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UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C.
20549

FORM 10-K

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

For the fiscal year ended December 31, 2010

[  ] 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: 000-31187

IntelGenx Technologies Corp.(Exact name of registrant as specified in its charter)

|Delaware                                                             | 87-0638336                          
|-------------------------------------------------------------------- | ------------------------------------
|(State or other jurisdiction of incorporation or
      organization) | (I.R.S. Employer Identification No.)

|6425 Abrams, Ville Saint Laurent, Quebec       | H4S 1X9   
|---------------------------------------------- | ----------
|(Address of
      principal executive offices) | (Zip Code)

(514) 331-7440(Registrants telephone number,
including area code)

Securities registered pursuant to Section 12(b) of the Act:
None

Securities registered pursuant to Section 12(g) of the
Act:Common Stock, $0.00001 par value per share

Indicate by check mark if the registrant is a well-known
seasoned issuer, as defined in Rule 405 of the Securities Act. Yes [ 
]       No [X]

Indicate by check mark if the registrant is not required to
file reports pursuant to Section 13 or Section 15(d) of the Act. Yes [
 ]       No [X]

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 [  ]       No [  ]

Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not
contained herein, and will not be contained, to the best of registrants
knowledge, in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this Form
10-K.   [X]

Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, 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 [  ] | Non-accelerated filer [  ]                          | Smaller reporting company [X]
|---------------------------- | ---------------------- | --------------------------------------------------- | -----------------------------
|                             |                        | (Do not check if a smaller
      reporting company) |                              

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



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As of June 30, 2010, the aggregate market value of the
registrants voting and non-voting common equity held by non-affiliates of the
registrant was $11,302,636 based on the closing price of the registrants common
shares of U.S. $0.50, as reported on the OTC Bulletin Board on that date. Shares
of the registrants common shares held by each officer and director and each
person who owns 10% or more of the outstanding common shares of the registrant
have been excluded in that such persons may be deemed to be affiliates. This
determination of affiliate status is not necessarily a conclusive determination
for other purposes.

Indicate the number of shares outstanding of each of the
registrants classes of common stock, as of the latest practicable date.

|Class                           | Outstanding at March 24, 2011
|------------------------------- | -----------------------------
|Common Stock, $.00001 par value | 39,808,896 shares            

Documents incorporated by reference: None.

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TABLE OF CONTENTS

|         |                                                                                                                           | Page    
|-------- | ------------------------------------------------------------------------------------------------------------------------- | --------
|PART I   |                                                                                                                           |         
|Item 1.  | Business.                                                                                                                 | 4       
|Item 1A  | Risk Factors.                                                                                                             | 11      
|Item 1B  | Unresolved Staff
      Comments.                                                                                          | 17      
|Item 2.  | Properties.                                                                                                               | 17      
|Item 3.  | Legal Proceedings.                                                                                                        | 17      
|Item 4.  | (Removed and Reserved).                                                                                                   | 17      
|         |                                                                                                                           |         
|PART II  |                                                                                                                           |         
|Item 5.  | Market for
      Registrants Common Equity, Related Stockholder Matters and Issuer
      Purchases of Equity Securities. | 18      
|Item 6   | Selected Financial Data.                                                                                                  | 21      
|Item 7.  | Managements
      Discussion and Analysis of Financial Condition and Results of Operations.                              | 21      
|Item 7A  | Quantitative and Qualitative
      Disclosures About Market Risk.                                                         | 30      
|Item 8.  | Financial Statements
      and Supplementary Data.                                                                        | 30      
|Item 9.  | Changes in and Disagreements with
      Accountants on Accounting and Financial Disclosure.                               | 30      
|Item 9A. | Controls and
      Procedures.                                                                                            | 31      
|Item 9B. | Other Information.                                                                                                        | 31      
|         |                                                                                                                           |         
|PART III |                                                                                                                           |         
|Item 10. | Directors, Executive
      Officers, and Corporate Governance.                                                            | 31      
|Item 11. | Executive Compensation.                                                                                                   | 32      
|Item 12. | Security Ownership
      of Certain Beneficial Owners and Management and Related Stockholder
      Matters.               | 32      
|Item 13. | Certain Relationships and Related
      Transactions, and Director Independence.                                          | 32      
|Item 14. | Principal Accounting
      Fees and Services.                                                                             | 32      
|         |                                                                                                                           |         
|PART IV  |                                                                                                                           |         
|Item 15. | Exhibits.                                                                                                                 | 33      
|         | Financial Statements
      Schedules.                                                                                     | F-1-F-28

Terminology and references

In this Annual Report on Form 10-K, the words Company,
IntelGenx, we, us, and our, refer collectively to IntelGenx Technologies
Corp. and IntelGenx Corp., our wholly-owned Canadian subsidiary.

In this Form 10-K, unless otherwise specified, all monetary
amounts are in United States dollars, all references to $, U.S.$, U.S.
dollars and dollars mean U.S. dollars and all references to C$, Canadian
dollars and CDN$ mean Canadian dollars. To the extent that such monetary
amounts are derived from our consolidated financial statements included
elsewhere in this Form 10-K, they have been translated into U.S. dollars in
accordance with our accounting policies as described therein. Unless otherwise
indicated, other Canadian dollar monetary amounts have been translated into
United States dollars at the December 31, 2010 closing rate reported by the Bank
of Canada, being U.S. $1.00 = C$0.9946.

3

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PART I

Cautionary Statement Concerning Forward-Looking Statements

Certain statements included or incorporated by reference in
this report constitute forward-looking statements within the meaning of
applicable securities laws. All statements contained in this report that are not
clearly historical in nature are forward-looking, and the words anticipate,
believe, continue, expect, estimate, intend, may, plan, will,
shall and other similar expressions are generally intended to identify
forward-looking statements within the meaning of Section 27A of the Securities
Act and Section 21E of the Securities Exchange Act of 1934. All forward-looking
statements are based on our beliefs and assumptions based on information
available at the time the assumption was made. These forward-looking statements
are not based on historical facts but on managements expectations regarding
future growth, results of operations, performance, future capital and other
expenditures (including the amount, nature and sources of funding thereof),
competitive advantages, business prospects and opportunities. Forward-looking
statements involve significant known and unknown risks, uncertainties,
assumptions and other factors that may cause our actual results, levels of
activity, performance or achievements to differ materially from those implied by
forward-looking statements. These factors should be considered carefully and
prospective investors should not place undue reliance on the forward-looking
statements. Although the forward-looking statements contained in this report or
incorporated by reference herein are based upon what management believes to be
reasonable assumptions, there is no assurance that actual results will be
consistent with these forward-looking statements. These forward-looking
statements are made as of the date of this report or as of the date specified in
the documents incorporated by reference herein, as the case may be. The
Company undertakes no obligation to update any forward-looking statements to
reflect events or circumstances after the date on which such statements were
made or to reflect the occurrence of unanticipated events, except as may be
required by applicable securities laws. The factors set forth in Item 1A.,
"Risk Factors", as well as any cautionary language in this report, provide
examples of risks, uncertainties and events that may cause IntelGenx' actual
results to differ materially from the expectations IntelGenx describes in our
forward-looking statements. Before you invest in the common stock, you should be
aware that the occurrence of the events described as risk factors and elsewhere
in this report could have a material adverse effect on our business, operating
results and financial condition.

ITEM 1. BUSINESS.

Corporate History

Our predecessor company, Big Flash Corp., was incorporated in
Delaware on July 27, 1999. On April 28, 2006, Big Flash, through its Canadian
holding corporation, completed the acquisition of IntelGenx Corp., a Canadian
company incorporated on June 15, 2003. The Company did not have any operations
prior to the acquisition of IntelGenx Corp. In connection with the acquisition,
we changed our name from Big Flash Corp. to IntelGenx Technologies Corp.
IntelGenx Corp. has continued operations as our operating subsidiary.

Overview

We are a drug delivery company focusing on the development of
novel, orally administered drug delivery products based on our proprietary oral
drug delivery technologies. We have positioned ourselves as a provider of
product development services for the pharmaceutical industry, including the
branded and generic pharmaceutical markets.

Drug delivery systems are an important tool in the hands of
physicians for purposes of optimizing drug therapy. For the pharmaceutical
industry, drug delivery systems represent an opportunity to extend the market
exclusivity and product lifecycle of drugs whose patent protection is nearing
expiration.

Controlled release (CR) delivery systems play an important role
in the development of orally administered drug delivery systems. Controlled
release technology provides patients with the required amount of medication over
a pre-determined, prolonged period of time. Because of the reduced fluctuation
of the active drug in the blood and the avoidance of plasma spikes, controlled
release products are deemed safer and more tolerable than conventional dosage
forms, and have shown better patient compliance.

Our primary business strategy is to develop pharmaceutical
products based upon our proprietary drug delivery technologies and license the
commercial rights to companies in the pharmaceutical industry once the viability
of a product has been demonstrated. In exchange for licensing rights to our
products, we seek funding consisting of a combination of one or more of the
following: advance down payments, milestone fees, reimbursement for development
costs, and royalties on sales. In addition, we may receive a manufacturing
royalty from our contract manufacturers for the exclusive right to manufacture
our products. The companies we partner with are typically responsible for
managing the regulatory approval process of the product with the United States
Food and Drug Administration (FDA) and/or other regulatory bodies, as well as
for the marketing and distribution of the products. On a case-by-case basis,
IntelGenx may be responsible for providing all or part of the documentation
required for the regulatory submission. In addition to pursuing partnering arrangements that provide for the full
funding of a drug development project, we may undertake development of selected
product opportunities until the marketing and distribution stage. We would first
assess the potential and associated costs for successful development of a
product, and then determine at which stage it would be most prudent to seek a
partner, balancing costs against the potential for higher returns later in the
development process.

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Technology Platforms

Our product development efforts are based upon three delivery
platform technologies: (1) a Multilayer Tablet technology (2) an Oral Film
technology, and (3) a Mucoadhesive Tablet technology. Our Multilayer Tablet
platform technology allows for the development of oral controlled-release
products. It is designed to be versatile and to reduce manufacturing costs as
compared to competing oral extended-release delivery technologies. The Oral Film
technology allows for the instant delivery of pharmaceuticals to the oral
cavity, while the Mucoadhesive Tablet allows for the controlled release of
active substances to the oral mucosa.

The Multilayer Tablet (VersaTab) platform technology
represents a new generation of controlled release layered tablets designed to
modulate the release of active compounds. The technology is based on a
multilayer tablet with an active core layer and erodible cover layers. The
release of the active drug from the core matrix initially occurs in a
first-order fashion. As the cover layers start to erode, their permeability for
the active ingredient through the cover layers increases. Thus, the Multilayer
Tablet can produce quasi-linear (zero-order) kinetics for releasing a chemical
compound over a desired period of time. The erosion rate of the cover layers can
be customized according to the physico-chemical properties of the active drug.
In addition, our multilayer technology offers the opportunity to develop
combination products in a regulatory-compliant format. Combination products are
made up of two or more active ingredients that are combined into a single dosage
form.

The Oral Film technology (VersaFilm) is made up of a thin
(25-35 micron) polymeric film comprised of United States Pharmacopeia (USP)
components that are approved by the FDA for use in food, pharmaceutical, and
cosmetic products. Derived from the edible film technology used for breath
strips and initially developed for the instant delivery of savory flavors to
food substrates, the VersaFilm technology is designed to provide a rapid
response compared to existing conventional tablets. The VersaFilm technology is
intended for indications requiring rapid onset of action, such as migraine,
motion sickness, erectile dysfunction, and nausea.

The Mucoadhesive Tablet (AdVersa) is a drug delivery system
capable of adhering to the oral mucosa and releasing the drug onto the site of
application at a controlled rate. The Mucoadhesive Tablet is designed to provide
the following advantages relative to competing technologies: (i) it avoids the
first pass effect, whereby the liver metabolizes the active ingredient and
greatly reduces the level of drug in the systemic circulation, (ii) it leads to
a higher absorption rate in the oral cavity as compared to the conventional oral
route, and (iii) it achieves a rapid onset of action for the drug. The
Mucoadhesive Tablet technology is designed to be versatile in order to permit
the site of application, residence time, and rate of release of the drug to be
modulated to achieve the desired results.

Product Portfolio

Our product portfolio includes a blend of generic and branded
products based on our proprietary delivery technology (generic drugs are
essentially copies of drugs that have already received FDA approval).

INT0001/2004. This is the most advanced generic product
involving our multilayer tablet technology. Equivalency with the reference
product Toprol XL and its European equivalent Beloc-ZOK has been demonstrated
in-vitro. The product has been tested in phase I studies. Pivotal
development activities are ongoing.

INT0004/2006. The development of a new, higher strength of the
antidepressant Bupropion HCl, the active ingredient in Wellbutrin XL®, has been
completed. A regulatory file for a 505(b)(2) New Drug Application (NDA)
submission was filed in April, 2009. In a complete response letter received on
February 4, 2010, the FDA commented on the food effect, which was observed in
the food effect study included in the NDA, and on the lack of a commercial
manufacturer. Both issues have been resolved with new pivotal batches being
manufactured by Pillar5 Pharma and, using product from these pivotal batches, a
new clinical study is being undertaken to address the food effect. A response to
the complete response letter is expected to be filed in the second quarter of
2011.

INT0006/2005. We have entered into a development agreement with
Azur Pharma for the development and manufacture of a prenatal vitamin
supplement. The product was developed using product specific intellectual
property that we developed. The product was launched in the United States during
the fourth quarter of 2008 under the brand name Gesticare®.

INT0010/2006. We initially entered into an agreement with
Cynapsus Therapeutics Inc. (formerly Cannasat Therapeutics Inc., Cynapsus) for
the development of a buccal mucoadhesive tablet product containing a
cannabinoid-based drug for the treatment of neuropathic pain and nausea in
cancer patients undergoing chemotherapy. A clinical biostudy undertaken in 2009
on the mucoadhesive tablet developed by IntelGenx indicated improved
bioavailability and reduced first-pass metabolization of the drug. In the 4th quarter of 2010, we acquired from Cynapsus
full control of, and interest in, this project going forward. We also obtained
worldwide rights to US Patent 7,592,328 and all corresponding foreign patents
and patent applications to exclusively develop and further provide intellectual
property protection for this project. We are preparing pivotal activities,
including manufacturing scale-up and a clinical efficacy study.

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INT0007/2006. An oral film product based on our proprietary
edible film technology is currently in the optimization stage. The product is
intended for the treatment of erectile dysfunction (ED). The results of a phase
I pilot study that was conducted in the third quarter of 2010 indicate that the
product is bioequivalent with the reference listed drug.

INT0008/2007. An oral film product based on our proprietary
edible film technology is currently in the pivotal stage of development, with
pivotal batch manufacturing expected to be completed in the third quarter of
2011. The product is intended for the treatment of migraine. The results of a
phase I pilot study that was conducted in 2009 indicate that the product is
bioequivalent with the reference listed drug. In the third quarter of 2010, we
entered into an agreement with RedHill Biopharma Ltd. for the co-development and
commercialization of this product.

INT0019/2009. An oral film product based on our proprietary
edible film technology is currently in the early development stage. The product
is intended for the treatment of diarrhea.

INT0020/2010. An oral film product based on our proprietary
edible film technology is currently being tested for bioequivalence against the
reference listed drug. Results are expected in the first half of 2011. The
product is intended for the treatment of insomnia.

INT0022/2010. An oral film product based on our proprietary
edible film technology is currently in the final stages of optimization. The
results of a phase I pilot study that was conducted in 2010 indicate that the
product is bioequivalent with the reference listed drug. The product is intended
for the treatment of bipolar disorder.

INT0024/2010. An oral tablet product based on our proprietary
multilayer tablet technology is currently in the early development stage. The
product is intended for the treatment of idiopathic pulmonary fibrosis.

INT0025/2010. An oral controlled release film product based on
our proprietary edible film technology is currently in the early development
stage. The product is intended for the treatment of benign prostatic
hyperplasia.

INT0026/2011. An oral film product based on our proprietary
edible film technology is currently in the early development stage. The product
is intended for the treatment of benign prostatic hyperplasia.

The current development status of each of our products as of
the date of this report is summarized in the following table:

Product
    Application
    Status of DevelopmentINT0001/2004
    CHF (Coronary Heart
      Failure), Hypertension
    Pivotal batches in
      preparation.INT0004/2006
    Antidepressant
    NDA filed April, 2009; complete
      response letter received Q1/2010. Pivotal batches completed at new
      manufacturing facility. Pivotal Phase I clinical study completed and
      ongoing stability study to support filing of response to complete response
      letter Q2, 2011.INT0006/2005
    Prenatal vitamin
      supplement
    Product launched in
      USA Q4, 2008.INT0010/2006
    Neuropathic pain
    Pilot biostudy completed. Pivotal
      activities in preparation.INT0007/2006
    Erectile Dysfunction
    Pilot biostudy
      completed indicating bioequivalence with Reference Listed Drug (RLD).INT0008/2007
    Migraine
    Pilot biostudy completed indicating
      bioequivalence with RLD. Pivotal activities ongoing.INT0019/2009
    Diarrhea
    Formulation
      development ongoing.


|INT0020/2010 | Insomnia                           | Formulation development completed.
      Proof of concept clinical study ongoing.
|------------ | ---------------------------------- | ---------------------------------------------------------------------------------
|INT0022/2008 | Bipolar Disorder                   | Pilot biostudy
      completed indicating bioequivalence with RLD.               
|INT0024/2010 | Idiopathic pulmonary fibrosis      | Formulation development ongoing.                                                 
|INT0025/2010 | Benign prostatic
      hyperplasia | Formulation
      development ongoing.                                           
|INT0026/2011 | Benign prostatic hyperplasia       | Formulation development ongoing.                                                 

6

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Growth Strategy

Our primary growth strategies include: (1) identifying
lifecycle management opportunities for existing blockbuster products, (2)
developing generic drugs with high barriers to entry, (3) developing products
for the (non-pharmaceutical) nutritional supplement market, and (4) developing
new drug delivery technologies.

Lifecycle Management Opportunities

We are seeking to position our delivery technologies as an
opportunity for lifecycle management of products for which patent protection of
the active ingredient is nearing expiration. While the patent for the underlying
substance cannot be extended, patent protection can be obtained for a new and
improved formulation by filing an application with the FDA under Section
505(b)(2) of the U.S. Federal Food, Drug and Cosmetic Act. Such applications,
known as a 505(b)(2) NDA, are permitted for new drug products that incorporate
previously approved active ingredients, even if the proposed new drug
incorporates an approved active ingredient in a novel formulation or for a new
indication. A 505(b)(2) NDA may include information regarding safety and
efficacy of a proposed drug that comes from studies not conducted by or for the
applicant. The first formulation for a respective active ingredient filed with
the FDA under a 505(b)(2) application may qualify for up to three years of
market exclusivity upon approval. Based upon a review of past partnerships
between third party drug delivery companies and pharmaceutical companies,
management believes that drug delivery companies which possess innovative
technologies to develop these special dosage formulations present an attractive
opportunity to pharmaceutical companies. Accordingly, we believe these so-called
505(b)(2) products represent a viable business opportunity for us.

Generic Drugs with High Barriers to Entry

We will also plan to pursue the development of generic drugs
that have certain barriers to entry, e.g., where product development and
manufacturing are complex and can limit the number of potential entrants into
the generic market. We plan to pursue such projects only if the number of
potential competitors is deemed relatively insignificant.

Nutritional Supplement Products

We plan to develop additional products for the nutritional
supplement market based upon our proprietary drug delivery technologies. The
market for these supplements is large, with little differentiation between
products. Our proprietary technology is aimed at increasing the absorption rate
of active ingredients. We believe that supplements represent attractive
short-term revenue opportunities since they are not regulated as pharmaceutical
products and do not require FDA approval.

Development of New Drug Delivery Technologies

The rapidly disintegrating film technology contained in our
VersaFilm, and our AdVersa mucosal adhesive tablet, are two examples of our
efforts to develop alternate technology platforms. As we work with various
partners on different products, we seek opportunities to develop new proprietary
technologies.

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Competition

The pharmaceutical industry is highly competitive and is
subject to the rapid emergence of new technologies, governmental regulations,
healthcare legislation, availability of financing, patent litigation and other
factors. Many of our competitors, including Valeant Pharmaceuticals
International, Inc. (formerly Biovail Corporation), Labopharm Inc., Monosol Rx,
Labtec GmbH and Skye Pharma PLC, have longer operating histories and greater
financial, technical, marketing, legal and other resources than we have. In
addition, many of our competitors have significantly greater experience than we
have in conducting clinical trials of pharmaceutical products, obtaining FDA and
other regulatory approvals of products, and marketing and selling products that
have been approved. We expect that we will be subject to competition from
numerous other companies that currently operate or are planning to enter the
markets in which we compete.

The key factors affecting the development and commercialization
of our drug delivery products are likely to include, among other factors:

- The safety and efficacy of our products;
- The relative speed with which we can develop products;
- Generic competition for any product that we develop;
- Our ability to defend our existing intellectual property and to broaden
  our intellectual property and technology base;
- Our ability to differentiate our products;
- Our ability to manufacture our products in compliance with current Good
  Manufacturing Practices (cGMP) and any other regulatory requirements; and
- Our ability to obtain financing.

In order to establish ourselves as a viable industry partner,
we plan to continue to invest in our research and development activities in
order to further strengthen our technology base and to develop the ability to
manufacture our products through our manufacturing partner at competitive
costs.

Our Competitive Strengths

We believe that our key competitive strengths include:

- Our intellectual property;
- The versatility of our drug delivery technology; and
- The potential manufacturing cost savings associated with our technology.

Manufacturing Partnership

We manufacture products only for testing purposes in our own
laboratories, and we do not manufacture products for clinical trials or for
commercial use.

We formed a strategic alliance with LTS Lohmann
Therapie-Systeme AG ("LTS") for the exclusive manufacturing of products
developed by us using our VersaFilm drug delivery technology. LTS is regarded as
a pioneer in the development and production of transdermal and film form/wafer
oral systems and has become one of the world's leading suppliers for the
international pharmaceutical industry. VersaFilm is IntelGenx' immediate release
wafer technology. It is comprised of a thin polymeric film using United States
Pharmacopeia (USP) components that are safe and approved by the FDA for use in
food, pharmaceutical and cosmetic products. VersaFilm provides a
patent-protected method of re-formulating approved pharmaceuticals in a more
convenient and discrete oral dosage form.

We formed a strategic manufacturing partnership with, and took
an ownership position in, Pillar5 Pharma Inc. (Pillar5). We have undertaken to
use our best efforts to ensure that distributors of our oral solid dose
pharmaceutical products that are developed for commercial production, be
directed to Pillar5 for the purpose of negotiating a manufacturing agreement
requiring Pillar5 to manufacture such products. As consideration for this
undertaking, Pillar5 issued to us common shares representing 10% of the issued
and outstanding shares of Pillar5.This manufacturing partnership secures the
production of clinical test batches and commercial products for our VersaTab and
AdVersa tablet products.

8

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We are not a manufacturer and we do not usually purchase large
quantities of raw materials. Our manufacturing partners, however, may purchase
significant quantities of raw materials, some of which may have long lead times.
If raw materials cannot be supplied to our manufacturing partners in a timely
and cost effective manner, our manufacturing partners may experience delays in
production that may lead to reduced supplies of commercial products being
available for sale or distribution. Such shortages could have a detrimental
effect on sales of the products and a corresponding reduction on our royalty
revenues earned.

