UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

| |  | 
| |  | 

FORM 10-K/A



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

For the fiscal year ended December 31, 2017



Commission file number001-37437

| |  | 
| |  | 



XBIOTECH INC.

(Exact name of Registrant as specified in its charter)



|British Columbia, Canada                                       | N/A                              
|-------------------------------------------------------------- | ---------------------------------
|(State or other jurisdiction of incorporation or organization) | (IRS Employer Identification No.)



8201 E. Riverside Drive, Bldg. 4, Suite 100

Austin TX 78744

(Address of principal executive offices, including zip code)



Telephone Number (512) 386-2900

(Registrant's telephone number, including area code)

| |  | 
| |  | 



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

|Title of each class                       | Name of each exchange on which registered
|----------------------------------------- | -----------------------------------------
|Common Stock, par value $0.0001 per share | NASDAQ Global Market                     

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

None

| |  | 
| |  | 



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

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  ý

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  ý    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  ý    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.  ý

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.










|Large accelerated filer ☐ |  | Accelerated filer ý |  | Non-accelerated filer ☐ |  | Smaller Reporting Company ☐
|------------------------- |  | ------------------- |  | ----------------------- |  | ---------------------------
|                          |  |                     |  |                         |  | Emerging growth company ý  



If an emerging growth company, indicate by check mark if the registrant has elected not
to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to
Section 13(a) of the Exchange Act.  ̈



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



The aggregate market value of the voting and non-voting common equity held by non-affiliates
of the registrant as of December 31, 2017, was approximately $139,630,732, based upon the closing sales price for the registrant’s
common stock, as reported on the NASDAQ Global Market. The calculation of the aggregate market value of voting and non-voting common
equity excludes 10,387,160 shares of common stock the registrant held by executive officers, directors and shareholders that the
registrant concluded were affiliates of the registrant on that date. Exclusion of such shares should not be construed to indicate
that any such person possesses the power, direct or indirect, to direct or cause the direction of management or policies of the
registrant or that such person is controlled by or under common control with the registrant.



As of March 15, 2018, 35,439,272 shares of the registrant’s Common Stock were
outstanding.















2





EXPLANATORY NOTE



This Amendment No. 2  on Form 10-K/A ("Amendment") to
the Annual Report on Form 10-K of XBiotech Inc. (the "Company") for the fiscal year ended December 31, 2017 (the
"Form 10-K"), originally filed with the Securities and Exchange Commission (the "SEC") on March 16, 2018,
is being filed for the sole purpose of including language from the introductory portion of paragraph 4 as well as paragraph
4(b) of the Section 302 certification regarding the Company's internal control over financial reporting.



Other than as expressly set forth above, no changes have been made
in this Amendment to amend, modify or restate any other information or disclosures presented in the Form 10-K. This Amendment does
not reflect events occurring after the original filing of the Form 10-K. As a result, the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 2017 continues to speak as of March 16, 2018. This Amendment should be read in conjunction
with the Company's Form 10-K and other Company filings made with the SEC.

























3







| | ITEM 8. | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
| | ------- | -------------------------------------------



Index to Financial Statements







|Report of Independent Registered Public Accounting Firm | 5 
|------------------------------------------------------- | --
|Consolidated Balance Sheets                             | 6 
|Consolidated Statements of Operations                   | 7 
|Consolidated Statements of Comprehensive Loss           | 8 
|Consolidated Statements of Shareholders’ Equity         | 9 
|Consolidated Statements of Cash Flows                   | 10
|Notes to Consolidated Financial Statements              | 11



























4





Report of Independent Registered Public Accounting Firm



To the Shareholders and the Board of Directors of XBiotech Inc.



Opinion on the Financial Statements



We have audited the accompanying consolidated balance sheets of XBiotech Inc. (the Company)
as of December 31, 2017 and 2016, the related consolidated statements of operations, comprehensive loss, shareholders' equity and
cash flows for each of the three years in the period ended December 31, 2017, and the related notes (collectively referred to as
the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in
all material respects, the financial position of the Company at December 31, 2017 and 2016, and the results of its operations and
its cash flows for each of the three years in the period ended December 31, 2017, in conformity with U.S. generally accepted accounting
principles.



Basis for Opinion



These financial statements are the responsibility of the Company's management. Our responsibility
is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered
with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the
Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange
Commission and the PCAOB.



We conducted our audits in accordance with the standards of the PCAOB. Those standards
require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its
internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control
over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control
over financial reporting. Accordingly, we express no such opinion.



Our audits included performing procedures to assess the risks of material misstatement
of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures
included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also
included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall
presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.







/s/ Ernst & Young LLP

We have served as the Company’s auditor since 2005.

Houston, Texas

March 16, 2018



5







XBiotech Inc.



