontrolling interest	57	65	200	179
Comprehensive loss attributable to CTI	$ (15,262)	$ (16,066)	$ (82,730)	$ (53,670)

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Share-based Compensation Expense

9 Months Ended

Sep. 30, 2012

Share-based Compensation Expense

4. Share-based Compensation Expense

The following table summarizes share-based compensation expense for the three and nine months ended September 30, 2012 and 2011, which was allocated as follows (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2012		2011		2012		2011
Research and development	$	363	$	206	$	1,379	$	839
Selling, general and administrative		653		574		4,705		1,481
Total share-based compensation expense	$	1,016	$	780	$	6,084	$	2,320

For the three and nine months ended September 30, 2012 and 2011, we incurred share-based compensation expense due to the following types of awards (in thousands):

	Three Months Ended September 30,					Nine Months Ended September 30,
	2012			2011		2012		2011
2012-2014 performance awards	$	(111	)	$	—	$	2,158	$	—
Restricted stock		996			753		3,635		2,243
Options		131			27		291		77
Total share-based compensation expense	$	1,016		$	780	$	6,084	$	2,320

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Commitments and Contingencies - Additional Information (Detail) (USD $)	Sep. 30, 2012
CONSOB
Loss Contingencies [Line Items]
Range of possible loss, minimum	$ 6,000
Range of possible loss, maximum	643,000
Provision for VAT Assessments
Loss Contingencies [Line Items]
Loss contingency accrual	1,300,000
Additional VAT exposure	10,800,000
Provision for VAT Assessments | Other Liabilities
Loss Contingencies [Line Items]
Loss contingency accrual	1,100,000
Provision for VAT Assessments | Other Assets
Loss Contingencies [Line Items]
Loss contingency accrual	200,000
Employment Settlement
Loss Contingencies [Line Items]
Loss contingency accrual	$ 400,000

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Acquisitions (Tables)

9 Months Ended

Sep. 30, 2012

Initial Purchase Consideration

The total initial purchase consideration was as follows (in thousands):

Cash	$	15,000
Fair value of Series 16 Preferred Stock		11,344
Transaction costs		2,764
Total initial purchase consideration	$	29,108