Dependence on Major Customers

We do not rely on any one or a few major customers for our end
products. However, we depend upon a limited number of partners to develop our
products, to provide funding for the development of our products, and to assist
in obtaining regulatory approvals that are required in order to commercialize
these products.

Intellectual Property and Patent Protection

We protect our intellectual property and technology by using
the following methods: (i) applying for patent protection in the United States
and in the appropriate foreign markets, (ii) non-disclosure agreements, license
agreements and appropriate contractual restrictions and controls on the
distribution of information, and (iii) trade secrets, common law trademark
rights and trademark registrations. We plan to file core technology patents
covering the use of our platform technologies in any pharmaceutical products.

We have obtained four (4) patents and have an additional seven
(7) pending patent applications, as described below. The patents expire 20 years
after submission of the initial application.

Patent No.
    Title
    Subject
    Date submitted / issuedUS 6,231,957
    Rapidly disintegrating flavor
      wafer for flavor enrichment
    The composition, manufacturing,
      and use of rapidly disintegrating flavored films for releasing flavors to
      certain substrates
    Issued May 15, 2001US 6,660,292
    Rapidly disintegrating film for precooked foods
    Composition and manufacturing of flavored films
      for releasing flavors to precooked food substrates
    Issued December 9, 2003US 7,132,113
    Flavored film
    Composition and manufacturing
      method of multi-layered films
    Issued April 16, 2002US Appl. 2007/0190144
    Multilayer Tablet
    Formulation and
      Method of Preparation of Multilayered Tablets
    Published August 16,
      2007


|US Appl. 2007/0128272                | Multi-Vitamin And
      Mineral Supplement                                     | Formulation and
      Method of Preparation of Prenatal Multivitamin Supplement      | Published June 7,
      2007
|------------------------------------ | ------------------------------------------------------------------------------ | ------------------------------------------------------------------------------------ | ----------------------------
|US Appl. 2006/0127478                | Oral dosage formulation                                                        | Multilayer oral dosage forms                                                         | Published June 15, 2006     
|US Appl. 11/782,838 PCT/IB2007/03950 | Controlled Release
      Pharmaceutical Tablets                                | Formulation and Method Of
      Making Tablets Containing Bupropion And Mecamylamine | July 25, 2006               
|US Patent 7674479                    | Sustained-release Bupropion and Bupropion /
      Mecamylamine tablets         | Formulation and Method Of Making Tablets
      Containing Bupropion And Mecamylamine | Issued March 9, 2010        
|US Appl. 12/836810                   | Oral Mucoadhesive dosage form                                                  | Direct compression formulation
      for buccal and sublingual dosage forms          | July 15, 2010               
|US Appl. US 12/936.132               | Oral film dosage forms and methods for making
      same                       | Optimization of Film strip technology                                                | December 8, 2010            
|US Provisional Appl. US 61/327969    | Methods for making improved
      solid oral dosage forms comprising Tadalafil | Oral films containing Tadalafil                                                      | April 26, 2010              

9

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Government Regulation

The pharmaceutical industry is highly regulated. The products
we participate in developing require certain regulatory approvals. In the United
States, drugs are subject to rigorous regulation by the FDA. The U.S. Federal
Food, Drug, and Cosmetic Act, and other federal and state statutes and
regulations, govern, among other things, the research, development, testing,
manufacture, storage, record keeping, packaging, labeling, adverse event
reporting, advertising, promotion, marketing, distribution, and import and
export of pharmaceutical products. Failure to comply with applicable regulatory
requirements may subject a company to a variety of administrative or
judicially-imposed sanctions and/or the inability to obtain or maintain required
approvals or to market drugs. The steps ordinarily required before a new
pharmaceutical product may be marketed in the United States include:

- preclinical laboratory tests, animal studies and formulation studies under
  FDAs good laboratory practices regulations, or GLPs;
- the submission to the FDA of an investigational new drug application, or
  IND, which must become effective before human clinical trials may begin;
- the completion of adequate and well-controlled clinical trials according
  to good clinical practice regulations, or GCPs, to establish the safety and
  efficacy of the product for each indication for which approval is sought;
- after successful completion of the required clinical testing, submission
  to the FDA of a New Drug Application, or NDA, or an Abbreviated New Drug
  Application, or ANDA, for generic drugs. In certain cases, an application for
  marketing approval may include information regarding safety and efficacy of a
  proposed drug that comes from studies not conducted by or for the applicant.
  Such applications, known as a 505(b)(2) NDA, are permitted for new drug
  products that incorporate previously approved active ingredients, even if the
  proposed new drug incorporates an approved active ingredient in a novel
  formulation or for a new indication;
- satisfactory completion of an FDA inspection of the manufacturing facility
  or facilities at which the product is produced to assess compliance with cGMPs
  to assure that the facilities, methods and controls are adequate to preserve
  the drugs identity, strength, quality and purity; and
- FDA review and approval of the NDA or ANDA.

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The cost of complying with the foregoing requirements,
including preparing and submitting an NDA or ANDA, may be substantial.

Accordingly, we typically rely upon our partners in the
pharmaceutical industry to spearhead and bear the costs of the FDA approval
process. We also seek to mitigate regulatory costs by focusing on 505(b)(2) NDA
opportunities. By applying our drug delivery technology to existing drugs, we
seek to develop products with lower research & development (R&D)
expenses and shorter time-to-market timelines as compared to regular NDA
products.

Research and Development Expense

Our R&D expenses, net of R&D tax credits, for the year
ended December 31, 2010 increased to $1,565 thousand as compared to $1,237
thousand for the year ended December 31, 2009. The increase in R&D
expenditure is explained in the section of this report entitled Managements
Discussion and Analysis of Financial Condition and Results of Operations.

Environmental Regulatory Compliance

We believe that we are in compliance with environmental
regulations applicable to our research and development facility located in Ville
Saint-Laurent, Quebec.

Employees

As of the date of this filing, we have 10 full-time and no
part-time employees. None of our employees are covered by collective bargaining
agreements. We believe that our relations with our employees are good.

ITEM 1A. RISK FACTORS.

An investment in our common stock involves significant
risks. You should carefully consider the following risks and all other
information set forth in this report before deciding to invest in shares of our
common stock. If any of the events or developments described below occurs, our
business, financial condition and results of operations may suffer. In that
case, the value of our common stock may decline and you could lose all or part
of your investment.

Risks Related to Our Business

We continue to sustain losses and our revenues are not
sufficient to sustain our operations.

Even though we ceased being a development stage company in
April 2006, we are still subject to all of the risks associated with having a
limited operating history and pursuing the development of new products. Our cash
flows may be insufficient to meet expenses relating to our operations and the
development of our business, and may be insufficient to allow us to develop new
products. We currently conduct research and development using our proprietary
platform technologies to develop oral controlled release and other delivery
products. We do not know whether we will be successful in the development of
such products. We have an accumulated deficit of approximately $9,761 thousand
since our inception in 2003 through December 31, 2010. To date, these losses
have been financed principally through sales of equity securities, long-term
debt and debt from related parties. Our revenues for the years ended December
31, 2010, December 31, 2009, December 31, 2008, December 31, 2007, December 31,
2006, December 31, 2005 and December 31, 2004 were $1,337 thousand, $1,279
thousand, $977 thousand, $863 thousand, $266 thousand, $20 thousand and $257
thousand respectively. Our revenues in 2010 consisted primarily of development
fee revenues, including non-refundable upfront license fees, from three clients,
royalty income earned from commercialization of the first product
fully-developed by the Company, a prenatal multivitamin supplement marketed as
Gesticare® in the USA, which was commercialized in November 2008, and other
income related to the write-back of previously accrued liabilities. Revenue
generated to date has not been sufficient to sustain our operations. In order to
achieve profitability, our revenue streams will have to increase and there is no
assurance that revenues will increase to such a level.

We may incur losses associated with foreign currency
fluctuations.

The majority of our expenses are paid in Canadian dollars,
while a significant portion of our revenues are in U.S. dollars. Our financial
results are subject to the impact of currency exchange rate fluctuations.
Adverse movements in exchange rates could have a material adverse effect on our
financial condition and results of operations.

We may need additional capital to fulfill our business
strategies. We may also incur unforeseen costs. Failure to obtain such capital
would adversely affect our business.

We will need to expend significant capital in order to continue
with our research and development by hiring additional research staff and
acquiring additional equipment. If our cash flows from operations are
insufficient to fund our expected capital needs, or our needs are greater than anticipated, we may be required to raise
additional funds in the future through private or public sales of equity
securities or the incurrence of additional indebtedness. Additional funding may
not be available on favorable terms, or at all. If we borrow additional funds,
we likely will be obligated to make periodic interest or other debt service
payments and may be subject to additional restrictive covenants. If we fail to
obtain sufficient additional capital in the future, we could be forced to
curtail our growth strategy by reducing or delaying capital expenditures,
selling assets or downsizing or restructuring our operations. If we raise
additional funds through public or private sales of equity securities, the sales
may be at prices below the market price of our stock and our shareholders may
suffer significant dilution.

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The loss of the services of key personnel would adversely
affect our business.

Our future success depends to a significant degree on the
skills, experience and efforts of our executive officers and senior management
staff. The loss of the services of existing personnel, particularly Horst Zerbe,
our Chairman of the Board and Chief Executive Officer, would be detrimental to
our research and development programs and to our overall business. We carry
key-man life insurance for Mr. Zerbe with insurance coverage of 1 million
dollars.

We are dependent on business partners to conduct clinical
trials of, obtain regulatory approvals for, and manufacture, market, and sell
our controlled release products.

We depend heavily on our pharmaceutical partners to pay for
part or all of the research and development expenses associated with developing
a new product and to obtain approval from regulatory bodies such as the U.S.
Food and Drug Administration (the FDA) to commercialize these products. We
also depend on our partners to distribute these products after receiving
regulatory approval. Our revenues from research and development fees, milestone
payments and royalty fees are provided by our partners. Our inability to find
pharmaceutical partners who are willing to pay us these fees in order to develop
new products would negatively impact our business and our cash flows.

We have limited experience in manufacturing, marketing and
selling pharmaceutical products. Accordingly, if we cannot maintain our existing
partnerships or establish new partnerships with respect to our other products in
development, we will have to establish our own capabilities or discontinue the
commercialization of the affected product. Developing our own capabilities would
be expensive and time consuming and could delay the commercialization of the
affected product. There can be no assurance that we would be able to develop
these capabilities.

Our existing agreements with pharmaceutical industry partners
are generally subject to termination by the counterparty on short notice upon
the occurrence of certain circumstances, including, but not limited to, the
following: a determination that the product in development is not likely to be
successfully developed or not likely to receive regulatory approval; our failure
to satisfy our obligations under the agreement, or the occurrence of a
bankruptcy event. If any of our partnerships are terminated, we may be required
to devote additional resources to the product, seek a new partner on short
notice, or abandon the product development efforts. The terms of any additional
partnerships or other arrangements that we establish may not be favorable to us.

We are also at risk that these partnerships or other
arrangements may not be successful. Factors that may affect the success of our
partnerships include the following:

- Our partners may incur financial and cash-flow difficulties that force
  them to limit or reduce their participation in our joint projects;
- Our partners may be pursuing alternative technologies or developing
  alternative products that are competitive to our product, either on their own
  or in partnership with others;
- Our partners may reduce marketing or sales efforts, or discontinue
  marketing or sales of our products, which may reduce our revenues received on
  the products;
- Our partners may terminate their partnerships with us. This could make it
  difficult for us to attract new partners or adversely affect perception of us
  in the business and financial communities;
- Our partners may pursue higher priority programs or change the focus of
  their development programs, which could affect the partners commitment to us.
  Pharmaceutical and biotechnology companies historically have re-evaluated
  their priorities from time to time, including following mergers and
  consolidations, a common occurrence in recent years; and
- Our partners may become the target of litigation for purported patent or
  intellectual property infringement, which could delay or prohibit
  commercialization of our products and which would reduce our revenue from such
  products.

We face competition in our industry, and many of our
competitors have substantially greater experience and resources than we do.

We compete with other companies within the drug delivery
industry, many of which have more capital, more extensive research and
development capabilities and greater human resources than we do. Some of these
drug delivery competitors include Valeant Pharmaceuticals International, Inc. (formerly Biovail
Corporation), Labopharm Inc., Monosol Rx, Labtec GmbH and Skye Pharma PLC. Our
competitors may develop new or enhanced products or processes that may be more
effective, less expensive, safer or more readily available than any products or
processes that we develop, or they may develop proprietary positions that
prevent us from being able to successfully commercialize new products or
processes that we develop. As a result, our products or processes may not
compete successfully, and research and development by others may render our
products or processes obsolete or uneconomical. Competition may increase as
technological advances are made and commercial applications broaden.

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We are dependent upon sales outside the United States, which
are subject to a number of risks.

Our future results of operations could be harmed by risks
inherent in doing business in international markets, including:

- Unforeseen changes in regulatory requirements;
- Weaker intellectual property rights protection in some countries;
- New export license requirements, changes in tariffs or trade restrictions;
  and
- Political and economic instability in our target markets.

We rely upon third-party manufacturers, which puts us at
risk for supplier business interruptions.

We have entered into agreements with third party manufacturers
to manufacture certain of our products once we complete development and after we
receive regulatory approval. If our third-party manufacturers fail to perform,
our ability to market products and to generate revenue would be adversely
affected. Our failure to deliver products in a timely manner could lead to the
dissatisfaction of our distribution partners and damage our reputation, causing
our distribution partners to cancel existing agreements with us and to stop
doing business with us.

The third-party manufacturers that we depend on to manufacture
our products are required to adhere to FDA regulations regarding cGMP, which
include testing, control and documentation requirements. Ongoing compliance with
cGMP and other regulatory requirements is monitored by periodic inspection by
the FDA and comparable agencies in other countries. Failure by our third-party
manufacturers to comply with cGMP and other regulatory requirements could result
in actions against them by regulatory agencies and jeopardize our ability to
obtain products on a timely basis.

We are subject to extensive government regulation including
the requirement of approval before our products may be marketed. Even if we
obtain marketing approval, our products will be subject to ongoing regulatory
review.

We, our partners, our products, and our product candidates are
subject to extensive regulation by governmental authorities in the United States
and other countries. Failure to comply with applicable requirements could result
in warning letters, fines and other civil penalties, delays in approving or
refusal to approve a product candidate, product recall or seizure, withdrawal of
product approvals, interruption of manufacturing or clinical trials, operating
restrictions, injunctions, and criminal prosecution.

Our products cannot be marketed in the United States without
FDA approval. Obtaining FDA approval requires substantial time, effort, and
financial resources, and there can be no assurance that any approval will be
granted on a timely basis, if at all. We rely on our partners for the
preparation of applications and for obtaining regulatory approvals. If the FDA
does not approve our product candidates in a timely fashion, or does not approve
them at all, our business and financial condition may be adversely affected.
Further, the terms of approval of any marketing application, including the
labeling content, may be more restrictive than we desire and could affect the
marketability of our or our collaborator's products. Subsequent discovery of
problems with an approved product may result in restrictions on the product or
its withdrawal from the market. In addition, both before and after regulatory
approval, we, our collaborators, our products, and our product candidates are
subject to numerous FDA requirements covering testing, manufacturing, quality
control, cGMP, adverse event reporting, labeling, advertising, promotion,
distribution, and export. Our partners and we are subject to surveillance and
periodic inspections to ascertain compliance with these regulations. Further,
the relevant law and regulations may change in ways that could affect us, our
partners, our products, and our product candidates. Failure to comply with
regulatory requirements could have a material adverse impact on our business.

Regulations regarding the manufacture and sale of our future
products are subject to change. We cannot predict what impact, if any, such
changes may have on our business, financial condition or results of operations.
Failure to comply with applicable regulatory requirements could have a material
adverse effect on our business, financial condition and results of operations.

Additionally, the time required for obtaining regulatory
approval is uncertain. We may encounter delays or product rejections based upon
changes in FDA policies, including cGMP, during periods of product development.
We may encounter similar delays in countries outside of the United States. We
may not be able to obtain these regulatory acceptances on a timely basis, or at
all.

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The failure to obtain timely regulatory acceptance of our
products, any product marketing limitations, or any product withdrawals would
have a material adverse effect on our business, financial condition and results
of operations. In addition, before it grants approvals, the FDA or any foreign
regulatory authority may impose numerous other requirements with which we must
comply. Regulatory acceptance, if granted, may include significant limitations
on the indicated uses for which the product may be marketed. FDA enforcement
policy strictly prohibits the marketing of accepted products for unapproved
uses. Product acceptance could be withdrawn or civil and/or criminal sanctions
could be imposed for our failure to comply with regulatory standards or the
occurrence of unforeseen problems following initial marketing.

We may not be able to expand or enhance our existing product
lines with new products limiting our ability to grow.

If we are not successful in the development and introduction of
new products, our ability to grow will be impeded. We may not be able to
identify products to enhance or expand our product lines. Even if we can
identify potential products, our investment in research and development might be
significant before we could bring the products to market. Moreover, even if we
identify a potential product and expend significant dollars on development, we
may never be able to bring the product to market or achieve market acceptance
for such product. As a result, we may never recover our expenses.

The market may not be receptive to products incorporating
our drug delivery technologies.

The commercial success of any of our products that are approved
for marketing by the FDA and other regulatory authorities will depend upon their
acceptance by the medical community and third party payers as clinically useful,
cost-effective and safe. To date, only one product based upon our technologies
has been marketed in the United States, which limits our ability to provide
guidance or assurance as to market acceptance.

Factors that we believe could materially affect market
acceptance of these products include:

- the timing of the receipt of marketing approvals and the countries in
  which such approvals are obtained;
- the safety and efficacy of the product as compared to competitive
  products;
- the relative convenience and ease of administration as compared to
  competitive products;
- the strength of marketing distribution support; and
- the cost-effectiveness of the product and the ability to receive third
  party reimbursement.

We are subject to environmental regulations and any failure
to comply may result in substantial fines and sanctions.

Our operations are subject to Canadian and international
environmental laws and regulations governing, among other things, emissions to
air, discharges to waters and the generation, handling, storage, transportation,
treatment and disposal of raw materials, waste and other materials. Many of
these laws and regulations provide for substantial fines and criminal sanctions
for violations. We believe that we are and have been operating our business and
facility in a manner that complies in all material respects with environmental,
health and safety laws and regulations; however, we may incur material costs or
liabilities if we fail to operate in full compliance. We do not maintain
environmental damage insurance coverage with respect to the products which we
manufacture.

We may have to make significant expenditures in the future to
comply with evolving environmental, health and safety requirements, including
new requirements that may be adopted or imposed in the future. To meet changing
licensing and regulatory standards, we may have to make significant additional
site or operational modifications that could involve substantial expenditures or
reduction or suspension of some of our operations. We cannot be certain that we
have identified all environmental and health and safety matters affecting our
activities and in the future our environmental, health and safety problems, and
the costs to remediate them, may be materially greater than we expect.

Risks Related to Our Intellectual Property

If we are not able to adequately protect our intellectual
property, we may not be able to compete effectively.

Our success depends, to a significant degree, upon the
protection of our proprietary technologies. While we currently own four U.S.
patents and have applied for seven U.S. patents, we will need to pursue
additional protection for our intellectual property as we develop new products
and enhance existing products. We may not be able to obtain appropriate
protection for our intellectual property in a timely manner, or at all. Our
inability to obtain appropriate protections for our intellectual property may
allow competitors to enter our markets and produce or sell the same or similar
products.

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If we are forced to resort to legal proceedings to enforce our
intellectual property rights, the proceedings could be burdensome and expensive.
In addition, our proprietary rights could be at risk if we are unsuccessful in,
or cannot afford to pursue, those proceedings.

We also rely on trade secrets and contract law to protect some
of our proprietary technology. We have entered into confidentiality and
invention agreements with our employees and consultants. Nevertheless, these
agreements may not be honored and they may not effectively protect our right to
our un-patented trade secrets and know-how. Moreover, others may independently
develop substantially equivalent proprietary information and techniques or
otherwise gain access to our trade secrets and know-how.

In 1995, the U.S. Patent and Trademark Office adopted changes
to the U.S. patent law that made the term of issued patents 20 years from the
date of filing rather than 17 years from the date of issuance, subject to
specified transition periods. Beginning in June 1995, the patent term became 20
years from the earliest effective filing date of the underlying patent
application. These changes may reduce the effective term of protection for
patents that are pending for more than three years. While we cannot predict the
effect that these changes will have on our business, they could have a material
adverse effect on our ability to protect our proprietary information.
Furthermore, the possibility of extensive delays in the patent issuance process
could effectively reduce the term during which a marketed product is protected
by patents.

We may need to obtain licenses to patents or other proprietary
rights from third parties. We may not be able to obtain the licenses required
under any patents or proprietary rights or they may not be available on
acceptable terms. If we do not obtain required licenses, we may encounter delays
in product development or find that the development, manufacture or sale of
products requiring licenses could be foreclosed. We may, from time to time,
support and collaborate in research conducted by universities and governmental
research organizations. We may not be able to acquire exclusive rights to the
inventions or technical information derived from these collaborations, and
disputes may arise over rights in derivative or related research programs
conducted by us or our collaborators.

If we infringe on the rights of third parties, we may not be
able to sell our products, and we may have to defend against litigation and pay
damages.

If a competitor were to assert that our products infringe on
its patent or other intellectual property rights, we could incur substantial
litigation costs and be forced to pay substantial damages. Such litigation costs
could be as a result of direct litigation against us, or as a result of
litigation against one or more of our partners to whom we have contractually
agreed to indemnify in the event that our intellectual property is the cause of
a successful litigious action against our partner. Third-party infringement
claims, regardless of their outcome, would not only consume significant
financial resources, but would also divert our managements time and attention.
Such claims could also cause our customers or potential customers to purchase
competitors products or defer or limit their purchase or use of our affected
products until resolution of the claim. If any of our products are found to
violate third-party intellectual property rights, we may have to re-engineer one
or more of our products, or we may have to obtain licenses from third parties to
continue offering our products without substantial re-engineering. Our efforts
to re-engineer or obtain licenses could require significant expenditures and may
not be successful.

Our controlled release products that are generic versions of
branded controlled release products that are covered by one or more patents may
be subject to litigation, which could delay FDA approval and commercial launch
of our products.

We expect to file or have our collaborators file Abbreviated
New Drug Applications or New Drug Applications (ANDAs or NDAs) for our
controlled release products under development that are covered by one or more
patents of the branded product. It is likely that the owners of the patents
covering the brand name product or the sponsors of the NDA with respect to the
branded product will sue or undertake regulatory initiatives to preserve
marketing exclusivity. Any significant delay in obtaining FDA approval to market
our products as a result of litigation, as well as the expense of such
litigation, whether or not we or our collaborators are successful, could have a
materially adverse effect on our business, financial condition and results of
operations.