Consolidated Balance Sheets

(in thousands, except share data)



December 31, 2017
    December 31, 2016AssetsCurrent assets:Cash and cash equivalents
    $31,768
    $34,324Prepaid expenses and other current assets
    1,564
    2,606Total current assets
    33,332
    36,930Property and equipment, net
    29,640
    10,142Building construction in progress
    -
    19,978Total assets
    $62,972
    $67,050Liabilities and shareholders’ equityCurrent liabilities:Accounts payable
    $1,730
    $4,431Accrued expenses
    1,062
    3,532Total current liabilities
    2,792
    7,963Long-term liabilities:Deferred rent
    18
    23Total liabilities
    2,810
    7,986Shareholders’ equity:Preferred Stock, no par value, unlimited shares authorized, no shares outstanding
    -
    -Common stock, no par value, unlimited shares authorized, 35,439,272 and 32,627,691 shares outstanding at December 31, 2017 and December 31, 2016, respectively
    277,492
    242,419Accumulated other comprehensive loss
    (768)
    57Accumulated deficit
    (216,562)
    (183,412)Total shareholders’ equity
    60,162
    59,064Total liabilities and shareholders’ equity
    $62,972
    $67,050




See accompanying notes.





6





XBiotech Inc.



Consolidated Statements of Operations

(in thousands, except share and per share data)



Year Ended December 31,2017
    2016
    2015Operating expenses:Research and development
    $26,424
    $42,486
    $31,310General and administrative
    7,635
    10,277
    6,200Total operating expenses
    34,059
    52,763
    37,510Loss from operations
    (34,059)
    (52,763)
    (37,510)Other income (loss):Interest income
    354
    49
    -Other income
    -
    -
    21Foreign exchange gain (loss)
    555
    (47)
    6Total other income (loss)
    909
    2
    27Net loss
    $(33,150)
    $(52,761)
    $(37,483)Net loss per share—basic and diluted
    $(0.95)
    $(1.63)
    $(1.22)Shares used to compute basic and diluted net loss per share
    34,875,814
    32,403,391
    30,801,994




See accompanying notes.





7





XBiotech Inc.



Consolidated Statements of Comprehensive Loss

(in thousands)







Year Ended December 31,2017
    2016
    2015Net loss
    $(33,150)
    $(52,761)
    $(37,483)Foreign currency translation adjustment
    (825)
    258
    (48)Comprehensive loss
    $(33,975)
    $(52,503)
    $(37,531)










See accompanying notes.











8





XBiotech Inc.



Consolidated Statements of Shareholders' Equity

(in thousands)



Number of Shares
    Common Stock Amount
    Accumulated Other Comprehensive Income (Loss)
    Accumulated Deficit
    TotalBalance at January 1, 2015
    27,547
    152,351
    (153)
    (93,168)
    59,030Net loss
    -
    -
    -
    (37,483)
    (37,483)Foreign currency translation adjustment
    -
    -
    (48)
    -
    (48)Issuance of common stock, net of issuance cost
    4,373
    75,386
    -
    -
    75,386Issuance of common stock under stock option plan
    359
    1,348
    -
    -
    1,348Stock subscription receivable
    -
    410
    -
    -
    410Share-based compensation expense
    -
    4,407
    -
    -
    4,407Balance at December 31, 2015
    32,279
    233,902
    (201)
    (130,651)
    103,050Net loss
    -
    -
    -
    (52,761)
    (52,761)Foreign currency translation adjustment
    -
    -
    258
    -
    258Issuance of common stock, net of issuance cost
    145
    1,808
    -
    -
    1,808Issuance of common stock under stock option plan
    204
    1,136
    -
    -
    1,136Share-based compensation expense
    -
    5,573
    -
    -
    5,573Balance at December 31, 2016
    32,628
    $242,419
    $57
    $(183,412)
    $59,064Net loss
    -
    -
    -
    (33,150)
    (33,150)Foreign currency translation adjustment
    -
    -
    (825)
    -
    (825)Issuance of common stock, net of issuance cost
    2,521
    32,620
    -
    -
    32,620Issuance of common stock under stock option plan
    290
    818
    -
    -
    818Share-based compensation expense
    -
    1,635
    -
    -
    1,635Balance at December 31, 2017
    35,439
    $277,492
    $(768)
    $(216,562)
    $60,162




See accompanying notes.









9





XBiotech Inc.



Consolidated Statements of Cash Flows

(in thousands)



Year Ended December 31,2017
    2016
    2015Operating activitiesNet loss
    $(33,150)
    $(52,761)
    $(37,483)Adjustments to reconcile net loss to net cash used in operating activities:Depreciation
    1,484
    698
    699Share-based compensation expense
    1,750
    5,573
    4,407Gain on disposal of property and equipment
    -
    -
    (157)Other non-cash adjustments
    401
    -
    -Changes in operating assets and liabilities:Prepaid expenses and other current
    1,041
    (617)
    (1,579)Accounts payable
    (2,700)
    (981)
    840Accrued expenses
    (2,470)
    2,066
    (52)Deferred rent
    (5)
    7
    17Net cash used in operating activities
    (33,649)
    (46,015)
    (33,308)Investing activitiesPurchase of property and equipment
    (1,405)
    (4,746)
    (2,322)Expenditures on building construction
    -
    (9,168)
    (8,070)Net cash used in investing activities
    (1,405)
    (13,914)
    (10,392)Financing activitiesIssuance of common stock and warrants, net
    32,620
    1,808
    75,712Issuance of common stock under stock option plan
    703
    1,136
    1,348Collection of subscription receivable
    -
    -
    410Net cash provided by financing activities
    33,323
    2,944
    77,470Effect of foreign exchange rate on cash and cash equivalents
    (825)
    258
    (48)Net change in cash and cash equivalents
    (2,556)
    (56,727)
    33,722Cash and cash equivalents, beginning of period
    34,324
    91,051
    57,329Cash and cash equivalents, end of period
    $31,768
    $34,324
    $91,051Supplemental Information:Accrued purchases of property and equipment
    $-
    $148
    $940Accrued expenditures on building construction
    -
    439
    1,416




See accompanying notes.





10





XBiotech Inc.



Notes to Consolidated Financial Statements





1. Organization  XBiotech Inc. (XBiotech or the Company) was incorporated in Canada
on March 22, 2005. XBiotech USA, Inc., a wholly-owned subsidiary of the Company, was incorporated in Delaware, United States
in November 2007. XBiotech Switzerland AG, a wholly-owned subsidiary of the Company, was incorporated in Zug, Switzerland
in August 2010. XBiotech Japan K.K., a wholly-owned subsidiary of the Company, was incorporated in Tokyo, Japan in March 2013.
XBiotech Germany GmbH, a wholly-owned subsidiary of the Company, was incorporated in Germany in January 2014. The Company’s
headquarters are located in Austin, Texas.  Since its inception, XBiotech has focused on advancing technology
to rapidly identify and clone antibodies from individuals that have resistance to disease. At the heart of the Company is a proprietary
technical knowhow to translate natural human immunity into therapeutic product candidates.  In 2005, the Company began to develop a new framework for commercial
manufacturing, using technology that required less capital, fewer operators and provided greater flexibility than standard industry
practices.  With the manufacturing capability to produce its True HumanTM
antibody therapy, in 2010, the Company began a clinical trial program. The first clinical trial program at MD Anderson Cancer Center
began treating the sickest cancer patients irrespective of tumor type. Soon thereafter, the Company used the same antibody therapy
in various clinical studies at treatment centers around the United States (U.S.) and abroad to investigate the antibody effect
in patients that had vascular disease, leukemia, type 2 diabetes, psoriasis or acne.  The Company continues to be subject to a number of risks common to
companies in similar stages of development. Principal among these risks are the uncertainties of technological innovations, dependence
on key individuals, development of the same or similar technological innovations by the Company’s competitors and protection
of proprietary technology. The Company’s ability to fund its planned clinical operations, including completion of its planned
trials, is expected to depend on the amount and timing of cash receipts from future collaboration or product sales and/or financing
transactions. The Company believes that its cash and cash equivalents of $31.8 million at December 31, 2017, will enable the
Company to achieve several major inflection points, including potential new clinical studies with our lead product candidate. We
expect to have sufficient cash through one year from the report issuance date.








2. Significant Accounting Policies  Basis of Presentation  These consolidated financial statements have been prepared in conformity
with accounting principles generally accepted in the United States (US GAAP).  Basis of Consolidation  The consolidated financial statements include the accounts of the
Company and its wholly-owned subsidiaries. All significant intercompany transactions have been eliminated upon consolidation.  Use of Estimates  The preparation of financial statements in accordance with accounting
principles generally accepted in the U.S. requires management to make estimates and assumptions that affect the reported values
of amounts in the financial statements and accompanying notes. Actual results could differ from those estimates.