Risks Related to Our Securities:

The price of our common stock could be subject to
significant fluctuations. Any of the following factors could affect the
market price of our common stock:

- Our failure to achieve and maintain profitability;
- Changes in earnings estimates and recommendations by financial analysts;
- Actual or anticipated variations in our quarterly results of operations;
- Changes in market valuations of similar companies;
- Announcements by us or our competitors of significant contracts, new
  products, acquisitions, commercial relationships, joint ventures or capital
  commitments;
- The loss of major customers or product or component suppliers;
- The loss of significant partnering relationships; and
- General market, political and economic conditions.

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We have a significant number of convertible securities
outstanding that could be exercised in the future. Subsequent resale of these
and other shares could cause the Companys stock price to decline. This could
also make it more difficult to raise funds at acceptable levels via future
securities offerings.

We have a concentration of stock ownership and control, and
a small number of stockholders have the ability to exert significant control in
matters requiring stockholder vote and may have interests that conflict with
yours.

Directors and others hold 28.7% of our common stock. See
Security Ownership of Certain Beneficial Owners and Management in our proxy
statement in connection with our 2011 annual meeting of stockholders, which
proxy statement will be filed with the SEC not later than 120 days after the
close of our fiscal year ended December 31, 2010. As a result, such
stockholders, acting together, may have the ability to control matters requiring
stockholder approval, including the election of directors and approval of
mergers and other significant corporate transactions. This concentration of
ownership may have the effect of delaying, preventing or deterring a change in
control of our company. It may also deprive our stockholders of an opportunity
to receive a premium for their shares as part of a sale of our company and may
affect the market price of our common stock. In deciding how to vote on such
matters, those stockholders interests may conflict with yours.

Directors Independency

Currently, we have a majority of independent directors, but in
the future we cannot guarantee that our Board of Directors will always have a
majority of independent directors. In the absence of a majority of independent
directors, our chief executive officer, who is also a principal stockholder and
director, could establish policies and enter into transactions without
independent review and approval. This could present the potential for a conflict
of interest between the Company and its stockholders generally and the
controlling officers, stockholders or directors.

Our common stock is a high risk investment.

Our common stock has been quoted on the OTC Bulletin Board
under the symbol IGXT since January 2007 and has been listed on the TSX
Venture Exchange under the symbol IGX since May 2008.

There is a limited trading market for our common stock, which
may affect the ability of shareholders to sell our common stock and the prices
at which they may be able to sell our common stock.

The market price of our common stock has been volatile, and
fluctuates widely in response to various factors which are beyond our control.
The price of our common stock is not necessarily indicative of our operating
performance or long term business prospects. In addition, the securities markets
have from time to time experienced significant price and volume fluctuations
that are unrelated to the operating performance of particular companies. These
market fluctuations may also materially and adversely affect the market price of
our common stock.

In the United States, our common stock is considered a penny
stock.. The SEC has adopted regulations which generally define a penny stock
to be an equity security that has a market price of less than $5.00 per share or
an exercise price of less than $5.00 per share, subject to specific exemptions.
This designation requires any broker or dealer selling these securities to
disclose certain information concerning the transaction, obtain a written
agreement from the purchaser and determine that the purchaser is reasonably
suitable to purchase the securities. These rules may restrict the ability of
brokers or dealers to sell our common stock and may affect the ability of
investors to sell their shares.

As a result of the foregoing, our common stock should be
considered a high risk investment.

We became public by means of a reverse merger, and as a
result we are subject to the risks associated with the prior activities of the
public company with which we merged. In addition, we may not be able to attract
the attention of major brokerage firms or institutional buyers.

Additional risks may exist because we became public through a
"reverse merger" with a shell corporation. Although the shell did not have
recent or past operations or assets and we performed a due diligence review of
the public company, there can be no assurance that we will not be exposed to
undisclosed liabilities resulting from the prior operations of our company.

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Security analysts of major brokerage firms and securities
institutions may not cover us since there are no broker-dealers who sold our
stock in a public offering who would have an incentive to follow or recommend
the purchase of our common stock. No assurance can be given that established
brokerage firms will want to conduct any financings for us in the future.

Our limited cash resources restrict our ability to pay cash
dividends.

Since our inception, we have not paid any cash dividends on our
common stock. We currently intend to retain future earnings, if any, to support
operations and to finance the growth and development of our business. Therefore,
we do not expect to pay cash dividends in the foreseeable future. Any future
determination relating to our dividend policy will be made at the discretion of
our Board of Directors and will depend on a number of factors, including future
earnings, capital requirements, financial conditions and future prospect and
other factors that the Board of Directors may deem relevant. If we do not pay
any dividends on our common stock, our stockholders will be able to profit from
an investment only if the price of the stock appreciates before the stockholder
sells it. Investors seeking cash dividends should not purchase our common
stock.

ITEM 1B. UNRESOLVED STAFF COMMENTS

Not applicable.

ITEM 2. PROPERTIES

We currently occupy 3,100 square feet of leased space at a rate
of CDN$8.64/square foot in an industrial zone in Ville St.-Laurent, Quebec,
Canada under a five year renewable lease agreement signed in 2004. We extended
the term of the lease agreement to August 31, 2011 under similar financial
conditions, with the option to terminate at any time after February 28, 2011,
provided we give four months notice. We expanded our laboratory and office
space at this facility to its maximum during the second quarter of 2006. In
order to continue to support ongoing product development activities and allow
the addition of further development programs we might be required to seek a
different location in 2011. Management has started the search for alternative,
or additional, facilities that would meet our short to medium requirements at
affordable rates.

ITEM 3. LEGAL PROCEEDINGS

In June of 2009, we announced that our New Drug Application
filing for our antidepressant CPI-300 had been accepted by the FDA for standard
review. CPI-300 is a higher strength of the antidepressant bupropion HCl, the
active ingredient in Wellbutrin XL®.

As required under NDA filings, our former development partner
Cary Pharmaceuticals (Cary), the NDA applicant, notified Biovail Laboratories
SLR (Biovail), holder of the Wellbutrin XL® patent, of the filing contending
non-infringement of the Wellbutrin XL® patent. On August 18, 2009, we learned
that Cary was named in a lawsuit filed by Biovail in the U.S. District Court for
the District of Delaware (the Court) for patent infringement under the
provisions of the Drug Price Competition and Patent Term Restoration Act of 1984
with respect to Biovail's U.S. Patent No. 6,096,341 for Wellbutrin XL®. The
filing of the patent infringement lawsuit instituted an automatic stay of any
FDA approval of the NDA until the earlier of a judgment or January 3, 2012.

On May 7, 2010 we executed a Project Transfer Agreement (the
Agreement) with Cary, whereby Cary assigned its 50% ownership stake in CPI-300
to us. Pursuant to the Agreement, IntelGenx and Cary (collectively, the
Parties) agreed to terminate the Collaborative Agreement entered into in
November 2007 and Cary further agreed to transfer and assign the CPI-300 project
to us. In addition, Cary assigned to us all rights and interest in the
regulatory approvals that Cary had or may have had, including the NDA, and we
assumed responsibility for the costs associated therewith. We obtained full and
complete authority with respect to the prosecution and/or amendment of the NDA
and the commercialization of the product and/or the technology encompassed in
the CPI-300 project. We also assumed all obligations to, and responsibility for,
the Biovail litigation, including the costs thereof. On October 19, 2010, the
Court granted a motion to substitute us as defendant and counter plaintiff in
place of Cary.

On January 4, 2011 we learned that the Court had ruled in our
favor regarding claim construction for the two patent terms at issue in the
action brought forward by Biovail. The ruling arises from a special proceeding
required under U.S. patent law called a "Markman Hearing", where both sides
present to the court their arguments on how they believe the patent terms at
issue should be interpreted.

Subsequent to the ruling on the Markman Hearing, on February 3,
2011, we announced that the United States District Court of Delaware had
dismissed the lawsuit against us.

ITEM 4. (REMOVED AND RESERVED)

17

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PART II

ITEM 5. MARKET FOR REGISTRANTS COMMON EQUITY, RELATED
STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Market Information

Our common stock has been quoted on the OTC Bulletin Board
under the symbol IGXT since January 2007. In addition, our common stock has
been listed on the TSX Venture Exchange under the symbol IGX since May 2008.
The table below sets forth the high and low bid prices of our common stock as
reported by the OTC Bulletin Board and the TSX for the periods indicated. These
prices represent inter-dealer quotations without retail markup, markdown, or
commission and may not necessarily represent actual transactions.

|               |   | OTCBB   |  |   | TSX-V   | 
|-------------- | - | ------- |  | - | ------- | 
|               |   | High    |  |   | Low     | 
|               |   | (U.S.$) |  |   | (U.S.$) | 
|2010           |   |         |  |   |         | 
|Fourth Quarter | $ | 0.46    |  | $ | 0.28    | 
|Third Quarter  | $ | 0.52    |  | $ | 0.28    | 
|Second Quarter | $ | 0.52    |  | $ | 0.40    | 
|First Quarter  | $ | 0.62    |  | $ | 0.42    | 
|               |   |         |  |   |         | 
|2009           |   |         |  |   |         | 
|Fourth Quarter | $ | 0.71    |  | $ | 0.52    | 
|Third Quarter  | $ | 0.70    |  | $ | 0.50    | 
|Second Quarter | $ | 0.60    |  | $ | 0.28    | 
|First Quarter  | $ | 0.60    |  | $ | 0.25    | 
|               |   |         |  |   |         | 
|2008           |   |         |  |   |         | 
|Fourth Quarter | $ | 0.95    |  | $ | 0.30    | 
|Third Quarter  | $ | 0.98    |  | $ | 0.67    | 
|Second Quarter | $ | 1.01    |  | $ | 0.80    | 
|First Quarter  | $ | 1.02    |  | $ | 0.51    | 

Number of Shareholders

On March 7, 2011 there were approximately 81 holders of record
of our common shares, one of which was Cede & Co., a nominee for Depository
Trust Company, and one of which was The Canadian Depository for Securities
Limited, or CDS. All of our common shares held by brokerage firms, banks and
other financial institutions in the United States and Canada as nominees for
beneficial owners are considered to be held of record by Cede & Co. in
respect of brokerage firms, banks and other financial institutions in the United
States, and by CDS in respect of brokerage firms, banks and other financial
institutions located in Canada. Cede & Co. and CDS are each considered to be
one shareholder of record.

Dividend Policy

We have never declared or paid any cash dividends on our common
stock. We currently intend to retain any earnings to support operations and to
finance the growth and development of our business. Therefore, we do not expect
to pay cash dividends in the foreseeable future. Any future determination
relating to our dividend policy will be made at the discretion of our Board of
Directors and will depend on a number of factors, including future earnings,
capital requirements, financial conditions and future prospect and other factors
that the board of directors may deem relevant.

18

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Equity Compensation Plan Information

2006 Stock Option Plan

A majority of our shareholders approved the 2006 Stock Option
Plan at our Annual General Meeting of Stockholders held on August 10, 2006.
Under the 2006 Stock Option Plan, up to 1,600,749 shares of common stock may be
issued upon the exercise of options granted to directors, management, employees
and consultants.

In May of 2008, the term of all options granted under the 2006
Stock Option Plan was amended to provide for a term not to exceed five years, in
order to ensure compliance with applicable rules and regulation of the TSX
Venture Exchange.

At the Annual General Meeting of Stockholders on September 8,
2008, our shareholders approved an amendment to the 2006 Stock Option Plan in
order to increase the number of shares available under the plan by 473,251, to
2,074,000.

At the Annual General Meeting of Stockholders on June 3, 2010,
our shareholders approved an amendment to the 2006 Stock Option Plan in order to
increase the number of shares available under the plan by 1,234,127 to
3,308,127.

As of December 31, 2010, 222,571 options have been
exercised.

Equity Compensation Plan Information as of December 31, 2010

|                                                                 |  | Number of Securities |  |   | Weighted-           |  |  | Number of securities   | 
|---------------------------------------------------------------- |  | -------------------- |  | - | ------------------- |  |  | ---------------------- | 
|                                                                 |  | to be issued upon    |  |   | Average             |  |  | remaining available    | 
|                                                                 |  | exercise of          |  |   | Exercise Price of   |  |  | for future issuance    | 
|                                                                 |  | outstanding options, |  |   | outstanding         |  |  | under equity           | 
|                                                                 |  | warrants and rights  |  |   | options,            |  |  | compensation plans     | 
|                                                                 |  |                      |  |   | warrants and rights |  |  | (excluding securities  | 
|                                                                 |  |                      |  |   |                     |  |  | reflected in the first | 
|                                                                 |  |                      |  |   |                     |  |  | column)                | 
|                                                                 |  |                      |  |   |                     |  |  |                        | 
|Equity Compensation Plans Approved by
      Security Holders     |  | 1,698,088            |  | $ | 0.53                |  |  | 1,387,468              | 
|                                                                 |  |                      |  |   |                     |  |  |                        | 
|Equity Compensation Plans Not Approved by
      Security Holders |  | None                 |  |   | None                |  |  | None                   | 
|                                                                 |  |                      |  |   |                     |  |  |                        | 
|Total                                                            |  | 1,698,088            |  | $ | 0.53                |  |  | 1,387,468              | 

On September 26, 2006, we granted options to purchase 225,000
shares of common stock to three non-employee directors. These options have an
exercise price of $0.41, vest upon issuance and expire on September 26, 2016.
The expiration date was subsequently amended to September 26, 2011.

On October 1, 2006, we granted options to purchase up to 69,000
shares of common stock to a consultant. These options have an exercise price of
$0.41, vest upon issuance, and expire on October 1, 2016. The expiration date
was subsequently amended to September 26, 2011.

On November 9, 2006, we granted options to purchase up to
450,000 shares of common stock to the CEO and a management employee. These
options have an exercise price of $0.41, vest upon issuance, and expire on
November 9, 2016. The expiration date was subsequently amended to September 26,
2011.

On November 13, 2006, we granted options to purchase up to
250,000 shares of common stock to a consultant. These options have an exercise
price of $0.41, vest over two years at the rate of 25% every six months, and
expire on November 13, 2016. The expiration date was subsequently amended to
September 26, 2011.

On November 16, 2006, we granted options to purchase up to
100,000 shares of common stock to employees and 25,000 options to a consultant.
These options have an exercise price of $0.41, vest over 2 years at the rate of
25% every six months, and expire on November 16, 2016. The expiration date was
subsequently amended to September 26, 2011.

19

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On August 9, 2007, we granted options to purchase up to 107,500
shares of common stock to four non-employee directors. These options have an
exercise price of $1.15, vest upon issuance, and expire on August 9, 2017. The
expiration date was subsequently amended to August 9, 2012.

On August 9, 2007, we granted options to purchase up to 75,000
shares of common stock to our former Vice President of Business Development.
These options have an exercise price of $1.15, vest over 2 years at the rate of
25% every six months, and expire on August 9, 2017. The expiration date was
subsequently amended to August 9, 2012. The contract for the Business
Development Consultant was terminated in November, 2010 and the options granted
expired in February, 2011.

On August 9, 2007, we granted options to purchase up to 75,000
shares of common stock to our former chief financial officer. These options have
an exercise price of $1.15, vest over 2 years at the rate of 25% every six
months, and expire on August 9, 2017. The expiration date was subsequently
amended to August 9, 2012. As the result of the termination of the employment
agreement with our chief financial officer, options to purchase 75,000 shares of
common stock expired un-exercised in November of 2008.

On May 22, 2008, we granted options to purchase up to 51,176
shares of common stock to two of our non-employee directors. These options have
an exercise price of $0.85, vest immediately, and expire on May 22, 2013.

On May 29, 2008, we granted options to purchase up to 400,000
shares of common stock to Auctus Capital in consideration for investor relation
services. The option grant was subject to shareholder approval to increase the
number of shares to be issued under the 2006 Stock Option Plan. The shareholders
approved to increase the number of shares by 473,251, to 2,074,000 at the Annual
General Meeting on September 8, 2008. The options granted to Auctus Capital have
an exercise price of $1.00, and vest based on a combination of the achievement
of certain performance conditions and the passage of time. As a result of the
termination of the agreement, all options to purchase common stock expired
un-exercised in May of 2009.

On September 8, 2008, we granted options to purchase up to
75,000 shares of common stock to a non-employee director of the company. These
options have an exercise price of $0.85, vest immediately, and expire on
September 8, 2013.

On September 8, 2008, we granted options to purchase up to
100,000 shares of common stock to our chief financial officer. These options
have an exercise price of $0.85, vest over 2 years at the rate of 25% every six
months, and expire on September 8, 2013.

On March 11, 2009, we granted options to purchase up to 25,000
shares of common stock to an employee of the company. The options have an
exercise price of $0.31, vest over 2 years at the rate of 25% every six months,
and expire on March 11, 2014.

On October 3, 2009, we granted options to purchase up to 50,000
shares of common stock to Little Gem Life Science Partners in consideration for
investor relation services. The options have an exercise price of $0.55, vest
50% on the first anniversary, and 50% on the second anniversary, of the
agreement and expire on October 3, 2012.

On November 24, 2009, we granted options to purchase up to
125,000 shares of common stock each to three of our non-employee directors, the
chief financial officer and the chief executive officer. The options have an
exercise price of $0.61. The options for the non-employee directors vest
immediately and the options for the executive employees vest over 2 years at the
rate of 25% every six months. All options expire on November 24, 2014.

On January 22, 2010, we granted options to purchase up to
50,000 shares of common stock to Sector Speak in consideration for investor
relation services. The options have an exercise price of $0.47, vest 50% on the
first anniversary, and 50% on the second anniversary, of the agreement and
expire on January 22, 2013.

On May 17, 2010, we granted options to purchase up to 75,000
shares of common stock to a non-employee director. The options have an exercise
price of $0.45, vest immediately, and expire on May 17, 2015.

On May 17, 2010, we granted options to purchase up to 25,000
shares of common stock to each of 3 employees. The options have an exercise
price of $0.45, vest over 2 years at the rate of 25% every six months, and
expire on May 17, 2015.

On August 10, 2010, we granted options to purchase up to 75,000
shares of common stock to each of 2 non-employee directors. The options have an
exercise price of $0.37, vest over 2 years at the rate of 25% every six months,
and expire on August 10, 2015.

Purchases of Equity Securities by the Issuer and Affiliated
Purchasers

There were no purchases or repurchases of our equity securities
by the Company or any affiliated purchasers.

20

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Unregistered Sales of Equity Securities and Use of
Proceeds

During the fourth quarter of 2010, we did not issue (or
contract to issue) equity securities without registration under the Securities
Act of 1933, as amended.

ITEM 6. SELECTED FINANCIAL DATA

Not applicable.

ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITIONS AND RESULTS OF OPERATIONS

Introduction to Managements Discussion and Analysis

The purpose of this section, Managements Discussion and
Analysis of Financial Condition and Results of Operations, is to provide a
narrative explanation of the financial statements that enables investors to
better understand our business, to enhance our overall financial disclosures, to
provide the context within which our financial information may be analyzed, and
to provide information about the quality of, and potential variability of, our
financial condition, results of operations and cash flows. Unless otherwise
indicated, all financial and statistical information included herein relates to
our continuing operations. Unless otherwise indicated or the context otherwise
requires, the words, IntelGenx, Company, we, us, and our refer to
IntelGenx Technologies Corp. and its subsidiaries, including IntelGenx Corp.
This information should be read in conjunction with the accompanying unaudited
Consolidated Financial Statements and Notes thereto.

Company Background

We are a drug delivery company established in 2003 and
headquartered in Montreal, Quebec, Canada. Our focus is on the development of
novel oral immediate-release and controlled-release products for the
pharmaceutical market. Our business strategy is to develop pharmaceutical
products based on our proprietary drug delivery technologies and, once the
viability of a product has been demonstrated, to license the commercial rights
to partners in the pharmaceutical industry. In certain cases, we rely upon
partners in the pharmaceutical industry to fund development of the licensed
products, complete the regulatory approval process with the U.S. Food and Drug
Administration (FDA) or other regulatory agencies relating to the licensed
products, and assume responsibility for marketing and distributing such
products.

In addition, we may choose to pursue the development of certain
products until the project reaches the marketing and distribution stage. We will
assess the potential for successful development of a product and associated
costs, and then determine at which stage it is most prudent to seek a partner,
balancing such costs against the potential for additional returns earned by
partnering later in the development process.

We have also undertaken a strategy under which we will work
with pharmaceutical companies in order to develop new dosage forms for
pharmaceutical products for which patent protection is nearing expiration. Under
§(505)(b)(2) of the Food, Drug, and Cosmetics Act, the FDA may grant market
exclusivity for a term of up to three years of exclusivity following approval of
a listed drug that contains previously approved active ingredients but is
approved in a new dosage, dosage form, route of administration or combination,
or for a new use, the approval of which was required to be supported by new
clinical trials, other than bioavailability studies, conducted by or for the
sponsor.

We are currently continuing to develop the existing products in
our pipeline and may also perform research and development on other potential
products as opportunities arise.

We currently purchase and/or lease, on an as-needed basis, the
equipment necessary for performing research and development activities related
to our products.

We plan to hire new personnel, primarily in the area of
research and development, on an as-needed basis as we enter into partnership
agreements and increase our research and development activities.

Key Developments

We achieved a number of milestones in our strategic
development, growth and future income potential throughout 2010, and subsequent
to the end of the year, most notably:

21

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Private Placement Financing:

On August 27, 2010 we announced the closing of a private
placement offering of 6,500,000 units at CAD$0.40 per unit for gross proceeds of
CAD$2.6 million. Each unit consists of one common share and one common share
purchase warrant. Each warrant entitles the holder thereof to purchase one
common share at an exercise price of CAD$0.50 expiring on August 27, 2013. The
proceeds of the private placement have and will be used to support our strategic
development projects and for working capital purposes.

CPI-300 Antidepressant Tablet:

Background:

On April 6, 2009, we submitted a New Drug Application (NDA)
to the FDA for CPI-300. CPI-300 is a higher strength of the antidepressant
bupropion HCl, the active ingredient in Wellbutrin XL®. The NDA was accepted for
standard review by the FDA in June 2009. As required under NDA filings, our
former development partner Cary Pharmaceuticals (Cary), the NDA applicant,
notified Biovail Laboratories SLR (Biovail), holder of the Wellbutrin XL®
patent, of the filing contending non-infringement of the Wellbutrin XL®
patent.

On August 18, 2009, Cary was sued by Biovail in the U.S.
District Court of Delaware for patent infringement, under provisions of the Drug
Price Competition and Patent Term Restoration Act of 1984 (Hatch-Waxman Act),
with respect to Biovail's U.S. Patent No. 6,096,341. Pursuant to the
Hatch-Waxman Act, the filing of the patent infringement lawsuit by Biovail
instituted an automatic stay of FDA approval of the NDA until the earlier of a
judgment or January 3, 2012. On October 19, 2010, the Court granted a motion to
substitute IntelGenx as defendant and counter plaintiff in place of Cary.

Progress in fiscal 2010:

On January 11, 2010, we announced a manufacturing site change
for CPI-300. The original manufacturer, PharmPro of Aurora, Illinois was sold to
URL Pharma (URL) of Philadelphia, PA. As a result of this acquisition, URL
advised us that they would no longer manufacture CPI-300. We have identified and
engaged Pillar5 Pharma Inc. (Pillar5) as the new manufacturing facility for
the product. Pillar5 operates a state-of-the-art Good Manufacturing Practice
(GMP) facility with a long-standing record of manufacturing quality product
for the pharmaceutical industry. As a result of the manufacturing site change,
we are preparing an amendment to the NDA.