11





Prior to its initial public offering on April 15, 2015, the Company
utilized significant estimates and assumptions in determining the fair value of its common stock. The board of directors determined
the estimated fair value of the Company’s common stock based on a number of objective and subjective factors, including the
prices at which the Company sold shares of its common stock to third parties and external market conditions affecting the biotechnology
industry sector. After the initial public offering, the fair market value is calculated by using the closing price of the Company’s
common stock as reported by NASDAQ.  Research and Development Costs  All research and development costs are charged to expense as incurred.
Research and development costs include salaries and personnel-related costs, consulting fees, fees paid for contract clinical trial
research services, the costs of laboratory consumables, equipment and facilities, license fees and other external costs. Costs
incurred to acquire licenses for intellectual property to be used in research and development activities with no alternative future
use are expensed as incurred as research and development costs.  Nonrefundable advance payments for goods or services to be received
in the future for use in research and development activities are deferred and capitalized. The capitalized amounts are expensed
as the related goods are delivered or the services are performed.  Income Taxes  The Company makes estimates and judgments in determining the need
for a provision for income taxes, including the estimation of its taxable income or loss for the full fiscal year. The Company
has accumulated significant deferred tax assets that reflect the tax effects of net operating losses and tax credit carryovers
and temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts
used for income tax purposes. Realization of certain deferred tax assets is dependent upon future earnings. The Company is uncertain
about the timing and amount of any future earnings. Accordingly, the Company offsets these deferred tax assets with a valuation
allowance. The Company may in the future determine that certain deferred tax assets will likely be realized, in which case the
Company will reduce its valuation allowance in the period in which such determination is made. If the valuation allowance is reduced,
the Company may recognize a benefit from income taxes in its statement of operations in that period.  The GAAP guidance requires recognition of the impact of a tax position
in our financial statements only if that position is more likely than not to be sustained upon examination by taxing authorities,
based on the technical merits of the position. Any interest and penalties related to uncertain tax positions will be reflected
in income tax expense. Determining the consolidated provision for income taxes involves judgments, estimates and the application
of complex tax regulations. We are required to provide for income taxes in each of the jurisdictions where we operate, including
estimated liabilities for uncertain tax positions. Although we believe that we have provided adequate liabilities for uncertain
tax positions, the actual liability resulting from examinations by taxing authorities could differ from the recorded income tax
liabilities and could result in additional income tax expense having a material impact on our consolidated results of operations.
Changes of estimates in our income tax liabilities are reflected in our income tax provision in the period in which the factors
resulting in the change to our estimate become known to us.  We benefit from the tax credit incentives under the U.S. research
and experimentation tax credit extended to taxpayers engaged in qualified research and experimental activities while carrying on
a trade or business.  Share-Based Compensation  The Company accounts for its share-based compensation awards in accordance
with ASC Topic 718, Compensation-Stock Compensation (“ASC 718”). ASC 718, which requires all share-based payments
to employees, including grants of employee stock options, to be recognized in the statements of operations based on their grant
date fair values. For stock options granted to employees and to members of the board of directors for their services on the board
of directors, the Company estimates the grant date fair value of each option award using the Black-Scholes option-pricing model.
The use of the Black-Scholes option-pricing model requires management to make assumptions with respect to the expected term of
the option, the expected volatility of the common stock consistent with the expected life of the option, risk-free interest rates
and expected dividend yields of the common stock. For awards subject to service-based vesting conditions, the Company recognizes
share-based compensation expense, equal to the grant date fair value of stock options on a straight-line basis over the requisite
service period. The Company accounts for forfeitures as they occur rather than on an estimated basis.


12





Share-based compensation expense recognized for the years ended December
31, 2017, 2016 and 2015 was included in the following line items on the Consolidated Statements of Operations (in thousands).   Year Ended December 31,2017
    2016
    2015Research and development
    $413
    $2,095
    $2,204General and administrative
    2,063
    3,478
    2,203Total share-based compensation expense
    $2,476
    $5,573
    $4,407
  No related tax benefits were recognized for the years ended December
31, 2017, 2016 and 2015.  The fair value of each option is estimated on the date of grant using
the Black-Scholes method with the following assumptions:  Year Ended December  31,2017
    2016
    2015Weighted-average grant date fair value per share
    
    $4.85
    
    
    $7.29
    
    
    $17.95Expected volatility
    65%
    -
    67%
    65%
    -
    70%
    66%
    -
    71%Risk-free interest rate
    1.83%
    -
    2.41%
    1.09%
    -
    2.44%
    1.07%
    -
    2.42%Expected life (in years)
    5.38
    -
    10
    5
    -
    10
    3
    -
    10Dividend yield
    
    -
    
    
    -
    
    
    -
  Due to the adoption of ASU No. 2016-09, “Stock Compensation,” the Company accounts for forfeitures
as they occur rather than on an estimated basis.  Cash and Cash Equivalents  The Company considers highly liquid investments with a maturity of
90 days or less when purchased to be cash equivalents. Cash and cash equivalents consisted primarily of cash on deposit in U.S.,
German, Swiss and Canadian banks. Cash and cash equivalents are stated at cost which approximates fair value.  Concentrations of Credit Risk  Financial instruments that potentially subject the Company to credit
risk consist primarily of cash and cash equivalents. The Company holds these investments in highly-rated financial institutions,
and limits the amounts of credit exposure to any one financial institution. These amounts at times may exceed federally insured
limits. The Company has not experienced any credit losses in such accounts and does not believe it is exposed to any significant
credit risk on these funds. The Company has no off-balance sheet concentrations of credit risk, such as foreign currency exchange
contracts, option contracts or other hedging arrangements.  Fair Value Measurements  The Company follows ASC Topic 820, Fair Value Measurements and
Disclosures, which establishes a fair value hierarchy for those instruments measured at fair value that distinguishes between
assumptions based on market date (observable inputs) and the Company’s own assumptions (unobservable inputs). The hierarchy
consists of three levels:


13





•Level 1—Unadjusted quoted prices in active markets for identical assets or liabilities.  •Level 2—Quoted prices for similar assets and liabilities in active markets, quoted prices in markets that are not active,
or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability.  •Level 3—Unobservable inputs that reflect the Company’s own assumptions about the assumptions market participants
would use in pricing the asset or liability in which there is little, if any, market activity for the asset or liability at the
measurement date.  At December 31, 2017 and 2016, the Company did not have any assets
or liabilities that are measured at fair value on a recurring basis. The carrying amounts reflected in the balance sheets for cash
and cash equivalents, prepaid expenses and other current assets, accounts payable, and accrued expenses approximate their fair
values at December 31, 2017 and 2016, due to their short-term nature.  Property and Equipment  Property and equipment, which consists of land, construction in process,
furniture and fixtures, computers and office equipment, scientific equipment, leasehold improvements, vehicles and building are
stated at cost and depreciated over the estimated useful lives of the assets, with the exception of land and construction in process
which are not depreciated, using the straight line method. The useful lives are as follows:  • Furniture and
    fixtures
    7 years• Office
    equipment
    5 years• Leasehold
    improvements
    Shorter of asset’s useful life or remaining lease term• Scientific
    equipment
    5 years• Vehicles
    5 years•
    Building
    39 years  Costs of major additions and betterments are capitalized; maintenance
and repairs, which do not improve or extend the life of the respective assets, are charged to expense as incurred. Upon retirement
or sale, the cost of the disposed asset and the related accumulated depreciation are removed from the accounts and the resulting
gain or loss is recognized.  Impairment of Long-Lived Assets  The Company periodically evaluates its long-lived assets for potential
impairment in accordance with ASC Topic 360, Property, Plant and Equipment. Potential impairment is assessed when there
is evidence that events or changes in circumstances indicate that the carrying amount of an asset may not be recovered. Recoverability
of these assets is assessed based on undiscounted expected future cash flows from the assets, considering a number of factors,
including past operating results, budgets and economic projections, market trends and product development cycles. If impairments
are identified, assets are written down to their estimated fair value. The Company has not recognized any impairment through December
31, 2017.


14





Foreign Currency Transactions  Certain transactions are denominated in a currency other than the
Company’s functional currency of the U.S. dollar, and the Company generates assets and liabilities that are fixed in terms
of the amount of foreign currency that will be received or paid. At each balance sheet date, the Company adjusts the assets and
liabilities to reflect the current exchange rate, resulting in a translation gain or loss. Transaction gains and losses are also
realized upon a settlement of a foreign currency transaction in determining net loss for the period in which the transaction is
settled.  Comprehensive Income (Loss)  ASC Topic 220, Comprehensive Income, requires that all components
of comprehensive income (loss), including net income (loss), be reported in the financial statements in the period in which they
are recognized. Comprehensive income (loss) is defined as the change in equity during a period from transactions and other events
and circumstances from non-owner sources, including unrealized gains and losses on investments and foreign currency translation
adjustments.  Segment and Geographic Information  Operating segments are identified as components of an enterprise
about which separate discrete financial information is available for evaluation by the chief operating decision maker, or decision
making group, in making decisions on how to allocate resources and assess performance. The Company’s chief operating decision
maker is the Chief Executive Officer. The Company and the chief operating decision maker view the Company’s operations and
manage its business as one operating segment. Substantially all of the Company’s operations are in the U.S. geographic segment.   15
 
 Net Loss per Share  Net loss per share (“EPS”) is computed by dividing net
loss by the weighted average number of common shares outstanding during each period. Diluted EPS is computed by dividing net loss
by the weighted average number of common shares and common share equivalents outstanding (if dilutive) during each period. The
number of common share equivalents, which include stock options, is computed using the treasury stock method.  Subsequent Events  The Company considered events or transactions occurring after the
balance sheet date but prior to the date the consolidated financial statements are available to be issued for potential recognition
or disclosure in its consolidated financial statements. We have evaluated subsequent events through the date of filing this Form
10-K.  Recent Accounting Pronouncements  In February 2016, the FASB issued final guidance that will change
the accounting for leases ASU No. 2016-02, “Leases.” ASU 2016-02. The FASB issued final guidance that requires lessees
to put most leases on their balance sheets but recognize expenses on their income statements in a manner similar to today’s
accounting. The guidance also eliminates today’s real estate-specific provisions for all entities. For lessors, the guidance
modifies the classification criteria and the accounting for sales-type and direct financing leases. All entities classify leases
to determine how to recognize lease-related revenue and expense. Classification continues to affect what lessors record on the
balance sheet. For calendar-year public business entities and certain calendar-year not-for-profit entities and employee benefit
plans, the guidance is effective in 2019, and interim periods within that year. For other calendar-year entities, it is effective
in 2020, and interim periods in 2021. Early adoption is permitted for all entities. The adoption of this standard will require
the Company to record its operating leases on the balance sheet. The Company is currently evaluating the impact of this pronouncement
on the Company's consolidated financial statements  In March 2016, the FASB issued ASU No. 2016-09, “Stock Compensation,”
which is intended to simplify several aspects of the accounting for share-based payment award transactions.  The guidance
requires the recognition of the income tax effects of awards in the income statement when the awards vest or are settled, thus
eliminating additional paid in capital pools. The Company adopted this pronouncement effective January 1, 2017. Upon adoption,
the Company recognized approximately $491 thousand of accumulated excess tax benefits as deferred tax assets that under the previous
guidance could not be recognized until the benefits were realized through a reduction in cash taxes paid. This part of the guidance
is applied using a modified retrospective method with a cumulative-effect adjustment to the accumulated deficit for the excess
tax benefits not previously recognized. However, given the full valuation allowance placed on the additional $491 thousand of
deferred tax assets, the recognition of this provision of ASU 2016-09 had no impact to the Company’s accumulated deficit
as of January 1, 2017. In addition, the guidance allows for a policy election to account for forfeitures as they occur rather
than on an estimated basis. The Company elected to account for forfeitures as they occur using a modified retrospective transition
method. The adoption of this one-time accounting policy election did not have a material impact on the Company’s financial
statements.