On January 21, 2010, we announced that the U.S. Patent and
Trademark Office had issued a formal Notice of Allowance for the patent
application protecting CPI-300. The patent was subsequently issued on March 9,
2010 under the number US 7,674,479. The patent will be listed in the FDAs
Orange Book and will provide broad protection for CPI-300 against generic
copies.

On February 8, 2010, we received a Complete Response Letter
(CRL) from the FDA regarding CPI-300. The CRL lists two main issues which need
to be addressed before obtaining final approval: 1) qualification of Pillar5 as
the commercial manufacturing site and 2) an observed food effect seen with
CPI-300 and the reference product. The FDA found no other notable deficiencies
in the NDA. As noted in our January 11, 2010 press release, the FDA was notified
about Pillar5. In addition, we planned to conduct a pilot food effect study with
CPI-300 tablets having a modified enteric coating. On June 10, 2010, we met with
FDA to clarify the steps necessary to obtain approval.

On May 7, 2010, we executed a Project Transfer Agreement (the
Agreement) with Cary, whereby Cary assigned its 50% ownership stake in CPI-300
to us. Pursuant to the Agreement, IntelGenx and Cary (collectively, the
Parties) have agreed to terminate the Collaborative Agreement entered into in
November 2007 and Cary further agreed that the CPI-300 project be transferred
and assigned to us. In addition, Cary has assigned to us all rights and interest
in the regulatory approvals that Cary has or may have had, including the NDA,
and we have assumed responsibility for the costs associated therewith. We
assumed full and complete authority with respect to the prosecution and/or
amendment of the NDA and the commercialization of the product and/or the
technology encompassed in the CPI-300 project. We also assumed all obligations
to, and responsibility for, the Biovail litigation, including the costs thereof.
In addition to certain potential pre-commercialization payments, we will pay
Cary, upon commercialization of CPI-300, 10% of net sales royalties received by
us and 3% of upfront payments received by us should a distribution agreement be
signed in the future.

On June 21, 2010, we announced that we had met with the FDA to
discuss our response to the CRL. The Agency confirmed that it agrees with the
clinical plan we proposed to address the previously observed food effect and to
demonstrate bioequivalency of product manufactured at the new manufacturing
site. Based on the FDA's recommendations regarding the stability data required
to support the new manufacturing site, we expect to file the amendment to the
NDA in the first half of 2011.

22

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On January 4, 2011, we announced that the United States
District Court of Delaware has ruled in our favor regarding claim construction
for the two patent terms at issue in the patent infringement action brought
forward by Biovail. The ruling arises from a special proceeding required under
U.S. patent law called a "Markman Hearing" where both sides present to the court
their arguments on how they believe the patent terms at issue should be
interpreted.

On February 3, 2011, we announced that the United States
District Court of Delaware had dismissed the lawsuit against us. Biovail agreed
to dismissal of the action following the ruling on the Markman Hearing.

Neuropathic Pain Tablet:

Background:

On April 14, 2009, we, together with our former development
partner, Cynapsus Therapeutics Inc. (formerly Cannasat Therapeutics Inc.,
Cynapsus), announced positive Phase 1b results for INT0010, a buccal
formulation of THC (dronabinol) for the symptomatic management of Multiple
Sclerosis (MS) induced neuropathic pain and chemotherapy induced nausea. The
randomized, single dose, double-blind, crossover study compared INT0010 with
Marinol 2.5 mg in healthy volunteers. INT0010 delivered twice the amount of
dronabinol into the bloodstream as the brand with no increase in side effects
due to a corresponding reduction in the metabolite responsible for the CNS
adverse effects of dronabinol. INT0010 was developed using our proprietary
AdVersa buccal delivery technology.

Progress in fiscal 2010:

On March 4, 2010, we, together with Cynapsus, announced that
the two parties had entered into a Letter of Intent ("LOI") under which we would
acquire a fifty-percent ownership stake from Cynapsus and an exclusive worldwide
license to develop and commercialize INT0010. The LOI detailed the terms under
which the two parties would negotiate an exclusive worldwide license, including
the terms for shared milestones and royalties, which would result in us assuming
sole product development and corresponding funding as well as commercialization
rights for INT0010. Upon completing a definitive license agreement, we would
forgive approximately CAD$231 thousand of debt owed by Cynapsus.

On November 29, 2010, we announced that we have acquired
exclusive rights to, and ownership of, INT0010. Under the terms of a royalty
based licensing agreement with PediPharm Ltd., we obtained worldwide rights to
US Patent 7,592,328 and all corresponding foreign patents and patent
applications to exclusively develop and further provide intellectual property
protection for INT0010. PediPharm received a signing fee and would receive a
milestone payment upon us securing a commercialization partner for the product,
along with a royalty from all sales of the product world-wide.

On December 31, 2010, we executed a License Agreement with
Cynapsus, whereby, for forgiveness of approximately CAD$231 thousand of debt and
a royalty on future sales of the product, we acquired full control of, and
interest in, INT0010 going forward.

Anti-Migraine Film:

On April 21, 2010, we announced the execution of a binding
term-sheet with RedHill Biopharma Ltd., an Israeli corporation ("RedHill"), to
co-develop and license IntelGenx' first oral thin film product based upon our
proprietary VersaFilm technology. The product is intended for the rapid relief
of migraine headaches.

On August 30, 2010, we and RedHill announced that the parties
have executed a co-development and commercialization agreement for the product.
Under the terms of the agreement, RedHill has obtained certain exclusive
worldwide rights to market and sell our rapidly dissolving anti-migraine oral
film product. In exchange, we will receive upfront, milestone and external
development fees totaling up to $2.1 million from RedHill. RedHill will also be
responsible for regulatory filing fees, if necessary. Upon commercialization of
the product, we would receive a percentage of all proceeds including, but not
limited to, all sales milestones and income from the product world-wide.

Erectile Dysfunction Film:

On September 2, 2010, we announced the completion of a pilot
study that indicates that we have successfully developed a novel oral film,
INT007, which is likely to be bioequivalent to a leading branded tablet
containing a phosphodiesterase type 5 (PDE-5) inhibitor for the treatment of
erectile dysfunction. INT007 has been developed using our proprietary immediate
release VersaFilm drug delivery technology.

23

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This was a randomized, two-period, two-way crossover study in
healthy male subjects. The study was designed to determine whether INT007 will
be bioequivalent in a pivotal bioequivalency study to a leading branded PDE-5
inhibitor tablet as measured by industry standard pharmacokinetic measures, peak
plasma concentration (Cmax) and area under the curve (AUC). The study also
measured time to peak concentration (Tmax), a common determinant of rate of
absorption. Our INT007 film reached Cmax 27% quicker than the oral tablet
formulation, indicating a potentially faster onset of action.

Anti-Psychcotic Film:

On February 7, 2011, we announced the completion of a pilot
study that indicates that we have successfully developed a novel oral film,
INT0022, which is likely to be bioequivalent to a leading anti-psychotic in a
pivotal bioequivalency study. INT0022 has been developed using our proprietary
immediate release "VersaFilm" drug delivery technology. According to IMS Health,
the global anti-psychotic market was worth $22.5 billion in 2008.

This was a randomized, two-period, two-way crossover study in
healthy male subjects. The study was designed to determine whether INT0022 will
be bioequivalent to a leading anti-psychotic product in a pivotal bioequivalency
study as measured by industry standard pharmacokinetic measures, peak plasma
concentration (Cmax) and area under the curve (AUC). The study results indicate
that INT0022 will likely be bioequivalent with the brand product and allow us to
advance the product to the pivotal bioequivalency study.

VersaFilm Manufacturing:

On January 25, 2010, we announced a strategic alliance with LTS
Lohmann Therapie-Systeme AG (LTS) for the exclusive manufacturing of
pharmaceutical products developed by us using our VersaFilm drug delivery
technology. VersaFilm is comprised of a thin polymeric film using components
that are safe and accepted by the FDA for use in pharmaceutical products.
VersaFilm provides a patent-protected method of re-formulating approved
pharmaceuticals in a more convenient and discrete oral dosage form. We currently
have six products in development using the VersaFilm technology.

Manufacturing Partnership and Ownership Position in
Manufacturing Facility:

On April 30, 2010, we entered into a Memorandum of Agreement
(the "MOA") with Pillar5 Pharma Inc. Pursuant to the MOA, we undertake to use
our best efforts to ensure that distributors of our oral solid dose
pharmaceutical products developed for commercial production be directed to
Pillar5 for purposes of negotiating a manufacturing agreement requiring Pillar5
to manufacture those products. As consideration for this undertaking, Pillar5
issued 114 voting common shares of Pillar5 to us, representing 10% of the issued
and outstanding shares of Pillar5. The shares will be held in escrow and are
forfeitable by us until Pillar5 achieves certain revenue targets from the
manufacture of products licensed by us and are subject to restrictions on
transfer pursuant to the MOA. We have a right of first refusal in the event of
bona fide sale to a third party of all of the shares or substantially all of the
assets of Pillar5. Pursuant to the MOA, we have designated a nominee to serve on
the board of directors of Pillar5 and Pillar5 has designated a nominee to serve
on our board of directors.

Currency rate fluctuations

Our operating currency is Canadian dollars, while our reporting
currency is U.S. dollars. Accordingly, our results of operations and balance
sheet position have been affected by currency rate fluctuations. The following
management discussion and analysis takes this into consideration whenever
material.

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Results of Operations  Year ended December 31, 2010
compared to the Year ended December 31, 2009.

|In U.S.$ thousands                        |   | 2010   |   |   | 2009   |   |   | Increase/(Decrease) |   |  | Percentage
      Change | 
|----------------------------------------- | - | ------ | - | - | ------ | - | - | ------------------- | - |  | ----------------------- | 
|                                          |   |        |   |   |        |   |   |                     |   |  |                         | 
|Revenue                                   | $ | 948    |   | $ | 1,275  |   | $ | (327                | ) |  | 26%                     | 
|Other Income                              |   | 389    |   |   | 4      |   |   | 385                 |   |  | 9,625%                  | 
|Research and Development Expenses         |   | 1,747  |   |   | 1,422  |   |   | 325                 |   |  | 23%                     | 
|Research and Development Tax
      Credit |   | (182   | ) |   | (185   | ) |   | (3                  | ) |  | 2%                      | 
|Management Salaries                       |   | 747    |   |   | 584    |   |   | 163                 |   |  | 28%                     | 
|General and Administrative
      Expenses |   | 335    |   |   | 360    |   |   | (25                 | ) |  | 7%                      | 
|Professional Fees                         |   | 1,648  |   |   | 437    |   |   | 1,211               |   |  | 277%                    | 
|Interest and Financing Fees               |   | 98     |   |   | 784    |   |   | (686                | ) |  | 88%                     | 
|Foreign Exchange Gain                     |   | (4     | ) |   | (98    | ) |   | (94                 | ) |  | 96%                     | 
|Income taxes                              |   | -      |   |   | (130   | ) |   | (130                | ) |  | 100%                    | 
|Net Loss                                  |   | (3,096 | ) |   | (1,940 | ) |   | 1,156               |   |  | 60%                     | 

Revenue

Revenue decreased by $327 thousand, or 26%, to $948 thousand
for the year ended December 31, 2010 from $1,275 thousand for the year
ended December 31, 2009.

In the year ended December 31, 2010, royalty revenues earned
from commercialization of the first product fully-developed by us, a prenatal
multivitamin supplement marketed as Gesticare® in the USA, decreased by
approximately 18% to $228 thousand from $277 thousand in the previous year. The
deterioration resulted from increased competition in the nutritional supplement
market.

Revenue earned from our pharmaceutical partners for development
milestones achieved, including non-refundable upfront license fees, decreased by
$278 thousand, or 28%, to $720 thousand, compared with $998 thousand in the
previous year. The decrease is attributable to development contracts that were
in effect during 2009 that have either been temporarily suspended, postponed, or
terminated, and relate primarily to the suspension of R&D operations by
Cynapsus Therapeutics Inc. (formerly Cannasat Therapeutics Inc.) for projects to
develop products indicated for the relief of neuropathic pain, and for
schizophrenia, and Circ Pharma for a product to reduce cholesterol. In addition,
the commercialization of Gesticare® has resulted in royalty income, which is
partially offset by reduced development milestones for this pre-natal
multivitamin supplement project. The co-development and commercialization
agreement entered into with RedHill Biopharma Ltd. on August 26, 2010 partially
compensated for the reduction in revenue. In November 2010, we acquired from
Cynapsus full control of, and interest in, the project for symptomatic
management of Multiple Sclerosis (MS) induced central neuropathic pain and
chemotherapy induced nausea. We are currently negotiating with a number of
potential partners related to new development projects for various drug
candidates and, whilst the timing of such events is difficult to predict, we are
optimistic of securing contracts in the near future.

Other Income

Interest and other income of $389 thousand were recorded in the
year ended December 31, 2010, compared with $4 thousand in the previous year.
Included within other income in fiscal 2010 is approximately $329 thousand
relating to the write-back of potential liabilities accrued in previous years
that are no longer expected to be realized, plus approximately $45 thousand
related to the refund of investment tax credits for fiscal 2008 that exceeded
the amount recorded as receivable.

Research and Development (R&D) Expenses

R&D expenses totaled $1,747 thousand in the year ended
December 31, 2010 compared with $1,422 thousand in the previous year,
representing an increase of $325 thousand, or 23%.

25

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The increase in R&D expenses can be primarily attributed to
a foreign exchange impact of approximately $158 thousand arising from the
translation of our operating currency into our reporting currency, and an
increase in R&D expenditure for clinical studies.

Included within R&D expenses for 2010 are R&D Salaries
of $491 thousand, of which approximately $9 thousand represents non-cash
compensation. This compares to R&D Salaries of $409 thousand in 2009, of
which approximately $2 thousand represented non-cash compensation. The increase
in R&D Salaries is primarily attributable to the foreign exchange impact of
approximately $44 thousand arising from the translation of our operating
currency into our reporting currency, plus R&D staff salary increases.

In the year ended December 31, 2010, we recorded estimated
Research and Development Tax Credits and refunds of $182 thousand, compared with
$185 that was recorded in the previous year.

Management Salaries and General and Administrative
(G&A) Expenses

Management salaries increased from $584 thousand in fiscal 2009
to $747 thousand in fiscal 2010, representing an increase of $163 thousand, or
28%. The increase is primarily attributable to a foreign exchange impact of
approximately $68 thousand arising from the translation of our operating
currency into our reporting currency, the payment of Directors Fees in the
amount of approximately $90 thousand (2009: $28 thousand, albeit in 2009
Directors Fees were classified under general and administrative expenses rather
than management salaries), and the payment of approximately $90 thousand (2009:
$Nil) in respect of the termination of a consultancy agreement. These increases
were partially offset by the decision of the Board of Directors to not grant
performance-related bonuses to management for the fiscal year 2010, compared
with the amount of bonuses paid to management in the previous year of
approximately $63 thousand.

Included in management salaries are approximately $23 thousand
(2009: $21 thousand) in non-cash compensation resulting from options granted to
management employees in 2008 and 2009, and $28 thousand (2009: $29 thousand) in
non-cash compensation from options granted to non-employee directors in
2010.

General and administrative expenses decreased to $335 thousand
in the year ended December 31, 2010 from $360 thousand in the year ended
December 31, 2009. The decrease relates to an amount of approximately $27
thousand related to a deposit paid for the anticipated lease of new premises
that was written off in 2009 following managements decision to remain at its
current premises for the foreseeable future, and a further reduction of
approximately $28 thousand arising from the reclassification of Directors Fees
from general and administrative expenses to management salaries. These
reductions were partially compensated by a foreign exchange impact of
approximately $30 thousand arising from the translation of our operating
currency into our reporting currency.

Included in general and administrative expenses is the
write-off of a receivable in the amount of approximately $223 thousand that was
owed to us by Cynapsus Therapeutics Inc. We agreed to the write-off of this debt
as part of the agreement to acquire full control of, and interest in, project
INT0010. An allowance for doubtful accounts in respect of 50% of this receivable
was recorded by us in the year ended December 31, 2009.

Professional Fees

Professional fees for the year ended December 31, 2010
increased to $1,648 thousand compared to $437 thousand for the year ended
December 31, 2009.

The increase in professional fees is primarily attributable to
legal expenses of approximately $1,035 thousand (2009: $64 thousand) related to
the defense of the Biovail lawsuit. On August 18, 2009, our former development
partner Cary Pharmaceuticals was sued by Biovail in the U.S. District Court of
Delaware for patent infringement under provisions of the Drug Price Competition
and Patent Term Restoration Act of 1984 (Hatch-Waxman Act), with respect to
Biovail's U.S. Patent No. 6,096,341. Under an agreement executed between us and
Cary on May 7, 2010, Cary assigned to us its 50% ownership stake in CPI-300,
including all rights and interest in the regulatory approvals as well as the
NDA, and we assumed full and complete responsibility for the Biovail litigation,
including the costs thereof. On October 19, 2010, the Court granted a motion to
substitute us as defendant and counter plaintiff in place of Cary. On January 4,
2011, we announced that the United States District Court of Delaware had ruled
in our favor regarding claim construction for the two patent terms at issue in
the patent infringement action, and on February 3, 2011 we announced that the
Court had dismissed the lawsuit.

In addition, general legal expenses increased by approximately
$145 thousand from $57 thousand in 2009 to $202 thousand 2010, primarily as a
result of (i) negotiations to acquire a strategic ownership position in Pillar5
Pharma Inc., a state-of-the-art manufacturer of quality products for the
pharmaceutical industry, (ii) the acquisition from Cary Pharmaceuticals of full
ownership of CPI-300, a novel strength of the antidepressant bupropion HCl, the active
ingredient in Wellbutrin XL®, and (iii) the acquisition from Cynapsus
Thereapeutics Inc. of project INT0010.

26

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Also included within professional fees are business development
expenses of approximately $87 thousand (2009: $30 thousand) and
shareholder/investor relations expenses of approximately $182 thousand (2009:
$135 thousand) of which approximately $14 thousand (2009: $38 thousand) is a
non-cash expense for options granted to investor relation firms for investor
relation services.

Share-Based Compensation Expense, Warrants and Stock Based
Payments

Share-based compensation expense, warrants and share-based
payments totaled $170 thousand for the year ended December 31, 2010, compared to
$104 thousand for the year ended December 31, 2009.

On July 28, 2010, we restated the exercise price of the
warrants issued with respect to the convertible notes transaction on May 22,
2007 from $0.80 to $0.48. The restatement resulted in an increase in the fair
value of the warrant and an additional compensation charge of approximately $96
thousand. There was no corresponding charge in the previous year.

We expensed approximately $32 thousand in 2010 for options
granted to our employees in 2008, 2009 and 2010 under the 2006 Stock Option Plan
and approximately $28 thousand for options granted to non-employee directors in
2010, compared with $37 thousand and $29 thousand, respectively, which was
expensed in the previous year.

We also expensed $14 thousand in 2010 for options granted to
investor relation firms for investor relation services, compared to $38 thousand
that was expensed in 2009.

There remains approximately $68 thousand in stock-based
compensation to be expensed in fiscal 2011 and 2012 of which approximately $54
thousand relates to the issuance of options to our employees and directors
during 2009 and 2010, and approximately $14 thousand relates to options granted
to investor relations firms. We anticipate the issuance of additional options
and warrants in the future, which will continue to result in stock-based
compensation expense.

Financing Cost

Interest and financing fee expense totaled $98 thousand for the
year ended December 31, 2010, compared with $784 thousand for the year ended
December 31, 2009.

On July 28, 2010, we restated the exercise price of the
warrants issued with respect to the convertible notes transaction on May 22,
2007 from $0.80 to $0.48. The restatement resulted in an increase in the fair
value of the warrant and an additional compensation charge of approximately $96
thousand.

Included within the expense for 2009 were interest payments and
an accretion expense totaling $592 thousand related to convertible notes issued
in May 2007, the outstanding balance of which was repaid in September 2009. In
addition, in the third quarter of 2009, approximately $254 thousand of
convertible notes were exchanged for 705,158 shares of common stock. Certain
convertible note holders took advantage of a one-time option that arose as a
result of our third quarter 2009 Special Warrant Offering to convert part of the
convertible debt at CDN$0.40 (approximately US$0.36) per share as opposed to the
convertible note agreement rate of $0.70 per share. This conversion resulted in
a debt conversion expense of approximately $175 thousand, which was expensed in
the third quarter of 2009.

Foreign Exchange

A foreign exchange gain of approximately $4 thousand was
recorded in the year ended December 31, 2010 compared with a foreign exchange
gain of $98 thousand in the previous year. The foreign exchange gains relate
primarily to currency fluctuations between the Canadian dollar and the U.S.
dollar.

Net Loss

The net loss for the year ended December 31, 2010 was $3,096
thousand and represents a deterioration of $1,156 thousand compared to the net
loss of $1,940 thousand for the previous year. The main items resulting in the
increase in net loss are summarized as follows:

|a) | An increase in legal expenses of approximately $1,116 thousand, of
      which approximately $971 thousand is related to the defense of the Biovail
      lawsuit.                                                                                                                 
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                    
|b) | An increase in R&D expenses of approximately $325 thousand,
      primarily related to clinical studies.                                                                                                                                                                           
|   |                                                                                                                                                                                                                                                                                    
|c) | An increase in management salaries of approximately $163 thousand,
      primarily related to directors fees and severance payments, and partially
      offset by the non-payment of management bonuses.                                                                          
|   |                                                                                                                                                                                                                                                                                    
|d) | A reduction in foreign exchange gain of approximately $94 thousand.                                                                                                                                                                                                                
|   |                                                                                                                                                                                                                                                                                    
|e) | A reduction in interest and financing fees of approximately $686
      thousand as a result of the repayment in September 2009 of convertible
      notes issued in May 2007, partially offset by the loss of the related
      deferred tax credit of approximately $130 thousand.

27

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Included within the net loss for 2010 is approximately $280
thousand related to a foreign exchange impact arising from the translation of
our operating currency into our reporting currency, which is the effect of the
recent strengthening of the Canadian dollar versus the U.S. dollar.

Key Items from the Balance Sheet.

|In U.S.$ thousands     |   | 2010   |  |   | 2009  |  |   | Increase/(Decrease) |   |  | Percentage Change | 
|---------------------- | - | ------ |  | - | ----- |  | - | ------------------- | - |  | ----------------- | 
|                       |   |        |  |   |       |  |   |                     |   |  |                   | 
|Current Assets         | $ | 1,666  |  | $ | 2,703 |  | $ | (1,038              | ) |  | 38%               | 
|Property and Equipment |   | 159    |  |   | 159   |  |   | 0                   |   |  | N/A               | 
|Current Liabilities    |   | 349    |  |   | 705   |  |   | (356                | ) |  | 50%               | 
|Total Equity           |   | 11,087 |  |   | 8,809 |  |   | 2,278               |   |  | 26%               | 

Current Assets

Current assets totaled $1,665 thousand at December 31, 2010
compared with $2,703 thousand at December 31, 2009. The decrease of $1,038
thousand is attributable to a decrease in cash and cash equivalents of
approximately $381 thousand, a decrease in accounts receivable of approximately
$340 thousand, and a decrease in investment tax credits receivable of
approximately $315 thousand.