16





3. Property and Equipment and Building Construction in Progress  Property and equipment consisted of the following as of December 31,
2017 and 2016 (in thousands):  2017
    2016Computer and office equipment
    $461
    $456Furniture and fixtures
    183
    132Land
    1,418
    1,418Leasehold improvements
    802
    794Scientific equipment
    12,194
    6,116Vehicle
    30
    30Building
    21,013
    19,978Construction in process
    472
    6,645Accumulated depreciation
    (6,933)
    (5,449)Total
    $29,640
    $30,120
  Depreciation expenses related to property and equipment amounted
to approximately $1,484,000, $698,000, and $699,000 and for the years ended December 31, 2017, 2016 and 2015, respectively.
Construction in process is related to research and development and manufactory equipment.








4. Accrued Expenses  Accrued expenses consist of the following as of December 31,
2017, and 2016 (in thousands):  2017
    2016Accrued compensation and
    related expenses
    $234
    $413Accrued professional fees
    32
    95Accrued building construction fees
    -
    521Accrued clinical trial expenses
    766
    2,402Other
    30
    101Total
    $1,062
    $3,532




5. Common Stock  Pursuant to its Articles, the Company has an
unlimited number of shares available for issuance with no par value.  From January through December 2016, 204 thousand
shares of common stock were issued upon the exercise of stock options at a price of $0.74 to $19.09 per share for total proceeds
of $1.1 million.


17





From November through December 2016, under the
Common Stock Sales Agreement with H.C. Wainwright & Co. LLC, the Company sold 145 thousand shares of common stock at a price
between $13.60 to $14.17 per share for total proceeds of $1.8 million.  In February 2017, under the Common Stock Sales
Agreement with H.C. Wainwright & Co. LLC, the Company sold 87 thousand shares of common stock at a price between $12.09 to
$12.37 per share for total proceeds of $1.0 million.  In March 2017, the Company sold 2.4 million
shares of common stock at a net price of $13.00 for total proceeds of approximately $31.6 million from investors.  From January
through December 2017, 290 thousand shares of common stock were issued upon the exercise of stock options at a price of $2.50
to $14.71 per share for a total of $703 thousand.






6. Common Stock Options  On November 11, 2005, the board of directors of the Company
adopted a stock option plan (“the Plan”) pursuant to which the Company may grant incentive stock and non-qualified
stock options to directors, officers, employees or consultants of the Company or an affiliate or other persons as the Compensation
Committee may approve.  All options will be non-transferable and may be exercised only by
the participant, or in the event of the death of the participant, a legal representative until the earlier of the options’
expiry date or the first anniversary of the participant’s death, or such other date as may be specified by the Compensation
Committee.  The term of the options is at the discretion of the Compensation
Committee, but may not exceed 10 years from the grant date. The options expire on the earlier of the expiration date or the date
three months following the day on which the participant ceases to be an officer or employee of or consultant to the Company, or
in the event of the termination of the participant with cause, the date of such termination. Options held by non-employee Directors
have an exercise period coterminous with the term of the options.  The number of common shares reserved for issuance to any one person
pursuant to this Plan shall not, in aggregate, exceed 5% of the total number of outstanding common shares. The exercise price per
common share under each option will be the fair market value of such shares at the time of the grant. Upon stock option exercise,
the Company issues new shares of common stock.  A summary of changes in common stock options issued under the Plan
is as follows:  Options
    Exercise Price
    Weighted-Average Exercise PriceOptions outstanding at December 31, 2014
    4,884,165
    $0.55
                                                                          -
                                                                          $15.00
    $7.03Granted
    375,928
    8.47
                                                               -
                                                               21.99
    17.95Exercised
    (359,141)
    0.53
                                                               -
                                                               10.00
    3.75Forfeitures
    (114,375)
    0.55
                                                                                               -
                                                                                               20.93
    11.05Options outstanding at December 31, 2015
    4,786,577
    $0.53
                                                               -
                                                               $21.99
    $8.56Granted
    1,059,990
    7.71
                                                               -
                                                               19.10
    11.72Exercised
    (204,159)
    0.74
                                                               -
                                                               19.09
    5.56Forfeitures
    (453,750)
    0.52
                                                                                               -
                                                                                               16.91
    12.79Options outstanding at December 31, 2016
    5,188,658
    $0.52
                                                               -
                                                               $21.99
    $8.49Granted
    1,251,000
    4.15
                                                               -
                                                               12.62
    4.85Exercised
    (406,667)
    0.93
                                                               -
                                                               14.71
    2.28Forfeitures
    (729,367)
    0.94
                                                                                               -
                                                                                               21.99
    11.90Options outstanding at December 31, 2017
    5,303,624
    $2.5
                                                                                                   -
                                                                                                   $21.99
    $7.69


18





The weighted average fair value of the options issued to directors,
employees and consultants during the fiscal years ended December 31, 2017, 2016 and 2015, was $2.97, $7.29 and $17.95, respectively.
Options with an intrinsic value of $(3.75), $1.63 and $2.86, became vested during 2017, 2016 and 2015, respectively. The total
intrinsic value of options exercisable and total options outstanding at December 31, 2017 was $746,000. The total fair value
of options vested during the years ended December 31, 2017, 2016 and 2015 was $1,601,000, $5,728,000and $5,463,000, respectively.  As of December 31, 2017, there was approximately $3.1 million of
unrecognized compensation cost, related to stock options granted under the Plan which will be amortized to stock compensation expense
over the next 2.23 years.








7. Net Loss Per Share  The following summarizes the computation of basic and diluted net
loss per share for the years ended December 31, 2017, 2016 and 2015 (in thousands, except share and per share data):  Year Ended December 31,2017
    2016
    2015Net loss
    $(33,150)
    $(52,761)
    $(37,483)Weighted-average number of common shares—basic and diluted
    34,875,814
    32,403,391
    30,801,994Net loss per share—basic and diluted
    $(0.95)
    $(1.63)
    $(1.22)
  The following potentially dilutive securities outstanding, prior
to the use of the treasury stock method or if-converted method, have been excluded from the computation of diluted weighted-average
common shares outstanding, because including them would have had an anti-dilutive effect due to the losses reported.   Year Ended December 31,2017
    2016
    2015Stock options
    5,303,624
    5,188,658
    4,786,577Warrants to purchase common stock
    -
    -
    -Total
    5,303,624
    5,188,658
    4,786,577






8. Income Taxes  The Company recorded no provision for income taxes for the years
ended December 31, 2017, 2016 and 2015 due to the reported net losses in each year and reported valuation allowance.  A reconciliation of the Company’s Canadian federal statutory
income tax rate to the Company’s effective income tax rate is as follows for the years ended December 31, 2017, 2016
and 2015:  2017
    2016
    2015Income tax benefit computed at federal tax rate
    26.0%
    26.0%
    26.0%Change in valuation allowance
    (15.3%)
    (22.1%)
    (27.2%)Impacts of US tax reform
    (13.4%)
    -
    -Stock compensation and other
    2.7%
    (3.9%)
    1.2%Total
    —%
    —%
    —%
  During the years ended December 31, 2017, 2016 and 2015, the
Company had no interest and penalties related to income taxes.   As of December 31, 2017, and 2016, the Company has unused net
operating losses of approximately $167.6 million (approximately $132.3 million in Canada, $27.7 million in the U.S., $6.7 million
in Germany and $0.9 million in Switzerland and Japan) and $133.0 million (approximately $108.9 million in Canada, $18.6 million
in the U.S., $4.8 million in Germany and $0.6 million in Switzerland and Japan), respectively, available to reduce taxable income
of future years. The tax benefit of net operating losses begin to expire in 2025 in Canada, 2028 in U.S., 2034 in Germany 2018
in Switzerland, and 2022 in Japan.


19





Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.
The Company has established a valuation allowance due to uncertainties regarding the realization of deferred tax assets based upon
the Company’s lack of earnings history. Significant components of the Company’s deferred tax assets and liabilities
as of December 31, 2017, 2016 and 2015 as follows (in thousands):  2017
    2016
    2015Deferred tax assets:Noncapital losses
    $41,551
    $35,064
    $23,038Qualifying research and development credits
    2,833
    2,408
    1,591Stock based compensation
    1,618
    2,737
    3,982Share issue costs
    42
    27
    30Accrued liabilities
    49
    286
    356Deferred rent
    4
    8
    6Total deferred tax assets
    46,097
    40,530
    29,003Deferred tax liabilities:Depreciation
    282
    31
    13Share issuance costs
    35
    16
    23Total deferred tax liabilities
    317
    47
    36Net deferred tax asset
    45,780
    40,483
    28,967Valuation allowance for deferred tax assets
    (45,780)
    (40,483)
    (28,967)Net deferred tax asset including valuation allowance
    $—
    $—
    $—
  On December 22, 2017, the President of the United States signed into law the Tax Cuts and Jobs Act, or
TCJA, tax reform legislation. The TCJA makes significant changes in U.S. tax law including a reduction in the corporate tax rates,
changes to net operating loss carryforwards and carrybacks, and a repeal of the corporate alternative minimum tax. The TCJA reduced
the U.S. corporate tax rate from the current rate of 34 percent down to 21 percent starting on January 1, 2018. As a result of
the TCJA, the Company was required to revalue deferred tax assets and liabilities at 21 percent. This revaluation resulted in a
provision of $4.5 million to income tax expense in continuing operations and a corresponding reduction in the valuation allowance. 
As a result, there was no impact to the Company’s consolidated statements of comprehensive loss as a result of the reduction
in tax rates.   As the Company does not have all of the necessary information to
analyze all income tax effects of the TCJA, the Company will continue to make and refine calculations and estimates as
additional information is obtained, which could potentially affect the provisional amounts relating to the deferred income taxes,
including but not limited to deferred tax assets related to share-based compensation expenses. Where the Company has not yet been
able to make reasonable estimates of the impact of certain elements, the Company has not recorded any amounts related to those
elements and has continued accounting for them in accordance with ASC 740 on the basis of the tax laws in effect immediately prior
to the enactment of the TCJA.  The Company expects to complete a detailed analysis no later than the fourth quarter
of 2018.  Due to additional current year losses, offset by the decrease of
the U.S. tax rate from 34% to 21% in 2017, the valuation allowance increased by approximately $5.3 million and $11.5 million during
the year ended December 31, 2017 and 2016 respectively.  The Company applies the accounting guidance in ASC 740 related to
accounting for uncertainty in income taxes. The Company’s reserves related to taxes are based on a determination of whether,
and how much of, a tax benefit taken by the Company in its tax filings or positions is more likely than not to be realized following
resolution of any potential contingencies present related to the tax benefit. As of December 31, 2017 and 2016, the Company
had no unrecognized tax benefits.