Prepaid Expenses

As of December 31, 2010, prepaid expenses totaled $47 thousand
as compared to $48 thousand at December 31, 2009.

Contractual Obligations and Commitments

Excluding trade accounts payable and accrued liabilities, we
are committed to the following contractual obligations and commitments:

|                            |   | 2011 (Lessthan 1 Year) |  |   | 1 Year or More | 
|--------------------------- | - | ---------------------- |  | - | -------------- | 
|                            |   |                        |  |   |                | 
|Operating Lease Obligations | $ | 17                     |  | $ | 0              | 
|Investor Relations          | $ | 19                     |  | $ | 0              | 
|Total                       | $ | 36                     |  | $ | 0              | 

Liquidity and Capital Resources

Cash and cash equivalents totaled $1,144 thousand as at
December 31, 2010, representing a decrease of $381 thousand as compared to
$1,525 thousand as at December 31, 2009. On August 27, 2010, we completed a
private placement of 6,500,000 units at CAD$0.40 (approximately US$0.38) per
unit for gross proceeds of CAD$2.6 million (approximately US$2,465 thousand).
Each unit consists of one common share and one common share purchase warrant.
Each warrant entitles the holder thereof to purchase one common share at an
exercise price of CAD$0.50 (approximately US$0.47) expiring on August 27, 2013.
The exercise price of the warrants is subject to adjustment for certain events,
including without limitation, dividends, distributions or split of our common
stock, subsequent rights offerings by us, or in the event of our consolidation,
merger or reorganization. The proceeds of the private placement have and will be
used to support our strategic development projects and for working capital
purposes.

We paid an agent a) cash compensation in the amount of CAD$208
thousand (approximately US$197 thousand), which is equal to 8% of the gross
proceeds of the offering, b) a corporate finance fee of CAD$20 thousand
(approximately US$19 thousand) and c) issued 520,000 compensation options, which was equal to 8% of the
number of units sold in the offering. Each compensation option entitles the
agent to purchase one common share at an exercise price of CAD$0.50
(approximately US$0.47) expiring on August 27, 2012. The exercise price of the
compensation options is subject to adjustment for certain events, including
without limitation, dividends, distributions or split of our common stock,
subsequent rights offerings by us, or in the event of our consolidation, merger
or reorganization.

28

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In addition, we paid approximately $140 thousand in cash
consideration for other transaction costs. All of the above transaction costs
have been reflected as a reduction of the common shares and the warrants based
on their relative fair values.

As at December 31, 2010, we had accumulated a deficit of $9,761
thousand compared with an accumulated deficit of $6,665 thousand as at December
31, 2009. Total assets amounted to $1,825 thousand and shareholders equity
totaled $1,476 thousand as at December 31, 2010, compared with total assets and
shareholders equity of $2,862 thousand and $2,157 thousand, respectively, as at
December 31, 2009.

Accounts receivable totaled $278 thousand (2009: $618 thousand)
as at December 31, 2010, of which approximately $132 thousand is a sales tax
refund that we expect to receive in the first half of 2011. As part of the
agreement to acquire full control of, and interest in, project INT0010, we
agreed to write off approximately $223 thousand that was owed to us by Cynapsus
Therapeutics Inc. An allowance for doubtful accounts in the amount of $110
thousand was recorded against this receivable in the year ended December 31,
2009.

In addition, we had R&D investment tax credits receivable
of approximately $197 thousand as at December 31, 2010 as compared to $512
thousand as at December 31, 2009. We expect to receive the R&D investment
tax credits during the fourth quarter of 2011.

Accounts payable and accrued liabilities as at December 31,
2010 amounted to $349 thousand (December 31, 2009 - $705 thousand), of which
approximately $80 thousand relates to research and development activities,
approximately $153 thousand relates to professional fees, and approximately $112
thousand relates to accrued payroll liabilities. Included within other accruals
is approximately $1 thousand due to a shareholder. The reduction in accounts
payable and accrued liabilities as at December 31, 2010 compared with December
31, 2009 is primarily attributable to the write-back of potential liabilities
accrued in previous years that are no longer expected to be realized.

Property and Equipment

As at December 31, 2010, the net book value of property and
equipment amounted to $159 thousand, compared to $159 thousand at December 31,
2009. In the year ended December 31, 2010, additions to assets totaled $37
thousand and comprised $30 thousand for laboratory equipment, $3 thousand for
computer equipment and $4 thousand for office equipment, fixtures and fittings.
Total depreciation in the year ended December 31, 2010 amounted to $44 thousand
and a foreign exchange gain of $7 thousand was recorded.

Capital Stock

As at December 31, 2010, capital stock amounted to $396
compared to $331 at December 31, 2009. The increase reflects the issuance of
6,500,000 shares at par value of $0.00001 related to the private placement
completed on August 27, 2010. Capital stock is disclosed at its par value with
the excess of proceeds shown in Additional Paid-in-Capital.

Additional Paid-in-Capital

Additional paid-in capital totaled $11,087 thousand at December
31, 2010, as compared to $8,809 thousand at December 31, 2009. The change is
made up of increases of $1,490 thousand, $974 thousand, and $117 thousand for
the private placement completed on August 27, 2010 in relation to common stock
issued, warrants, and agents compensation, respectively, as well as a decrease
of $473 thousand for transaction costs. Additional paid in capital also
increased by $96 thousand related to the modification of warrant terms, and by
$74 thousand for stock-based compensation of which approximately $14 thousand is
attributable to the amortization of stock options granted to our investor
relations consultants and approximately $60 thousand is attributable to the
amortization of stock options granted to employees and directors.

29

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Key items from the Statement of Cash Flows

|In U.S.$ thousands                        |   | 2010   |   |   | 2009   |   |   | Increase/(Decrease) |   |  | PercentageChange | 
|----------------------------------------- | - | ------ | - | - | ------ | - | - | ------------------- | - |  | ---------------- | 
|                                          |   |        |   |   |        |   |   |                     |   |  |                  | 
|Operating Activities                      | $ | (2,580 | ) | $ | (1,588 | ) | $ | 992                 |   |  | 63%              | 
|Financing Activities                      |   | 2,109  |   |   | 2,131  |   |   | (22                 | ) |  | 1%               | 
|Investing Activities                      |   | (37    | ) |   | 254    |   |   | (291                | ) |  | 115%             | 
|Cash and cash equivalents - end of period |   | 1,144  |   |   | 1,525  |   |   | (381                | ) |  | 25%              | 

Statement of cash flows

Net cash used by operating activities was $2,580 thousand in
the year ended December 31, 2010, compared to $1,588 thousand for the year ended
December 31, 2009. In fiscal 2010, net cash used by operating activities
consisted of an operating loss of $3,096 thousand and an increase in non-cash
operating elements of working capital of $302 thousand. The increase in net cash
used by operating activities is primarily attributable to the costs of the
Biovail litigation in respect of CPI-300, which was dismissed by the United
States District Court of Delaware on February 2, 2011.

Operating activities will continue to consume our available
funds until we are able to generate increased revenues.

The net cash provided by financing activities was $2,109
thousand in fiscal 2010, compared to $2,131 thousand provided in the previous
year. The net cash provided in 2010 resulted from the private placement
completed on August 27, 2010 for gross proceeds of $2,465 thousand, less related
transaction costs of $356 thousand. Of the net cash provided by financing
activities in the previous year, $3,873 thousand came from private placements
completed in the third quarter of 2009, less $678 thousand used to pay related
transaction costs of those private placements and less $976 thousand used to
repay the balance of convertible notes that were outstanding at September 22,
2009.

Net cash used in investing activities amounted to $37 thousand
in the year ended December 31, 2010 compared to net cash provided of $254
thousand in the year ended December 31, 2009. Included within the provision of
funds in 2009 was approximately $277 thousand in respect of the restricted cash
for the CPI-300 project under the collaborative agreement with Cary
Pharmaceuticals that was terminated on May 7, 2010.

Cash of $37 thousand was used to purchase capital assets in the
year ended December 31, 2010 (2009: $23 thousand), including approximately $19
thousand for laboratory equipment that was purchased from a shareholder, who is
also an officer of the Company.

The balance of cash and cash equivalents as at December 31,
2010 amounted to $1,144 thousand, compared to $1,525 thousand at December 31,
2009.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements.

ITEM 7A.QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK.

Not applicable.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The consolidated financial statements and supplementary data of
the Company required in this item are set forth beginning on page F-1 of this
Annual Report on Form 10-K.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE

We have had no disagreements with our independent registered
public accountants with respect to accounting practices or procedures or financial disclosure.

30

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ITEM 9A. CONTROLS AND PROCEDURES

a.   Evaluation of Disclosure Controls and
Procedures

Based on an evaluation under the supervision and with the
participation of our management, our Chief Executive Officer and Chief Financial
Officer have concluded that the Company's disclosure controls and procedures as
defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of
1934, as amended (the Exchange Act) were effective as of December 31, 2010 to
ensure that information required to be disclosed by the Company in reports that
it files or submits under the Exchange Act is (i) recorded, processed,
summarized and reported within the time periods specified in the Securities and
Exchange Commission rules and forms and (ii) accumulated and communicated to the
Company's management, including our Chief Executive Officer and Chief Financial
Officer, as appropriate to allow timely decisions regarding required
disclosure.

b.   Changes in Internal Controls over Financial
Reporting

Our Chief Executive Officer and Chief Financial Officer have
concluded that there were no changes in the Companys internal controls over
financial reporting during the quarter ended December 31, 2010 that have
materially affected or are reasonably likely to materially affect the Companys
internal controls over financial reporting.

c.   Managements Report on Internal Control Over
Financial Reporting

Our management is responsible for establishing and maintaining
adequate internal control over financial reporting, as such term is defined in
Exchange Act Rule 13a-15(f). Our internal control system was designed to provide
reasonable assurance to our management and the Board of directors regarding the
preparation and fair presentation of published financial statements.

All internal control systems, no matter how well designed, have
inherent limitations. Therefore, even those systems determined to be effective
can provide only reasonable assurance with respect to financial statement
preparation and presentation.

Our management, including the Chief Executive Officer and Chief
Financial Officer, assessed the effectiveness of the Companys internal control
over financial reporting as of December 31, 2010. In making this assessment, our
management used the criteria set forth by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO) in Internal ControlIntegrated
Framework. Based on this assessment, we believe that, as of December 31, 2010,
our internal control over financial reporting was effective based on those
criteria.

This Annual Report does not include an attestation report of
our registered public accounting firm regarding internal control over financial
reporting. Management's report was not subject to attestation by the company's
registered public accounting firm pursuant to temporary rules of the Securities
and Exchange Commission that permit the Company to provide only management's
report in this Annual Report.

ITEM 9B. OTHER INFORMATION

We do not have any information required to be disclosed in a
report on Form 8-K during the fourth quarter of 2010 that was not reported.

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE
GOVERNANCE

Certain information required by this Item 10 relating to our
directors, executive officers and corporate governance is incorporated by
reference herein from our proxy statement in connection with our 2011 annual
meeting of stockholders, which proxy statement will be filed with the SEC not
later than 120 days after the close of our fiscal year ended December 31,
2010.

Audit Committee. The Audit Committee is
currently composed of J. Bernard Boudreau, Ian Troup and Bernd Melchers. The
Audit Committee held four meetings during our 2010 Fiscal Year.

Our Audit Committee assists our board of directors in
fulfilling its responsibilities for oversight and supervision of financial and
accounting matters. The chairman of the Audit Committee is J. Bernard Boudreau.
Our Audit Committees responsibilities include, among others (i) recommending to the board of directors the
engagement of the external auditor and the terms of the external auditors
engagement; (ii) overseeing the work of the external auditor, including dispute
resolution between management and the external auditor, if required; (iii)
pre-approving all non-audit services to be provided to us by our external
auditor; (iv) reviewing our financial statements, managements discussion and
analysis and annual and interim earnings press releases before this information
is publicly disclosed; (v) assessing the adequacy of procedures for our public
disclosure of financial information; (vi) establishing procedures to deal with
complaints received by us relating to our accounting and auditing matters; and
(vii) reviewing our hiring policies regarding employees of our external auditor
or former auditor. We have adopted, along with our Audit Committee, a written
charter of the Audit Committee setting out the mandate and responsibilities of
the Audit Committee which provides that the Audit Committee convene no less than
four times per year.

31

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The Audit Committee Charter is posted on our website at
http://www.intelgenx.com.

Accordingly, the Audit Committee discusses with RSM Richter,
LLP, our auditors, our audited financial statements, including, among other
things, the quality of our accounting principles, the methodologies and
accounting principles applied to significant transactions, the underlying
processes and estimates used by our management in our financial statements and
the basis for the auditor's conclusions regarding the reasonableness of those
estimates, in addition to the auditor's independence.

Audit Committee Financial Expert. Mr. Bernd Melchers
serves as the Financial Expert of the Audit Committee. Mr. Melchers is an
independent director as defined in the Nasdaq Stock Market, Inc. Marketplace
Rules.

Code of Ethics

We have adopted a Code of Business Conduct and Ethics that
applies to our directors and officers, including our principal executive
officer, principal financial officer and principal accounting officer. The Code
of Business Conduct and Ethics is posted on our website at
http://www.intelgenx.com.

ITEM 11. EXECUTIVE COMPENSATION

Certain information required by this Item 11 relating to
remuneration of directors and executive officers and other transactions
involving management is incorporated by reference herein from our proxy
statement in connection with our 2011 annual meeting of stockholders, which
proxy statement will be filed with the SEC not later than 120 days after the
close of our fiscal year ended December 31, 2010.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT AND RELATED STOCKHOLDER MATTERS

Certain information required by this Item 12 relating to
security ownership of certain beneficial owners and management is incorporated
by reference herein from our proxy statement in connection with our 2011 annual
meeting of stockholders, which proxy statement will be filed with the SEC not
later than 120 days after the close of our fiscal year ended December 31, 2010.
For information on securities authorized for issuance under the equity
compensation plan, see the section entitled Market for Registrants Common
Equity and Related Stockholder Matters in Part II, Item 5, in this Annual
Report on form 10-K.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND
DIRECTORS INDEPENDENCE

Certain information required by this Item 13 relating to
certain relationships and related transactions, and director independence is
incorporated by reference herein from our proxy statement in connection with our
2011 annual meeting of stockholders, which proxy statement will be filed with
the SEC not later than 120 days after the close of our fiscal year ended
December 31, 2010.

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

Certain information required by this Item 14 regarding
principal accounting fees and services is set forth under Principal Accounting
Fees and Services in our proxy statement in connection with our 2011 annual
meeting of stockholders, which proxy statement will be filed with the SEC not
later than 120 days after the close of our fiscal year ended December 31, 2010.

32

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PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES(a)
Financial Statements and Schedules 1. Financial Statements

The following financial statements are filed as part of this
report under Item 8 of Part II Financial Statements and Supplementary Data:

|A. | Report of Independent Registered Public Accounting Firm.                                                           
|-- | -------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                    
|B. | Consolidated Balance Sheets as of December 31, 2010 and 2009.                                                      
|   |                                                                                                                    
|C. | Consolidated Statements of Operations for the years ended of December
      31, 2010 and 2009.                     
|   |                                                                                                                    
|D. | Consolidated Statements of Changes in Shareholders Equity for the
      years ended of December 31, 2010 and 2009.
|   |                                                                                                                    
|E. | Consolidated Statements of Cash Flows as of December 31, 2010 and
      2009.                                      
|   |                                                                                                                    
|F. | Notes to Consolidated Financial Statements.                                                                        

2.Financial Statement
Schedules

Financial statement schedules not included herein have been
omitted because they are either not required, not applicable, or the information
is otherwise included herein.

(b) Exhibits.

EXHIBIT INDEX

|Exhibit | Description                                                                                                                                                       
|------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------
|No.     |                                                                                                                                                                   
|2.1     | Share exchange
      agreement dated April 10, 2006 (incorporated by reference to the Form
      8-K/A filed on April 28, 2006)                                   
|3.1     | Articles of incorporation
      (incorporated by reference to the Form SB-2 (File No. 333-90149) filed on
      November 16, 1999)                                
|3.2     | By-Laws
      (incorporated by reference to the Form SB-2 (File No. 333-91049) filed on
      November 16, 1999)                                                  
|3.3     | Amendment to the Articles of
      Incorporation (incorporated by reference to amendment No. 2 to Form SB-2
      (File No. 333- 135591) filed on August 28, 2006)
|9.1     | Voting Trust
      agreement (incorporated by reference to the Form 8-K/A filed on April 28,
      2006)                                                          
|10.1    | Horst Zerbe employment agreement
      (incorporated by reference to the Form SB-2 (File No. 333-135591) filed on
      July 3, 2006)                             
|10.2    | Joel Cohen
      consulting agreement (incorporated by reference to the Form SB-2 (File No.
      No. 333-135591) filed on July 3, 2006)                          
|10.3    | Ingrid Zerbe employment agreement
      (incorporated by reference to the Form SB-2 (File No. 333-135591) filed on
      July 3,                                  
|10.4    | 2006) Registration
      rights agreement (incorporated by reference to the Form SB-2 (File No.
      333-135591) filed on July 3, 2006)                          
|10.5    | Principal's registration rights
      agreement (incorporated by reference to the Form SB-2 (File No.
      333-135591) filed on July 3, 2006)                    
|10.6    | Investor relations
      consulting agreement (incorporated by reference to the Form SB-2 (File No.
      333-135591) filed on July 3, 2006).                     
|10.7    | 2006 Stock Option Plan (incorporated
      by reference to the Form S-8 filed on November 21, 2006)                                                               
|10.8    | Form of Securities
      Purchase Agreement (incorporated by reference to the Form 8-K filed on May
      23, 2007)                                               
|10.9    | Form of 8% Secured Convertible
      Debenture (incorporated by reference to the Form 8-K filed on May 23,
      2007)                                            
|10.10   | Form of Registration
      Rights Agreement (incorporated by reference to the Form 8-K filed on May
      23, 2007)                                               
|10.11   | Form of Warrant (incorporated by
      reference to the Form 8-K filed on May 23, 2007)                                                                           

33

---

|10.12 | Form of Security Agreement
      (incorporated by reference to the Form 8-K filed on May 23, 2007)                                                                                                                                              
|----- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.13 | Subsidiary Guarantee (incorporated by reference
      to the Form 8-K filed on May 23, 2007)                                                                                                                                                    
|10.14 | Deed of Hypothec (incorporated
      by reference to the Form 8-K filed on May 23, 2007)                                                                                                                                                        
|10.15 | Agency Agreement (incorporated by reference to
      the Form 8-K filed on March 28, 2008)                                                                                                                                                      
|10.16 | Form of Subscription Agreement
      (incorporated by reference to the Form 8-K filed on March 28, 2008)                                                                                                                                        
|10.17 | Form of Amending Letter to Subscription
      Agreement (incorporated by reference to the Form 8-K filed on March 28,
      2008)                                                                                                               
|10.18 | Form of Registration Rights
      Agreement (incorporated by reference to the Form 8-K filed on March 28,
      2008)                                                                                                                           
|10.19 | Form of Warrant (incorporated by reference to
      the Form 8-K filed on March 28, 2008)                                                                                                                                                       
|10.20 | Form of Lock up Agreement
      (incorporated by reference to the Form 8-K filed on March 28, 2008)                                                                                                                                             
|10.21 | Brokers Warrant (incorporated by reference to
      the Form S-1 filed on March 24, 2009)                                                                                                                                                      
|10.22 | Form of Amended and Restated
      Warrant (incorporated by reference to the Form 8-K filed on August 4,
      2008)                                                                                                                            
|10.23 | Employment Contract Paul A. Simmons
      (incorporated by reference to the Form 8-K filed on September 5, 2008)                                                                                                                                
|10.24 | Amended and Restated 2006 Stock
      Option Plan, May 29, 2008 (incorporated by reference to the Form 10-K
      filed on March 25, 2009)                                                                                                      
|10.25 | Co-Development and Commercialization Agreement
      with RedHill Biopharma Ltd. (incorporated by reference to the Form 10-Q
      filed on November 9, 2010)                                                                                   
|10.26 | Amended and Restated 2006 Stock
      Option Plan (incorporated by reference to the Form S-8 filed on November
      15, 2010)                                                                                                                  
|10.27 | Agency Agreement, dated as of August 27, 2010,
      between the Company and Bolder Investment Partners, Ltd. (incorporated by
      reference to the Form 8-K filed on August 30, 2010)                                                        
|10.28 | Registration Rights Agreement,
      dated as of August 27, 2010, by and among the Company and the purchasers
      pursuant to the offering (incorporated by reference to the Form 8-K filed
      on August 30, 2010)                         
|10.29 | Form of Subscription
      Agreement(incorporated by reference to the Form 8-K filed on
      August 30, 2010)                                                                                                                                  
|10.30 | Form of
      Warrant(incorporated by reference to the Form 8-K filed on August
      30, 2010)                                                                                                                                                 
|10.31 | Form of Compensation Option(incorporated by reference to the Form 8-K filed on August 30,
      2010)                                                                                                                                           
|10.32 | Form of
      Amended and Restated Warrant(incorporated by reference to the Form
      8-K filed on July 29, 2010)                                                                                                                              
|10.33 | Project Transfer Agreement(incorporated by reference to the Form 10-Q filed on May 14, 2010)                                                                                                                                                    
|10.34 | Co-development and Licensing Agreement(incorporated
      by reference to the Form 10-Q filed on May 14, 2010)                                                                                                                                  
|10.35 | Agency Agreement, dated as of July 13, 2009, by
      and among the Company, Bolder Investment Partners Ltd., Union                                                                                                                             
|10.36 | Securities Ltd. and Paradigm
      Capital Inc. (incorporated by reference to the Form 8-K filed on July 14,
      2009) Registration Rights Agreement, dated as of July 13, 2009, by and
      among the Company, Paradigm Capital Inc., Bolder
|10.37 | Investment Partners Ltd. and Union Securities
      Ltd. (incorporated by reference to the Form 8-K filed on July 14, 2009)
      Form of Subscription Agreement (incorporated by reference to the Form 8-K
      filed on July 14, 2009)       
|10.38 | Form of
      Special Warrant(incorporated by reference to the Form 8-K filed on
      July 14, 2009)                                                                                                                                           
|10.39 | Form of Warrant(incorporated by reference to the Form 8-K filed on July 14, 2009)                                                                                                                                                               
|10.40 | Form of
      Compensation Option(incorporated by reference to the Form 8-K
      filed on July 14, 2009)                                                                                                                                       
|14    | Code of Ethics (incorporated by reference to
      the Form S-1 filed on March 24, 2009)                                                                                                                                                        
|16.1  | Letter on change in certifying
      accountant (incorporated by reference to the Form SB-2 (File No.
      333-135591) filed on July 3, 2006)                                                                                                  
|21.1  | Subsidiaries of the small business issuer
      (incorporated by reference to the Form SB-2 (File No. 333-135591) filed on
      July 3, 2006)                                                                                                  
|23.1* | Consent
    of RSM Richter Chamberland, LLP                                                                                                                                                                                                     
|31.1* | Certification of Horst G.
      Zerbe, President and Chief Executive Officer, pursuant to Section 302 of
      the Sarbanes-Oxley Act of 2002.*                                                                                                 
|31.2* | Certification of Paul A. Simmons, Chief Financial Officer,
      pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*                                                                                                                    
|32.1* | Certification of Horst G. Zerbe, President
      and Chief Executive Officer, pursuant to 18 U.S.C. Section 1350.*                                                                                                                              
|32.2* | Certification of Paul A. Simmons, Chief Financial Officer,
      pursuant to 18 U.S.C. Section 1350. *                                                                                                                                          
|      |                                                                                                                                                                                                                                                 
|      | * Filed herewith.                                                                                                                                                                                                                               

34

---

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the
Exchange Act, the registrant has duly caused this Form 10-K Annual Report to be
signed on its behalf by the undersigned on March 28, 2011, thereunto duly
authorized.

| | INTELGENX TECHNOLOGIES CORP.
| | ----------------------------
| |                             
| | By:                         
| |                             
| |                             
| |                             
| |                             
| | By:                         
| |                             
| |                             
| |                             

In accordance with the requirements of the Securities Exchange
Act of 1934, this Form 10-K Annual Report has been signed by the following
persons in the capacities and on the dates indicated.

|Signature                | Position                                        | Date          
|------------------------ | ----------------------------------------------- | --------------
|                         |                                                 |               
|By: /s/Horst G. Zerbe    | President, Chief Executive Officer and Director | March 28, 2011
|Horst G. Zerbe           |                                                 |               
|                         |                                                 |               
|By: /s/Paul A. Simmons   | Chief Financial Officer                         | March 28, 2011
|Paul A. Simmons          |                                                 |               
|                         |                                                 |               
|By: /s/ Bernard Boudreau | Director                                        | March 28, 2011
|J. Bernard Boudreau      |                                                 |               
|                         |                                                 |               
|By: /s/ Ian Troup        | Director                                        | March 28, 2011
|John (Ian) Troup         |                                                 |               
|                         |                                                 |               
|By: /s/Bernd Melchers    | Director                                        | March 28, 2011
|Bernd J. Melchers        |                                                 |               
|                         |                                                 |               
|By: /s/John Marinucci    | Director                                        | March 28, 2011
|John Marinucci           |                                                 |               

35

---

Consolidated Financial Statements December 31, 2010 and
2009(Expressed in U.S. Funds)





---

IntelGenx Technologies Corp.

Consolidated Financial Statements December 31, 2010 and
2009(Expressed in U.S. Funds)

|Contents                                                           |           
|------------------------------------------------------------------ | ----------
|Report of Independent Registered Public
      Accounting Firm      | F - 1     
|Consolidated Balance Sheets                                        | F - 2     
|Consolidated Statements of Shareholders'
      Equity              | F - 3 - 4 
|Consolidated Statements of Operations and Comprehensive
      Loss | F - 5     
|Consolidated Statements of Cash Flows                              | F - 6     
|Notes to Consolidated Financial Statements                         | F - 7 - 28

---

IntelGenx Technologies Corp.

RSM Richter Chamberland S.E.N.C.R.L.Comptables agréésChartered Accountants2, Place Alexis NihonMontréal, (Québec) H3Z 3C2Téléphone / Telephone : (514) 934-3400Télécopieur / Facsimile : (514) 934-3408www.rsmrch.com


Report of Independent Registered Public
Accounting Firm

To the Shareholders and Board of Directors of IntelGenx
Technologies Corp.

We have audited the accompanying consolidated balance sheets of
IntelGenx Technologies Corp. as at December 31, 2010 and 2009 and the related
consolidated statements of operations and comprehensive loss, shareholders'
equity and cash flows for the years then ended. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audit.

We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those standards
require that we plan and perform an audit to obtain reasonable assurance whether
the financial statements are free of material misstatement. The Company is not
required to have, nor were we engaged to perform an audit of its internal
control over financial reporting. Our audit included consideration of internal
control over financial reporting as a basis for designing audit procedures that
are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Companys internal control over financial
reporting. As such, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

In our opinion, these consolidated financial statements present
fairly in all material respects, the financial position of the Company as at
December 31, 2010 and 2009 and the results of its operations, comprehensive
loss, and its cash flows for the years then ended in accordance with U.S.
generally accepted accounting principles.

The accompanying financial statements have been prepared
assuming that the Company will continue as a going concern. As described in note
2 to the financial statements, the Company has experienced operating losses and
requires significant capital to finance operations. This raises substantial
doubt about its ability to continue as a going concern. Management's plans in
regard to these matters are also described in note 2. The financial statements
do not include any adjustments that may result from the outcome of this
uncertainty.

RSM Richter Chamberland LLP (Signed)Chartered Accountants

Montreal, Quebec March 24, 2011

F-1

---

IntelGenx Technologies Corp.

Consolidated Balance Sheets As at December 31, 2010 and
2009(Expressed in Thousands of U.S. Dollars ($000) Except Share and
Per Share Data)

|                                               |   | 2010   |   |   | 2009   |  
|---------------------------------------------- | - | ------ | - | - | ------ | -
|Assets                                         |   |        |   |   |        |  
|Current                                        |   |        |   |   |        |  
|Cash and
      cash equivalents                | $ | 1,144  |   | $ | 1,525  |  
|Accounts receivable                            |   | 278    |   |   | 618    |  
|Prepaid
      expenses                         |   | 47     |   |   | 48     |  
|Investment tax credits receivable              |   | 197    |   |   | 512    |  
|                                               |   | 1,666  |   |   | 2,703  |  
|Property and
      Equipment(note 6)           |   | 159    |   |   | 159    |  
|                                               | $ | 1,825  |   | $ | 2,862  |  
|Liabilities                                    |   |        |   |   |        |  
|Current                                        |   |        |   |   |        |  
|Accounts payable
      and accrued liabilities |   | 349    |   |   | 705    |  
|                                               |   | 349    |   |   | 705    |  
|Commitments(note 7)                            |   |        |   |   |        |  
|Shareholders' Equity                           |   |        |   |   |        |  
|Capital Stock (note 8)                         |   | 0      |   |   | 0      |  
|Additional Paid-in-Capital                     |   | 11,087 |   |   | 8,809  |  
|Accumulated Deficit                            |   | (9,761 | ) |   | (6,665 | )
|Accumulated Other Comprehensive Income (Loss)  |   | 150    |   |   | 13     |  
|                                               |   | 1,476  |   |   | 2,157  |  
|                                               | $ | 1,825  |   | $ | 2,862  |  

See accompanying notes

Approved on Behalf of the Board:

/s/ J. Bernard
BoudreauDirector

/s/Horst G.
ZerbeDirector

F - 2

---

IntelGenx TechnologiesCorp.

ConsolidatedStatementofShareholders'Equity For the Year EndedDecember31, 2009(ExpressedinThousandsof U.S. Dollars
($000) Except Share and Per Share Data)

AccumulatedAdditional
    
    
    
    
    
    Other
    
    
    TotalCapital Stock
    
    
    Paid-In
    
    
    Accumulated
    
    
    Comprehensive
    
    
    **Shareholders'**Number
    
    
    Amount
    
    
    Capital
    
    
    Deficit
    
    
    Income (Loss)
    
    
    EquityBalance - December 31, 2008
    
    20,850,002
    
    $
    0
    
    $
    5,081
    
    $
    (4,725
    )
    $
    (184
    )
    $
    172Foreign currency translation adjustment
    
    -
    
    
    -
    
    
    -
    
    
    -
    
    
    197
    
    
    197Issue of common stock, net of transaction
      costs of $633.4 (note 8)
    
    11,076,000
    
    
    -
    
    
    1,845
    
    
    -
    
    
    -
    
    
    1,845Warrants issued, net of transaction costs of $350.6 (note
      9)
    
    -
    
    
    -
    
    
    1,023
    
    
    -
    
    
    -
    
    
    1,023Stock-based compensation (note 9)
    
    -
    
    
    -
    
    
    104
    
    
    -
    
    
    -
    
    
    104Agents options (note 9)
    
    -
    
    
    -
    
    
    161
    
    
    -
    
    
    -
    
    
    161Options exercised (note 9)
    
    31,071
    
    
    -
    
    
    21
    
    
    -
    
    
    -
    
    
    21Convertible notes conversions
    
    705,158
    
    
    -
    
    
    429
    
    
    -
    
    
    -
    
    
    429Agents stock compensation (note 8)
    
    419,040
    
    
    -
    
    
    145
    
    
    
    
    
    
    
    
    145Net loss for the
      period
    
    -
    
    
    -
    
    
    -
    
    
    (1,940
    )
    
    -
    
    
    (1,940
    )Balance  December 31, 2009
    
    33,081,271
    
    $
    0
    
    $
    8,809
    
    $
    (6,665
    )
    $
    13
    
    $
    2,157


See accompanying notes

F - 3

---

IntelGenx Technologies Corp.

ConsolidatedStatementofShareholders'Equity For the Year EndedDecember31, 2010(ExpressedinThousandsof U.S. Dollars
($000) Except Share and Per Share Data)

AccumulatedAdditional
    
    
    
    
    
    Other
    
    
    TotalCapital Stock
    
    
    Paid-In
    
    
    Accumulated
    
    
    Comprehensive
    
    
    **Shareholders'**Number
    
    
    Amount
    
    
    Capital
    
    
    Deficit
    
    
    Income
    
    
    EquityBalance - December 31, 2009
    
    33,081,271
    
    $
    0
    
    $
    8,809
    
    $
    (6,665
    )
    $
    13
    
    $
    2,157Foreign currency translation adjustment
    
    -
    
    
    -
    
    
    -
    
    
    -
    
    
    137
    
    
    137Issue of common stock, net of transaction
      costs of $286.4 (note 8)
    
    6,500,000
    
    
    0
    
    
    1,204
    
    
    -
    
    
    -
    
    
    1,204Warrants issued, net of transaction costs of $186.8 (note
      9)
    
    -
    
    
    -
    
    
    787
    
    
    -
    
    
    -
    
    
    787Agents options
    
    -
    
    
    -
    
    
    117
    
    
    -
    
    
    -
    
    
    117Modification of warrant terms (note 9)
    
    -
    
    
    -
    
    
    96
    
    
    -
    
    
    -
    
    
    96Stock-based compensation (note 9)
    
    -
    
    
    -
    
    
    74
    
    
    -
    
    
    -
    
    
    74Net loss for the
      period
    
    -
    
    
    -
    
    
    -
    
    
    (3,096
    )
    
    -
    
    
    (3,096
    )Balance  December 31, 2010
    
    39,581,271
    
    $
    0
    
    $
    11,087
    
    $
    (9,761
    )
    $
    150
    
    $
    1,476


See accompanying notes

F - 4

---

IntelGenx Technologies Corp.

Consolidated Statements of Operations and Comprehensive Loss
For the Years Ended December 31, 2010 and 2009(Expressed in
Thousands of U.S. Dollars ($000) Except Share and Per Share Data)

|                                                          |   | 2010       |   |   | 2009       |  
|--------------------------------------------------------- | - | ---------- | - | - | ---------- | -
|Revenue                                                   | $ | 948        |   | $ | 1,275      |  
|Other Income                                              |   | 389        |   |   | 4          |  
|                                                          |   | 1,337      |   |   | 1,279      |  
|Expenses                                                  |   |            |   |   |            |  
|Research and development                                  |   | 1,747      |   |   | 1,422      |  
|Research
      and development tax credits                |   | (182       | ) |   | (185       | )
|Management salaries                                       |   | 747        |   |   | 584        |  
|General and
      administrative                          |   | 335        |   |   | 360        |  
|Professional fees                                         |   | 1,648      |   |   | 437        |  
|Depreciation                                              |   | 44         |   |   | 45         |  
|Foreign exchange gain                                     |   | (4         | ) |   | (98        | )
|Interest and financing fees                               |   | 98         |   |   | 784        |  
|                                                          |   | 4,433      |   |   | 3,349      |  
|Loss Before Income Taxes                                  |   | (3,096     | ) |   | (2,070     | )
|Income taxes (note 10)                                    |   | -          |   |   | (130       | )
|Net Loss                                                  |   | (3,096     | ) |   | (1,940     | )
|Other Comprehensive Income                                |   |            |   |   |            |  
|Foreign currency translation adjustment                   |   | 137        |   |   | 197        |  
|Comprehensive Loss                                        | $ | (2,959     | ) | $ | (1,743     | )
|Basic Weighted
      Average Number of Shares Outstanding |   | 35,325,107 |   |   | 24,527,541 |  
|Basic and Diluted Loss Per Common Share (note 13)         | $ | (0.08      | ) | $ | (0.07      | )

See accompanying notes

F - 5

---

IntelGenx Technologies Corp.

Consolidated Statements of Cash FlowsFor the
Year Ended December 31, 2010 and 2009(Expressed in Thousands of U.S.
Dollars ($000) Except Share and Per Share Data)

|                                                                          |   | 2010   |   |   | 2009   |  
|------------------------------------------------------------------------- | - | ------ | - | - | ------ | -
|Funds Provided (Used) -                                                   |   |        |   |   |        |  
|Operating Activities                                                      |   |        |   |   |        |  
|Net loss                                                                  | $ | (3,096 | ) | $ | (1,940 | )
|Depreciation                                                              |   | 44     |   |   | 45     |  
|Investor
      relations services                                         |   | 14     |   |   | 38     |  
|Stock-based compensation                                                  |   | 60     |   |   | 66     |  
|Allowance
      for doubtful debts                                        |   | (110   | ) |   | 110    |  
|Accounts receivable
      write-off                                       |   | 223    |   |   | -      |  
|Modification of warrant terms                                             |   | 96     |   |   | -      |  
|Interest accretion                                                        |   | -      |   |   | 524    |  
|Debt
      conversion expense                                             |   | -      |   |   | 175    |  
|Deferred income tax                                                       |   | -      |   |   | (128   | )
|                                                                          |   | (2,769 | ) |   | (1,110 | )
|Changes in non-cash operating elements of working
      capital (note 11) |   | 189    |   |   | (478   | )
|                                                                          |   | (2,580 | ) |   | (1,588 | )
|Financing Activities                                                      |   |        |   |   |        |  
|Issue of
      common stock and warrants                                  |   | 2,465  |   |   | 3,873  |  
|Transaction costs                                                         |   | (356   | ) |   | (678   | )
|Repayment
      of shareholder loan                                       |   | -      |   |   | (88    | )
|Repayment of convertible notes                                            |   | -      |   |   | (976   | )
|                                                                          |   | 2,109  |   |   | 2,131  |  
|Investing Activities                                                      |   |        |   |   |        |  
|Additions
      to property and equipment                                 |   | (37    | ) |   | (23    | )
|Restricted cash                                                           |   | -      |   |   | 277    |  
|                                                                          |   | (37    | ) |   | 254    |  
|Increase (Decrease) in Cash and Cash Equivalents                          |   | (508   | ) |   | 797    |  
|Effect of Foreign Exchange on Cash and
      Cash Equivalents             |   | 127    |   |   | 172    |  
|Cash and Cash Equivalents                                                 |   |        |   |   |        |  
|Beginning of Year                                                         |   | 1,525  |   |   | 556    |  
|End of Year                                                               | $ | 1,144  |   | $ | 1,525  |  

See accompanying notes

F - 6

---

IntelGenx Technologies Corp.

Notes to Consolidated Financial Statements December 31,
2010 and 2009 (Expressed in U.S. Funds)

|1. | Basis of Presentation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | The Company prepares its financial statements in
      accordance with accounting principles generally accepted in the United
      States of America (USA). This basis of accounting involves the
      application of accrual accounting and consequently, revenues and gains are
      recognized when earned, and expenses and losses are recognized when
      incurred.                                                                                                                                                                                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | The consolidated financial statements include the
      accounts of the Company and its subsidiary companies. On consolidation,
      all inter-entity transactions and balances have been eliminated.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | The financial statements are expressed in U.S. funds.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | Management has performed an evaluation of the Companys
      activities through the date and time these financial statements were
      issued and concluded that there are no additional significant events
      requiring recognition or disclosure.                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|2. | Going Concern                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | The accompanying financial statements have been prepared
      assuming the Company will continue as a going concern. The Company has
      reported an accumulated deficit of $9,761 thousand (2009 - $6,665
      thousand). To date, these losses have been financed principally through
      the issuance of capital stock, long-term debt and debt from related
      parties. Additional capital and/or borrowings may be necessary in order
      for the Company to continue in existence and attain profitable operations.
      With the Company's existing working capital levels, it should be able to
      continue operations at least into the third quarter of fiscal 2011 based
      on historical factors .
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | The first product fully-developed by the Company, a
      prenatal multivitamin supplement marketed as Gesticare® in the USA, was
      commercialized in November 2008 and generated royalty income of
      approximately $228 thousand in 2010 and $277 thousand in 2009. To date,
      however, revenues for the Company have consisted primarily of research and
      development fees and have not been sufficient to sustain operations.
      Nonetheless, the Company does expect to generate significant revenues from
      sales and manufacturing royalties in future years following successful
      development and commercialization of products within its current pipeline.                                

F - 7

---

IntelGenx Technologies Corp.

Notes to Consolidated Financial Statements December 31,
2010 and 2009 (Expressed in U.S. Funds)

|2. | Going Concern (Contd)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   | The Company currently has a pipeline of 12 products under
      development. Of the products under development, CPI-300, a higher strength
      of the antidepressant bupropion HCl, the active ingredient in Wellbutrin
      XL®, formulated using the Companys proprietary controlled release
      technology, is the most advanced. The Company submitted a New Drug
      Application (NDA) (505(b)(2) for this product to the U.S. Food and Drug
      Administration (FDA) in the first quarter of 2009. Subsequently, Biovail
      Laboratories SLR (Biovail), holder of the Wellbutrin XL® patent, sued
      the Company in the U.S. District Court of Delaware for patent
      infringement. In February 2011, following the courts ruling in favor of
      IntelGenx regarding claim construction for the two patent terms at issue,
      the U.S. District Court of Delaware dismissed the litigation. Up to
      December 31, 2010 the Company expensed approximately $1 million of direct
      costs related to this litigation and expects additional costs of
      approximately $200 thousand in the first quarter of 2011. The Company
      anticipates FDA approval of CPI-300 during the second half of 2011, with
      commercialization of the product following in the fourth quarter.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   | Nonetheless, in order to achieve profitability, revenue
      streams will have to increase significantly from current levels and there
      is no assurance that revenues can increase to such a level.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   | The Company raised net cash proceeds of approximately
      $2.1 million through the issuance of common shares in the year ended
      December 31, 2010 compared to net proceeds of approximately $2.1 million
      (net of amounts used to repay convertible notes and debt) raised in the
      previous year. The Company is currently reviewing cash requirements for
      fiscal 2011 in order to determine whether further fundraising will be
      necessary.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   | The Company can give no assurances that any additional
      capital that it is able to obtain will be sufficient to meet its needs, or
      will be on terms favorable to it. If the Company is unsuccessful at
      obtaining additional financing as needed, it may be required to
      significantly curtail operations. The Company may also receive funds
      through the exercise of outstanding stock options and warrants in addition
      to funds that may be generated from pre- commercialization payments. There
      can be no assurance that such proceeds, if any, will be material.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   | Should the Company be unable to continue as a going
      concern, it may be unable to realize the carrying value of its assets and
      to meet its liabilities as they become due.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|3. | Nature of Business                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   | The Company specializes in the development of
      pharmaceutical products in co-operation with various pharmaceutical
      companies. The Company has developed three proprietary technologies and is
      currently utilizing these to develop 12 products, 4 of which are
      partnered. Of these products, 1 has successfully completed pivotal phase 1
      trials, 2 are in preparation for pivotal phase 1 trials, and 3 have
      successfully completed pilot phase 1 trials.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   | The Companys first product, a prenatal multivitamin
      supplement marketed as Gesticare® in the USA, was commercialized in
      November 2008. This product has generated approximately $0.5 million in
      royalty revenues for the Company to date.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     

F - 8

---

IntelGenx Technologies Corp.

Notes to Consolidated Financial Statements December 31,
2010 and 2009 (Expressed in U.S. Funds)

|3. | Nature of Business (Contd)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   | A NDA for the Companys second product, CPI-300, was
      submitted to the FDA in the first quarter of 2009. CPI- 300 is a higher
      strength of the antidepressant bupropion HCl, the active ingredient in
      Wellbutrin XL®, and was formulated using the Companys proprietary
      controlled release technology. FDA approval of CPI-300 is expected during
      the second half of 2011 and the product is expected to be commercialized
      in the fourth quarter.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   | The Company has a number of projects in development
      utilizing the Companys VersaFilm proprietary thin film technology, the
      most advanced of which is a product intended for the rapid relief of
      migraine. The Company entered into a co-development and commercialization
      agreement for this product with RedHill Biopharma Ltd., an Israeli
      corporation, in the third quarter of 2010. Another VersaFilm project in
      the more advanced stages of development is intended for the treatment of
      erectile dysfunction.                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|4. | Adoption of New Accounting Standards                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   | Fair Value Measurements and Disclosures                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   | On January 1, 2010, the Company adopted FASB ASU 2010-06,
      Fair Value Measurements and Disclosures (Topic 820). This Update
      provides amendments to Subtopic 820-10 and related guidance within U.S.
      GAAP to require disclosure of the transfers in and out of Levels 1 and 2
      and a schedule for Level 3 that separately identifies purchases, sales,
      issuances and settlements. It also clarifies exposing disclosures
      requirements indicating that disaggregate information regarding classes of
      assets and liabilities that make up each level and more detail regarding
      valuation techniques and inputs. This Update is effective for fiscal years
      beginning on or after December 15, 2009 except for the disclosure
      regarding Level 3 activity which is effective for fiscal years beginning
      after December 15, 2010. The adoption of ASU 2010-06 did not have a
      material effect on the Companys financial position or results of
      operations.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|5. | Summary of Significant Accounting Policies                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   | Revenue Recognition                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   | The Company recognizes revenue from research and
      development contracts as the contracted services are performed or when
      milestones are achieved, in accordance with the terms of the specific
      agreements and when collection of the payment is reasonably assured. In
      addition, the performance criteria for the achievement of milestones are
      met if substantive effort was required to achieve the milestone and the
      amount of the milestone payment appears reasonably commensurate with the
      effort expended. Amounts received in advance of the recognition criteria
      being met, if any, are included in deferred income.                                                                                                                                                                                                                                                                                                                                                     

F - 9

---

IntelGenx Technologies Corp.

Notes to Consolidated Financial Statements December 31,
2010 and 2009 (Expressed in U.S. Funds)

|5. | Summary of Significant Accounting Policies (contd)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   | The Company has license agreements that specify that
      certain royalties are earned by the Company on sales of licensed products
      in the licensed territories. Licensees usually report sales and royalty
      information in the 45 days after the end of the quarter in which the
      activity takes place and typically do not provide the Company with forward
      estimates or current-quarter information. Because the Company is not able
      to reasonably estimate the amount of royalties earned during the period in
      which these licensees actually ship products, royalty revenue is not
      recognized until the royalties are reported to the Company and the
      collection of these royalties is reasonably assured.                                                                                                                                                                                                                                        
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   | Other Income                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   | Included in other income is an amount of $329 thousand
      relating to the write-back of potential liabilities accrued in previous
      years that are no longer expected to be realized and an amount of
      approximately $45 thousand relating to the refund of investment tax
      credits for fiscal 2008 that exceeded the amount recorded as receivable.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   | Use of Estimates                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   | The preparation of financial statements in conformity
      with US GAAP requires management to make estimates and assumptions that
      affect the reported amounts of assets and liabilities, disclosure of
      contingent assets and liabilities at the date of the financial statements,
      and the reported amounts of revenues and expenses during the reporting
      period. The financial statements include estimates based on currently
      available information and management's judgment as to the outcome of
      future conditions and circumstances. Significant estimates in these
      financial statements include the useful lives and impairment of long-lived
      assets, stock-based compensation costs, the investment tax credits
      receivable, the determination of the fair value of warrants issued as part
      of fundraising activities, and the resulting impact on the allocation of
      the proceeds between the common shares and the warrants.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   | Changes in the status of certain facts or circumstances
      could result in material changes to the estimates used in the preparation
      of the financial statements and actual results could differ from the
      estimates and assumptions.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   | Financial Instruments                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   | The Company estimates the fair value of its financial
      instruments based on current interest rates, market value and pricing of
      financial instruments with comparable terms. Unless otherwise indicated,
      the carrying value of these financial instruments approximates their fair
      value.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   | Cash and Cash Equivalents                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   | Cash and cash equivalents is comprised of cash on hand
      and term deposits with original maturity dates of less than three months
      that are stated at cost, which approximates fair value.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   

F - 10

---

IntelGenx Technologies Corp.

Notes to Consolidated Financial Statements December 31,
2010 and 2009 (Expressed in U.S. Funds)

|5. | Summary of Significant Accounting Policies (Contd)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   | Accounts Receivable                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   | The Company accounts for trade receivables at original
      invoice amount less an estimate made for doubtful receivables based on a
      review of all outstanding amounts on a quarterly basis. Management
      determines the allowance for doubtful accounts by regularly evaluating
      individual customer receivables and considering a customer's financial
      condition, credit history and current economic conditions. The Company
      writes off trade receivables when they are deemed uncollectible. As part
      of the agreement to acquire full control of, and interest in, project
      INT0010, the Company agreed to write off approximately $223 thousand that
      was owed to the Company by Cynapsus Therapeutics Inc. The Company records
      recoveries of trade receivables previously written-off when they receive
      them. Management considers that no allowance for doubtful accounts is
      necessary in order to adequately cover exposure to loss in its December
      31, 2010 accounts receivable (2009 - $110 thousand).
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   | Investment Tax Credits                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   | Investment tax credits relating to qualifying
      expenditures are recognized in the accounts at the time at which the
      related expenditures are incurred and there is reasonable assurance of
      their realization. Management has made estimates and assumptions in
      determining the expenditures eligible for investment tax credits claimed.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   | Property and Equipment                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   | Property and equipment are recorded at cost. Provisions
      for depreciation are based on their estimated useful lives using the
      methods as follows:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   | On the declining balance method -                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   

| | Laboratory and office equipment | 20%
| | ------------------------------- | ---
| | Computer equipment              | 30%

On the straight-line method -

| | Leasehold improvements | over the lease term
| | ---------------------- | -------------------

Upon retirement or disposal, the cost
of the asset disposed of and the related accumulated depreciation are removed
from the accounts and any gain or loss is reflected in income. Expenditures for
repair and maintenance are expensed as incurred.

F - 11

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IntelGenx Technologies Corp.

Notes to Consolidated Financial Statements December 31,
2010 and 2009 (Expressed in U.S. Funds)

|5. | Summary of Significant Accounting Policies (Contd)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | Impairment of Long-lived Assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | Long-lived assets held and used by the Company are
      reviewed for possible impairment whenever events or changes in
      circumstances indicate the carrying amount of an asset may not be
      recoverable. Recoverability of assets to be held and used is measured by a
      comparison of the carrying amount of the assets to the estimated
      undiscounted cash flows expected to be generated by the asset. If such
      assets are considered to be impaired, the impairment to be recognized is
      measured by the amount by which the carrying amount of the asset exceeds
      the fair value thereof.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | Foreign Currency Translation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | The Company's reporting currency is the U.S. dollar. The
      Canadian dollar is the functional currency of the Company's Canadian
      operations, which is translated to the United States dollar using the
      current rate method. Under this method, accounts are translated as
      follows:                                                                                                                                                                                                                                                                                                                         

Assets and liabilities - at exchange
rates in effect at the balance sheet date;

Revenue and expenses - at average
exchange rates prevailing during the year.

Gains and losses arising from foreign
currency translation are included in other comprehensive income.

Income Taxes

The Company accounts for income taxes
in accordance with FASB ASC 740 "Income Taxes". Deferred taxes are provided on
the liability method whereby deferred tax assets are recognized for deductible
temporary differences, and deferred tax liabilities are recognized for taxable
temporary differences. Temporary differences are the differences between the
reported amounts of assets and liabilities and their tax bases. Deferred tax
assets are reduced by a valuation allowance when, in the opinion of management,
it is more likely than not that some portion or all of the deferred tax assets
will be realized. Deferred tax assets and liabilities are adjusted for the
effects of changes in tax laws and rates on the date of enactment.

Unrecognized Tax Benefits

The Company accounts for unrecognized
tax benefits in accordance with FASB ASC 740 Income Taxes. ASC 740 prescribes
a recognition threshold that a tax position is required to meet before being
recognized in the financial statements and provides guidance on de-recognition,
measurement, classification, interest and penalties, accounting in interim
periods, disclosure and transition issues. ASC 740 contains a two-step approach
to recognizing and measuring uncertain tax positions. The first step is to
evaluate the tax position for recognition by determining if the weight of
available evidence indicates that it is more likely than not that the position
will be sustained upon ultimate settlement with a taxing authority, including
resolution of related appeals or litigation processes, if any. The second step
is to measure the tax benefit as the largest amount that is more than 50% likely
of being realized upon ultimate settlement.

F - 12

---

IntelGenx Technologies Corp.

Notes to Consolidated Financial Statements December 31,
2010 and 2009 (Expressed in U.S. Funds)

|5. | Summary of Significant Accounting Policies (Contd)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   | Additionally, ASC 740 requires the Company to accrue
      interest and related penalties, if applicable, on all tax positions for
      which reserves have been established consistent with jurisdictional tax
      laws. The Company elected to classify interest and penalties related to
      the unrecognized tax benefits in the income tax provision.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   | Share-Based Payments                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   | The Company accounts for share-based payments to
      employees in accordance with the provisions of FASB ASC 718
      "CompensationStock Compensation" and accordingly recognizes in its
      financial statements share-based payments at their fair value. In
      addition, the Company will recognize in the financial statements an
      expense based on the grant date fair value of stock options granted to
      employees. The expense will be recognized on a straight-line basis over
      the vesting period and the offsetting credit will be recorded in
      additional paid-in capital. Upon exercise of options, the consideration
      paid together with the amount previously recorded as additional paid-in
      capital will be recognized as capital stock. The Company estimates its
      forfeiture rate in order to determine its compensation expense arising
      from stock-based awards. The Company uses the Black-Scholes option pricing
      model to determine the fair value of the options.                                                                                
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   | The Company measures compensation expense for its
      non-employee stock-based compensation under ASC 505-50, Accounting for
      Equity Instruments that are Issued to Other Than Employees for Acquiring,
      or in Conjunction with Selling, Goods or Services". The fair value of the
      option issued is used to measure the transaction, as this is more reliable
      than the fair value of the services received. The fair value is measured
      at the value of the Companys common stock on the date that the commitment
      for performance by the counterparty has been reached or the counterpartys
      performance is complete. The fair value of the equity instrument is
      charged directly to compensation expense and additional paid-in capital.
      For common stock issuances to non-employees that are fully vested and are
      for future periods, the Company classifies these issuances as prepaid
      expenses and expenses the prepaid expenses over the service period. At no
      time has the Company issued common stock for a period that exceeds one
      year.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   | Loss Per Share                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   | Basic loss per share is calculated based on the weighted
      average number of shares outstanding during the year. Any antidilutive
      instruments are excluded from the calculation of diluted loss per share.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   | Fair Value Measurements                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   | ASC 820 applies to all assets and liabilities that are
      being measured and reported on a fair value basis. ASC 820 requires new
      disclosure that establishes a framework for measuring fair value in US
      GAAP, and expands disclosure about fair value measurements. This statement
      enables the reader of the financial statements to assess the inputs used
      to develop those measurements by establishing a hierarchy for ranking the
      quality and reliability of the information used to determine fair values.
      The statement requires that assets and liabilities carried at fair value
      be classified and disclosed in one of the following three categories:                                                                                                                                                                                                                                                                                                                                                                                                                   

| | Level 1: | Quoted market prices in active markets for
      identical assets or liabilities.                
| | -------- | -------------------------------------------------------------------------------------------------
| | Level 2: | Observable market based inputs or unobservable
      inputs that are corroborated by market data.
| | Level 3: | Unobservable inputs that are not corroborated
      by market data.                              

F - 13

---

IntelGenx Technologies Corp.

Notes to Consolidated Financial Statements December 31,
2010 and 2009 (Expressed in U.S. Funds)

|5. | Summary of Significant Accounting Policies (Contd)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   | In determining the appropriate levels, the Company
      performs a detailed analysis of the assets and liabilities that are
      subject to ASC 820. At each reporting period, all assets and liabilities
      for which the fair value measurement is based on significant unobservable
      inputs are classified as Level 3. There are no assets or liabilities
      measured at fair value as at December 31, 2010.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   | Fair Value of Financial Instruments                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   | The fair value represents managements best estimates
      based on a range of methodologies and assumptions. The carrying value of
      receivables and payables arising in the ordinary course of business and
      the investment tax credits receivable and the convertible notes
      approximate fair value because of the relatively short period of time
      between their origination and expected realization. The loan payable,
      shareholder was presumed to have had a fair value measured by the cash
      proceeds exchanged at issuance.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   | Recent Accounting Pronouncements                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   | In October 2009, the FASB issued Update No. 2009-13,
      Revenue Recognition (Topic 605)Multiple-Deliverable Revenue Arrangements
      a consensus of the FASB Emerging Issues Task Force (ASU 2009-13). ASU
      2009-13 provides amendments to the criteria in ASC 605-25, Revenue
      Recognition  Multiple-Element Arrangements for separating consideration
      in multiple-deliverable arrangements. As a result of those amendments,
      multiple- deliverable arrangements will be separated in more circumstances
      than under existing U.S. GAAP. ASU 2009- 13: 1) establishes a selling
      price hierarchy for determining the selling price of a deliverable, 2)
      eliminates the residual method of allocation and requires that arrangement
      consideration be allocated at the inception of the arrangement to all
      deliverables using the relative selling price method, 3) requires that a
      vendor determine its best estimate of selling price in a manner that is
      consistent with that used to determine the price to sell the deliverable
      on a standalone basis, 4) significantly expands the disclosures related to
      a vendors multiple- deliverable revenue arrangements. ASU 2009-13 is
      effective prospectively for revenue arrangements entered into or
      materially modified in fiscal years beginning on or after June 15, 2010.
      The Company is currently evaluating the impact of this Statement on its
      consolidated financial statements.

F - 14

---

IntelGenx Technologies Corp.

Notes to Consolidated Financial Statements December 31,
2010 and 2009 (Expressed in U.S. Funds)

|5. | Significant Accounting Policies (Contd)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   | In April 2010, the FASB issued Update No. 2010-13,
      CompensationStock Compensation (Topic 718): Effect of Denominating the
      Exercise Price of a Share-Based Payment Award in the Currency of the
      Market in Which the Underlying Equity Security Trades. This amendment
      clarifies that a share-based payment award with an exercise price
      denominated in the currency of a market in which a substantial portion of
      the entitys equity securities trades shall not be considered to contain a
      market, performance, or service condition. Therefore, such an award is not
      to be classified as a liability if it otherwise qualifies as equity
      classification. ASU 2010-13 is effective for fiscal years, and interim
      periods within those fiscal years, beginning on or after December 15,
      2010. Earlier application is permitted. The adoption of ASU 2010-13 is not
      expected to have a material effect on the Companys financial position or
      results of operations.                                                                                                                                                                              
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   | In April 2010, the FASB issued Update No. 2010-17,
      Revenue RecognitionMilestone Method (Topic 605): Milestone Method of
      Revenue Recognition. This ASU provides guidance on defining a milestone
      under Topic 605 and determining when it may be appropriate to apply the
      milestone method of revenue recognition for research or development
      transactions. Consideration that is contingent on achievement of a
      milestone in its entirety may be recognized as revenue in the period in
      which the milestone is achieved only if the milestone is judged to meet
      certain criteria to be considered substantive. Milestones should be
      considered substantive in their entirety and may not be bifurcated. An
      arrangement may contain both substantive and nonsubstantive milestones
      that should be evaluated individually. ASU 2010-17 is effective on a
      prospective basis for milestones achieved in fiscal years, and interim
      periods within those years, beginning on or after June 15, 2010. Early
      adoption is permitted. The Company is currently evaluating the impact of
      this Statement on its consolidated financial statements.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|6. | Property and Equipment                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            

| |                                 |   |      |  |   |              |  |   | 2010         |  |   | 2009         | 
| | ------------------------------- | - | ---- |  | - | ------------ |  | - | ------------ |  | - | ------------ | 
| | In US$ thousands                |   |      |  |   | Accumulated  |  |   | Net Carrying |  |   | Net Carrying | 
| |                                 |   | Cost |  |   | Depreciation |  |   | Amount       |  |   | Amount       | 
| |                                 |   |      |  |   |              |  |   |              |  |   |              | 
| | Laboratory and office equipment | $ | 346  |  | $ | 200          |  | $ | 146          |  | $ | 136          | 
| | Computer equipment              |   | 39   |  |   | 26           |  |   | 13           |  |   | 14           | 
| | Leasehold
      improvements    |   | 63   |  |   | 63           |  |   | 0            |  |   | 9            | 
| |                                 |   |      |  |   |              |  |   |              |  |   |              | 
| |                                 | $ | 448  |  | $ | 289          |  | $ | 159          |  | $ | 159          | 

F - 15

---

IntelGenx Technologies Corp.

Notes to Consolidated Financial Statements December 31,
2010 and 2009 (Expressed in U.S. Funds)

|7. | Commitments                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | The Company entered into an agreement to lease premises
      up to August 2009 and subsequently extended the term of the lease until
      August 2010 and again until August 2011. The future minimum lease payments
      until expiry of the extended lease period are approximately $17 thousand.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | On October 1, 2009, the Company signed two new agreements
      with Little Gem Life Science Partners and SectorSpeak Inc. for investor
      relation services in the USA and in Canada, respectively. As part of the
      terms of these agreements, the Company is required to pay for a period of
      one year $4.5 thousand a month to Little Gem Life Science Partners and
      CDN$5.0 thousand (US$4.8 thousand) monthly to Sector Speak Inc. The
      agreements automatically renew unless specifically terminated.                                                                                                                                                                                                                                                                                                                                                     
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | On May 7, 2010, the Company executed a Project Transfer
      Agreement with one of its former development partners whereby the Company
      acquired full rights to, and ownership of, CPI-300, a novel, high strength
      formulation of Bupropion hydrochloride, the active ingredient in
      Wellbutrin XL®. In accordance with the Project Transfer Agreement the
      Company will be required to make a payment to its former development
      partner within 45 days after both the FDA notifies the Company of NDA
      approval for CPI-300, and all other necessary U.S. Regulatory Approvals
      for CPI-300 have been obtained. In addition, the Company will have to pay
      to its former development partner 10% of net sales royalties received, and
      3% of upfront payments received, should a distribution agreement be signed
      in the future.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|8. | Capital Stock                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          

| |                                                                 |   | 2010 |  |   | 2009 | 
| | --------------------------------------------------------------- | - | ---- |  | - | ---- | 
| | Authorized -                                                    |   |      |  |   |      | 
| | 100,000,000 common shares of $0.00001 par
      value           |   |      |  |   |      | 
| | 20,000,000 preferred shares of
      $0.00001 par value         |   |      |  |   |      | 
| | Issued -                                                        |   |      |  |   |      | 
| | 39,581,271 (December 31, 2009 - 33,081,271)
      common shares | $ | 396  |  | $ | 331  | 

On July 13, 2009, as part of a private
placement, the Company issued 10,476,000 special warrants for gross proceeds of
$3,631 thousand. Each special warrant consists of one common share and one
common share purchase warrant. Each warrant entitles the holder to purchase one
common share at an exercise price of $0.80 per common share and expires 36
months after the date of issuance. Proceeds were allocated between the common
shares and the warrants based on their relative fair value. The common shares
were recorded at a value of $2,338 thousand. (See note 9 for the portion
allocated to the warrants.)

F - 16

---

IntelGenx Technologies Corp.

Notes to Consolidated Financial Statements December 31,
2010 and 2009 (Expressed in U.S. Funds)

|8. | Capital Stock (Contd)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   | The Company paid agents a cash commission in the amount
      of $291 thousand, which is equal to 8% of the gross proceeds of the
      offering, issued the agents 419,040 common shares of the Company which is
      equal to 4% of the number of special warrants issued in the offering and
      issued agents options entitling the agents to acquire 838,080 units
      (consisting of one common share and one common share purchase warrant) at
      an exercise price of $0.80 per unit, which expire 36 months after the date
      of issuance. Each warrant included in the agents options entitles the
      holder to purchase one common share at an exercise price of $0.80 per
      common share and expires 36 months after the date of issuance of the unit.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   | In addition, the Company paid approximately $370 thousand
      in cash consideration for other transaction costs. All of the above
      transaction costs have been reflected as a reduction to the common shares
      and the warrants based on their relative fair values.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   | On July 22, 2009, as part of a private placement, the
      Company issued 350,000 units to investors for gross proceeds of $128
      thousand. Each unit consists of one common share and one common share
      purchase warrant. Each warrant entitles the holder to purchase one common
      share at an exercise price of $0.80 per common share and expires 36 months
      after the date of issuance. Proceeds were allocated between the common
      shares and the warrants based on their relative fair values. The common
      shares were recorded at a value of $81 thousand. (See note 9 for the
      portion allocated to the warrants.)                                                                                                                         
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   | In addition, the Company paid approximately $10 thousand
      in cash consideration for other transaction costs, which have been
      reflected as a reduction of the common shares and the warrants based on
      their relative fair values.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   | On September 3, 2009, as part of a private placement, the
      Company issued 250,000 units to investors for gross proceeds of $93
      thousand. Each unit consists of one common share and one common share
      purchase warrant. Each warrant entitles the holder to purchase one common
      share at an exercise price of $0.80 per common share and expires 36 months
      after the date of issuance. Proceeds were allocated between the common
      shares and the warrants based on their relative fair value. The common
      shares were recorded at a value of $59 thousand. (See note 9 for the
      portion allocated to the warrants.)                                                                                                                       
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   | In addition, the Company paid approximately $7 thousand
      in cash consideration for other transaction costs, which have been
      reflected as a reduction of the common shares and the warrants based on
      their relative fair values.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   | On August 27, 2010, as part of a private placement, the
      Company issued 6,500,000 units for gross proceeds of CAD$2.6 million
      (approximately US$2,465 thousand). Each unit consists of one common share
      and one common share purchase warrant. Each warrant entitles the holder to
      purchase one common share at an exercise price of CAD$0.50 (approximately
      US$0.47) per common share and expires 36 months after the date of
      issuance. Proceeds were allocated between the common shares and the
      warrants based on their relative fair value. The common shares were
      recorded at a value of $1,492 thousand. (See note 9 for the portion
      allocated to the warrants.)                                                           

F - 17

---

IntelGenx Technologies Corp.

Notes to Consolidated Financial Statements December 31,
2010 and 2009 (Expressed in U.S. Funds)

|8. | Capital Stock (Contd)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | The Company paid an agent a cash commission in the amount
      of CAD$208 thousand (approximately US$197 thousand), which is equal to 8%
      of the gross proceeds of the offering, a corporate finance fee of CAD$20
      thousand (approximately US$19 thousand), and issued 520,000 compensation
      options, which was equal to 8% of the number of units sold in the
      offering. Each compensation option entitles the holder to purchase one
      common share in the capital of the Company at an exercise price of
      CAD$0.50 (approximately US$0.47) per common share and expires 24 months
      after the date of issuance of the unit.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | In addition, the Company paid approximately $140 thousand
      in cash consideration for other transaction costs. All the above
      transaction costs have been reflected as a reduction to the common shares
      and the warrants based on their relative fair values.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | In the year ended December 31, 2010, no stock options
      were exercised compared to the year ended December 31, 2009 where 31,071
      stock options were exercised for 31,071 common shares having a par value
      of $Nil in aggregate, for cash consideration of $22 thousand, resulting in
      an increase in additional paid-in capital of $22 thousand.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|9. | Additional Paid-In Capital                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | Stock Options                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | In November 2006, the Company adopted the 2006 Stock
      Incentive Plan ("Plan") for the purpose of issuing both Incentive Options
      and Nonqualified Options to officers, employees, directors and eligible
      consultants of the Company. A total of 1,600,749 shares of common stock
      were reserved for issuance under this plan. Options may be granted under
      the Plan on terms and at prices as determined by the Board of Directors
      except that the options cannot be granted at less than 100%, of the fair
      market value of the common stock on the date of the grant. Each option
      will be exercisable after the period or periods specified in the option
      agreement, but no option may be exercised after the expiration of 10 years
      from the date of grant. All options granted to individuals other than non-
      employee directors will have a total vesting period of 24 months from the
      date of grant, with one quarter of the total options granted vesting and
      becoming exercisable every six months. Options granted to non-employees
      will vest and become 100% fully exercisable immediately upon grant.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | At the Annual General Meeting on September 8, 2008 the
      shareholders of the Company approved to amend the 2006 Stock Option Plan
      to increase the number of shares available for issuance under the Plan
      from 1,600,749 to 2,074,000, or 10% of the Companys issued and
      outstanding common shares as of July 28, 2008.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | A modification was made to the 2006 Stock Option Plan.
      The life of the options was reduced from 10 years to 5 years to comply
      with the regulations of the TSX-V. Accordingly, because the grant-date
      fair value of the modified options was less than the fair value of the
      original options measured immediately before the modification, no
      incremental share-based compensation expense resulted from the
      modification.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  

F - 18

---

IntelGenx Technologies Corp.

Notes to Consolidated Financial Statements December 31,
2010 and 2009 (Expressed in U.S. Funds)

|9. | Additional Paid-In Capital (Contd)                                                                                                                                                                                                                                                                                                                                                                   
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                       
|   | On March 11, 2009, the Company granted 25,000 stock
      options to an employee to purchase common shares. The stock options are
      exercisable at $0.31 per share and vest over 2 years at 25% every six
      months. The stock options were accounted for at their fair value, as
      determined by the Black-Scholes valuation model, of $4 thousand, using the
      following assumptions:

| | Expected volatility     | 100%     
| | ----------------------- | ---------
| | Expected life           | 3.1 years
| | Risk-free interest rate | 2.49%    
| | Dividend yield          | Nil      

On July 13, 2009, the Company issued
838,080 agents options exercisable into one common share at an exercise price
of $0.80 per share option, which expire on July 13, 2012. The agents options
were issued as part of the transaction costs in connection with the private
placement described in note 8. The agents options were accounted for at their
fair value, as determined by the Black-Scholes valuation model, of $161
thousand, using the assumptions below:

| | Expected volatility     | 117%   
| | ----------------------- | -------
| | Expected life           | 3 years
| | Risk-free interest rate | 1.41%  
| | Dividend yield          | Nil    

On October 3, 2009, the Company granted
50,000 stock options to Little Gem Life Science Partners as compensation for
investor relation services. The stock options are exercisable into common shares
at an exercise price of $0.55 per share option, which expire on October 3, 2012.
The stock options vest 50% on the first, and 50% on the second, anniversary of
the agreement. The stock options were accounted for at their fair value, as
determined by the Black-Scholes valuation model, of $17 thousand, using the
assumptions below:

| | Expected volatility     | 132%      
| | ----------------------- | ----------
| | Expected life           | 1.75 years
| | Risk-free interest rate | 0.71%     
| | Dividend yield          | Nil       

On November 24, 2009, the Company
granted 25,000 stock options to each of a director and to an officer to purchase
common shares. The stock options are exercisable at $0.61 per share, have a term
of 5 years and vest in equal increments over two years at 25% every six months.
The stock options were accounted for at their fair value, as determined by the
Black-Scholes valuation model, of $21 thousand, using the following assumptions:

| | Expected volatility     | 113%     
| | ----------------------- | ---------
| | Expected life           | 3.1 years
| | Risk-free interest rate | 1.22%    
| | Dividend yield          | Nil      

F - 19

---

IntelGenx Technologies Corp.

Notes to Consolidated Financial Statements December 31,
2010 and 2009 (Expressed in U.S. Funds)

|9. | Additional Paid-In Capital (Contd)                                                                                                                                                                                                                                                                                                                                                                                                       
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   | On November 24, 2009, the Company granted 75,000 stock
      options to three non-employee directors to purchase common shares. The
      stock options are exercisable at $0.61 per share and have a term of 5
      years with immediate vesting provisions. The stock options were accounted
      for at their fair value, as determined by the Black-Scholes valuation
      model, of $29 thousand, using the following assumptions:

| | Expected volatility     | 123%     
| | ----------------------- | ---------
| | Expected life           | 2.5 years
| | Risk-free interest rate | 0.98%    
| | Dividend yield          | Nil      

On January 22, 2010, the Company
granted 50,000 stock options to SectorSpeak as compensation for investor
relation services. The stock options are exercisable into common shares at an
exercise price of $0.47 per share option, which expire on January 22, 2013. The
stock options vest 50% on the first, and 50% on the second, anniversary of the
agreement. The stock options were accounted for at their fair value of $15
thousand, as determined by the Black-Scholes valuation model, using the
assumptions below:

| | Expected volatility     | 120%     
| | ----------------------- | ---------
| | Expected life           | 3.0 years
| | Risk-free interest rate | 1.39%    
| | Dividend yield          | Nil      

On May 17, 2010, the Company granted
75,000 stock options to a non-employee director to purchase common shares. The
stock options are exercisable at $0.45 per share and have a term of 5 years with
immediate vesting provisions. The stock options were accounted for at their fair
value, as determined by the Black-Scholes valuation model, of $21 thousand,
using the following assumptions:

| | Expected volatility     | 124%     
| | ----------------------- | ---------
| | Expected life           | 2.5 years
| | Risk-free interest rate | 1.05%    
| | Dividend yield          | Nil      

On May 17, 2010, the Company granted
25,000 stock options to each of 3 employees to purchase common shares. The stock
options are exercisable at $0.45 per share, vest over 2 years at 25% every six
months and expire on May 17, 2015. The stock options were accounted for at their
fair value, as determined by the Black-Scholes valuation model, of $23 thousand,
using the following assumptions:

| | Expected volatility     | 129%      
| | ----------------------- | ----------
| | Expected life           | 3.13 years
| | Risk-free interest rate | 1.30%     
| | Dividend yield          | Nil       

F - 20

---

IntelGenx Technologies Corp.

Notes to Consolidated Financial Statements December 31,
2010 and 2009 (Expressed in U.S. Funds)

|9. | Additional Paid-In Capital (Contd)                                                                                                                                                                                                                                                                                                                                                                                                                     
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   | At the Annual General Meeting on June 3, 2010, the
      Shareholders of the Company approved an amendment to the 2006 Stock Option
      Plan to increase the number of shares available for issuance under the
      Plan from 2,074,000 to 3,308,127, or 10% of the Companys issued and
      outstanding shares as of April 5, 2010.                                                                                                               
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   | On August 10, 2010, the Company granted 75,000 stock
      options to each of 2 non-employee directors to purchase common shares. The
      stock options are exercisable at $0.37 per share, vest over 2 years at 25%
      every six months and expire on August 10, 2015. The stock options were
      accounted for at their fair value, as determined by the Black-Scholes
      valuation model, of $35 thousand, using the following assumptions:

| | Expected volatility     | 118%      
| | ----------------------- | ----------
| | Expected life           | 3.13 years
| | Risk-free interest rate | 0.78%     
| | Dividend yield          | Nil       

On August 27, 2010, the Company issued
520,000 agents options exercisable into one common share at an exercise price
of CAD$0.50 (approximately $0.47) per common share, which expire on August 27,
2012. The agents options were issued as part of the transaction costs in
connection with the private placement described in note 8. The agents options
were accounted for at their fair value, as determined by the Black-Scholes
valuation model, of $117 thousand, using the assumptions below:

| | Expected volatility     | 128%   
| | ----------------------- | -------
| | Expected life           | 2 years
| | Risk-free interest rate | 0.56%  
| | Dividend yield          | Nil    

F - 21

---

IntelGenx Technologies Corp.

Notes to Consolidated Financial Statements December 31,
2010 and 2009 (Expressed in U.S. Funds)

|9. | Additional Paid-In Capital (Contd)                                                     
|-- | ----------------------------------------------------------------------------------------
|   |                                                                                         
|   | Information with respect to stock option activity for
      2009 and 2010 is as follows:

| |                                       |  |                   |   |  | Weighted average |  
| | ------------------------------------- |  | ----------------- | - |  | ---------------- | -
| |                                       |  | Number of options |   |  | exercise price   |  
| |                                       |  |                   |   |  | $                |  
| |                                       |  |                   |   |  |                  |  
| | Outstanding  January 1, 2009         |  | 1,698,676         |   |  | 0.70             |  
| |                                       |  |                   |   |  |                  |  
| | Granted                               |  | 200,000           |   |  | 0.56             |  
| | Forfeited                             |  | (200,000          | ) |  | (1.00            | )
| | Expired                               |  | (319,517          | ) |  | (0.97            | )
| | Exercised                             |  | (31,071           | ) |  | (0.70            | )
| |                                       |  |                   |   |  |                  |  
| | Outstanding 
      December 31, 2009 |  | 1,348,088         |   |  | 0.56             |  
| |                                       |  |                   |   |  |                  |  
| | Granted                               |  | 350,000           |   |  | 0.42             |  
| | Forfeited                             |  | -                 |   |  | -                |  
| | Expired                               |  | -                 |   |  | -                |  
| | Exercised                             |  | -                 |   |  | -                |  
| |                                       |  |                   |   |  |                  |  
| | Outstanding  December 31, 2010       |  | 1,698,088         |   |  | 0.53             |  

F - 22

---

IntelGenx Technologies Corp.

Notes to Consolidated Financial Statements December 31,
2010 and 2009 (Expressed in U.S. Funds)

|9. | Additional Paid-In Capital (Contd)                                               
|-- | ----------------------------------------------------------------------------------
|   |                                                                                   
|   | Details of stock options outstanding as at December 31,
      2010 are as follows:

Outstanding options
    
    
    Exercisable optionsWeighted
    
    
    
    
    
    
    
    
    WeightedWeighted average
    
    
    average
    
    
    
    
    
    
    
    
    averageExercise
    
    Number of
    
    
    remaining
    
    
    exercise
    
    
    Aggregate
    
    
    Number of
    
    
    exercise
    
    
    Aggregateprices
    
    options
    
    
    contractual life
    
    
    price
    
    
    intrinsic
    
    
    options
    
    
    price
    
    
    intrinsic$
    
    
    
    
    (years)
    
    
    $
    
    
    value $
    
    
    
    
    
    $
    
    
    value $0.31
    
    25,000
    
    
    3.25
    
    
    0.31
    
    
    
    
    
    18,750
    
    
    0.310.37
    
    150,000
    
    
    4.67
    
    
    0.370.41
    
    800,000
    
    
    0.88
    
    
    0.41
    
    
    
    
    
    800,000
    
    
    0.410.45-0.47
    
    200,000
    
    
    4.33
    
    
    0.46
    
    
    
    
    
    106,250
    
    
    0.460.55-0.61
    
    175,000
    
    
    3.87
    
    
    0.59
    
    
    
    
    
    150,000
    
    
    0.590.70-0.85
    
    240,588
    
    
    2.60
    
    
    0.83
    
    
    
    
    
    240,588
    
    
    0.831.15
    
    107,500
    
    
    1.58
    
    
    1.15
    
    
    
    
    
    107,500
    
    
    1.151,698,088
    
    
    2.25
    
    
    0.53
    
    
    1,000
    
    
    1,423,088
    
    
    0.56
    
    
    750


Stock-based compensation expense
recognized in 2010 in regards to the stock options was $74 thousand (2009 - $104
thousand). As of December 31, 2010, total unrecognized compensation expense
related to unvested stock options was $68 thousand (2009 - $50 thousand). This
amount is expected to be recognized as an expense over a period of two years. A
change in control of the Company due to acquisition would cause the vesting of
these stock options to accelerate and would result in this amount being charged
to stock-based compensation expense.

Warrants

On July 13, 2009 the Company issued
10,476,000 stock purchase warrants exercisable into common shares at $0.80 per
share which expire on July 13, 2012. The stock purchase warrants were issued in
connection with the July 13, 2009 private placement described in note 9. The
stock purchase warrants were valued at $1,294 thousand based on their relative
fair value, as determined by the Black-Scholes valuation model using the
assumptions below:

| | Expected volatility     | 117%   
| | ----------------------- | -------
| | Expected life           | 3 years
| | Risk-free interest rate | 1.41%  
| | Dividend yield          | Nil    

F - 23

---

IntelGenx Technologies Corp.

Notes to Consolidated Financial Statements December 31,
2010 and 2009 (Expressed in U.S. Funds)

9.

Additional
Paid-In Capital (Contd)

On July 22, 2009 the Company issued
350,000 stock purchase warrants exercisable into common shares at $0.80 per
share which expire on July 22, 2012. The stock purchase warrants were issued in
connection with the July 22, 2009 private placement described in note 9. The
stock purchase warrants were valued at $46 thousand based on their relative fair
value, as determined by the Black-Scholes valuation model using the assumptions
below:

| | Expected volatility     | 117%   
| | ----------------------- | -------
| | Expected life           | 3 years
| | Risk-free interest rate | 1.50%  
| | Dividend yield          | Nil    

On September 3, 2009 the Company issued
250,000 stock purchase warrants exercisable into common shares at $0.80 per
share which expire on September 3, 2012. The stock purchase warrants were issued
in connection with the September 3, 2009 private placement described in note 9.
The stock purchase warrants were valued at $34 thousand based on their relative
fair value, as determined by the Black-Scholes valuation model using the
assumptions below:

| | Expected volatility     | 117%   
| | ----------------------- | -------
| | Expected life           | 3 years
| | Risk-free interest rate | 1.42%  
| | Dividend yield          | Nil    

On July 28, 2010, the Company restated
the exercise price of the warrants issued with respect to the convertible notes
transaction on May 22, 2007 from $0.80 to $0.48. The exercise price of these
warrants had previously been restated from their original exercise price of
$1.02 to $0.80 on March 19, 2008. Each of these modifications was treated as an
exchange of the original warrant for a new warrant in accordance to FASB ASC 718
Compensation-Stock Compensation. The July 28, 2010 restatement resulted in an
increase in fair value of the warrants of approximately $96 thousand. This
increase was recorded as an additional compensation expense and a corresponding
increase in additional paid-up capital.

The expiry provision of the Warrants
has also been amended such that the expiration date of the Warrants will be
accelerated if the Company's common shares trade at, or above, $0.625 for a
period of 60 consecutive trading days. The trading price for purposes of this
amendment will be calculated by using the average of the closing prices on the
Toronto Venture Exchange and the OTCBB. If the Company's shares trade above
$0.625 for a period of 60 consecutive trading days, warrant holders will then
have 30 calendar days to exercise the Warrants they hold, after which time such
Warrants shall expire.

F - 24

---

IntelGenx Technologies Corp.

Notes to Consolidated Financial Statements December 31,
2010 and 2009 (Expressed in U.S. Funds)

|9. | Additional Paid-In Capital (Contd)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   | On August 27, 2010 the Company issued 6,500,000 stock
      purchase warrants exercisable into common shares at CAD$0.50
      (approximately US$0.47) per share which expire on August 27, 2013. The
      stock purchase warrants were issued in connection with the August 27, 2010
      private placement described in note 9. The stock purchase warrants were
      valued at $973 thousand based on their relative fair value, as determined
      by the Black-Scholes valuation model using the assumptions below:

| | Expected volatility     | 116%   
| | ----------------------- | -------
| | Expected life           | 3 years
| | Risk-free interest rate | 0.83%  
| | Dividend yield          | Nil    

As at December 31, 2010, no additional
stock purchase warrants had been exercised.

Information with respect to warrant
activity for 2009 and 2010 is as follows:

| |                                                |  | Number of  |   |  | Weighted average |  
| | ---------------------------------------------- |  | ---------- | - |  | ---------------- | -
| |                                                |  | warrants   |   |  | exercise price   |  
| |                                                |  |            |   |  | $                |  
| |                                                |  |            |   |  |                  |  
| | Outstanding  January 1, 2009                  |  | 6,678,223  |   |  | 0.95             |  
| |                                                |  |            |   |  |                  |  
| | Attached to private placements                 |  | 11,076,000 |   |  | 0.80             |  
| | Issued to agents                               |  | 838,080    |   |  | 0.80             |  
| |                                                |  |            |   |  |                  |  
| | Outstanding -
      December 31, 2009          |  | 18,592,303 |   |  | 0.85             |  
| |                                                |  |            |   |  |                  |  
| | Attached to private placement                  |  | 6,500,000  |   |  | 0.47             |  
| | Issued to agent                                |  | 520,000    |   |  | 0.47             |  
| | Re-pricing - Cancellation of original warrants |  | (2,142,857 | ) |  | (0.80            | )
| | Re-Issue
      of Warrants                     |  | 2,142,857  |   |  | 0.48             |  
| | Expired                                        |  | (4,321,080 | ) |  | (1.02            | )
| |                                                |  |            |   |  |                  |  
| | Outstanding -
      December 31, 2010          |  | 21,291,223 |   |  | 0.66             |  

F - 25

---

IntelGenx Technologies Corp.

Notes to Consolidated Financial Statements December 31,
2010 and 2009 (Expressed in U.S. Funds)

|10. | Income Taxes                                                                                                                      
|--- | ----------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                   
|    | Income taxes reported differ from the amount computed by
      applying the statutory rates to losses. The reasons are as follows:

| |                                                                         |   | 2010 |   |   | 2009 |  
| | ----------------------------------------------------------------------- | - | ---- | - | - | ---- | -
| | Statutory income taxes                                                  | $ | (963 | ) | $ | (692 | )
| | Net operating losses for which no tax benefits have been
      recorded |   | 761  |   |   | 265  |  
| | Excess of depreciation over capital cost
      allowance                |   | (1   | ) |   | 15   |  
| | Non-deductible expenses                                                 |   | 21   |   |   | 213  |  
| | Undeducted research and development
      expenses                      |   | 246  |   |   | 297  |  
| | Tax deductible portion of transaction costs                             |   | (37  | ) |   | (36  | )
| | Investment tax credit                                                   |   | (57  | ) |   | (62  | )
| | Modification of warrants terms                                          |   | 30   |   |   | -    |  
| | Amortization of convertible debt discount                               |   | -    |   |   | (130 | )
| |                                                                         |   |      |   |   |      |  
| |                                                                         | $ | -    |   | $ | (130 | )

The major components of the deferred
tax assets classified by the source of temporary differences are as follows:

| |                                                    |   | 2010   |   |   | 2009   |  
| | -------------------------------------------------- | - | ------ | - | - | ------ | -
| | Property and equipment                             | $ | (5     | ) | $ | (18    | )
| | Net operating losses carryforward                  |   | 1,088  |   |   | 672    |  
| | Undeducted research and development
      expenses |   | 578    |   |   | 431    |  
| | Non-refundable tax credits carryforward            |   | 616    |   |   | 409    |  
| | Transaction costs to be deducted in future years   |   | -      |   |   | 36     |  
| |                                                    |   |        |   |   |        |  
| |                                                    |   | 2,277  |   |   | 1,530  |  
| |                                                    |   |        |   |   |        |  
| | Valuation allowance                                |   | (2,277 | ) |   | (1,530 | )
| |                                                    |   |        |   |   |        |  
| |                                                    | $ | -      |   | $ | -      |  

The valuation allowance at December 31,
2009 was $1,530 thousand. The net change in the valuation allowance during the
period ended December 31, 2010, was an increase of $747 thousand. In assessing
the realizability of deferred tax assets, management considers whether it is
more likely than not that some portion or all of the deferred income tax assets
will not be realized. The ultimate realization of deferred income tax assets is
dependent upon the generation of future taxable income during the periods in
which those temporary differences become deductible. Management considers the
scheduled reversal of deferred income tax liabilities, projected future taxable
income, and tax planning strategies in making this assessment. Based on
consideration of these items, management has determined that enough uncertainty
exists relative to the realization of the deferred income tax asset balances to
warrant the application of a full valuation allowance as of December 31, 2010.

F - 26

---

IntelGenx Technologies Corp.

Notes to Consolidated Financial Statements December 31,
2010 and 2009 (Expressed in U.S. Funds)

|10. | Income Taxes (Contd)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    | There were Canadian and provincial net operating losses
      of approximately $5,730 thousand (2009 - $3,505 thousand) and $4,788
      thousand (2009 - $3,380 thousand) respectively, that may be applied
      against earnings of future years. Utilization of the net operating losses
      is subject to significant limitations imposed by the change in control
      provisions. A portion of the net operating losses may expire before they
      can be utilized.                                                                                                                                                                    
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    | As at December 31, 2010, the Company had non-refundable
      tax credits of $616 thousand (2009 -$430 thousand) of which $24 thousand
      is expiring in 2017, $213 thousand is expiring in 2018, $193 thousand is
      expiring in 2019 and $186 thousand is expiring in 2020 and undeducted
      research and development expenses of $2,958 thousand (2009 - $2,235
      thousand) with no expiration date.                                                                                                                                                                                                                               
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    | The deferred tax benefit of these items was not
      recognized in the accounts.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    | Unrecognized Tax Benefits                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    | The Company does not expect its unrecognized tax benefits
      to change significantly over the next twelve months.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    | Tax Years and Examination                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    | The Company files tax returns in each jurisdiction in
      which it is registered to do business. For each jurisdiction a statute of
      limitations period exists. After a statute of limitations period expires,
      the respective tax authorities may no longer assess additional income tax
      for the expired period. Similarly, the Company is no longer eligible to
      file claims for refund for any tax that it may have overpaid. The
      following table summarizes the Companys major tax jurisdictions and the
      tax years that remain subject to examination by these jurisdictions as of
      December 31, 2010:

| | Tax
      Jurisdictions |  | Tax Years      
| | ----------------------- |  | ---------------
| | Federal - Canada        |  | 2006 and onward
| | Provincial - Quebec     |  | 2006 and onward

|11. | Statement of Cash Flows Information
|--- | -----------------------------------

| | In US$
      thousands                                    |   | 2010 |   |   | 2009 |  
| | --------------------------------------------------------- | - | ---- | - | - | ---- | -
| | Accounts receivable                                       | $ | 227  |   | $ | (411 | )
| | Prepaid expenses                                          |   | 2    |   |   | (3   | )
| | Investment tax credits receivable                         |   | 315  |   |   | (243 | )
| | Accounts payable
      and accrued liabilities            |   | (355 | ) |   | 179  |  
| | Changes in non-cash operating elements of working capital | $ | 189  |   | $ | (478 | )
| | Additional Cash Flow Information:                         |   |      |   |   |      |  
| | Interest paid                                             | $ | 2    |   | $ | 69   |  

F - 27

---

IntelGenx Technologies Corp.

Notes to Consolidated Financial Statements December 31,
2010 and 2009 (Expressed in U.S. Funds)

|12. | Related Party Transactions                                                                                                                                                                                                                                                                                                                                                                                                  
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                             
|    | During the year, the Company incurred expenses of
      approximately $13 thousand (2009 - $18 thousand) for laboratory equipment
      leased from a shareholder, who is also an officer of the Company. The
      lease agreement covering the equipment expired on August 31, 2010 and the
      Company purchased the equipment from a shareholder for a consideration of
      approximately $19 thousand in aggregate.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                             
|    | Included in management salaries are $18 thousand (2009 -
      $20 thousand) for options granted to the Chief Financial Officer and $5
      thousand (2009 - $Nil) for options granted to the Chief Executive Officer
      under the 2006 Stock Option Plan and $28 thousand (2009 - $29 thousand)
      for options granted to non-employee directors.                                                                   
|    |                                                                                                                                                                                                                                                                                                                                                                                                                             
|    | Included in general and administrative expenses are
      director fees of $90 thousand (2009 - $28 thousand) for attendance to
      board meetings and audit committee meetings.                                                                                                                                                                                                                                          
|    |                                                                                                                                                                                                                                                                                                                                                                                                                             
|    | Included in accounts payable and accrued liabilities is
      approximately $1 thousand (2009 - $12 thousand) payable to shareholders,
      who are also officers of the Company.                                                                                                                                                                                                                                          
|    |                                                                                                                                                                                                                                                                                                                                                                                                                             
|    | The above related party transactions have been measured
      at the exchange amount which is the amount of the consideration
      established and agreed upon by the related parties.                                                                                                                                                                                                                                     
|    |                                                                                                                                                                                                                                                                                                                                                                                                                             
|13. | Basic and Diluted Loss Per Common Share                                                                                                                                                                                                                                                                                                                                                                                     
|    |                                                                                                                                                                                                                                                                                                                                                                                                                             
|    | Basic and diluted loss per common share is calculated
      based on the weighted average number of shares outstanding during the
      period. The warrants, share-based compensation and convertible notes have
      been excluded from the calculation of diluted loss per share since they
      are anti-dilutive.                                                                                                    
|    |                                                                                                                                                                                                                                                                                                                                                                                                                             
|14. | Subsequent Events                                                                                                                                                                                                                                                                                                                                                                                                           
|    |                                                                                                                                                                                                                                                                                                                                                                                                                             
|    | On March 4, 2011, 227,625 agents options were exercised
      into common shares of the Company for gross proceeds of approximately $114
      thousand.                                                                                                                                                                                                                                                                   

F - 28

---