20





The Company files federal income tax returns in Canada, U.S, Switzerland,
Germany, and Japan. The Company also files income tax returns in the state of Texas in the U.S. The statute of limitations for
assessment by local taxing authorities is open for tax years ended after December 2011. There are currently no federal or state
income tax audits in progress.  The components of income before income taxes
are as follows:  (In thousands)
    Years Ended December 31,2017
    2016
    2015Domestic
    $(5,765)
    $(8,749)
    $(6,544)Canada
    (26,034)
    (41,625)
    (28,129)Other Foreign
    (1,351)
    (2,387)
    (2,810)Total
    $(33,150)
    $(52,761)
    $(37,483)
   In November 2015, the FASB issued ASU 2015-17, “Balance Sheet
Classification of Deferred Taxes”. The Company adopted these accounting changes on a prospective basis during the three months
ended December 31, 2016. To simplify the presentation of deferred income taxes, the amendments in this update require that deferred
tax liabilities and assets be classified as noncurrent in a classified statement of financial position. The adoption of this standard
did not have a material effect on the Company’s financial statements or disclosures.




9. Commitments and Contingencies  On January 12, 2008, the Company entered a lease agreement to lease its facility in Austin, Texas,
U.S. On September 15, 2010, the Company entered into a second lease agreement to lease additional space in Austin, Texas,
U.S. On March 20, 2013, the company extended the lease for another 21 months with the same terms and rental rates as the current
leases. On February 28, 2015, the Company extended the leases for another four years with two years early termination right. The
future minimum lease payments are as follows as of December 31, 2017 (in thousands):   2018
    $4702019
    $79
  Rent expense was approximately $741,000, $761,000 and $688,000 for
the years ended December 31, 2017, 2016 and 2015, respectively.  XBiotech Corporate officers, Queena Han (VP of Finance) and John
Simard (President and CEO), XBiotech Inc., and certain directors were named defendants in securities class action civil
suits filed in federal court at the U.S. District Court for the Western District of Texas, in Austin, Texas and state court at
the Los Angeles County Superior Court, in California.  In the California action, the underwriter WR Hambrecht & Co., LLC
was also named as a defendant.  These civil suits were filed on December 1, 2015.  The foundation for both suits are
similar in that the plaintiffs allege the officers of the Company made false and misleading statements, violating the securities
laws, in the IPO documents in April 2015.  Specifically, these alleged false statements in the IPO documents are in relation
to the European Phase III clinical trial for XilonixTM.  The allegations focus on a press release posted by XBiotech
on November 23, 2015, explaining certain issues with patient data.  Plaintiffs allege the company knew of these issues during
the IPO and neglected to disclose them in supporting documentation filed with the Security and Exchange Commission (SEC). As a
result of the news release, XBiotech (traded on the NASDAQ) stock declined.  The resulting securities class action lawsuits
are seeking relief for plaintiffs who report financial losses due to the alleged false and misleading statements.  In September
2016, a stay was granted in the California case. Plaintiffs were, at that time, left with the opportunity to re-file in Texas prior
to the decision on the motion to dismiss. Plaintiffs did not re-file in Texas before the case was dismissed with prejudice in October
2016. Plaintiffs sought to re-open the case in California. A hearing to address whether the case should be dismissed, was
scheduled June 7, 2017. At the hearing, counsel for XBiotech argued that California was a forum non conveniens given the nexus
of the allegations in the suit took place in Texas. The judge granted the forum non conveniens motion, finding that the case does
not belong in California. As a result, the case is stayed rather than dismissed per California procedural rules. Plaintiffs were
compelled to re-file in Texas.


21





The plaintiffs re-filed their suit in Travis County district court,
located in Austin, Texas, on July 6, 2017. A hearing date has yet to be scheduled in this matter. Subsequently, XBiotech won on
its motion to remove the case from state court to federal court at the U.S. District Court for the Western District of Texas, Austin
Division. Counsel further argued for a motion to stay the case, which was granted on October 6, 2017, taking into account the upcoming
hearings at the U.S. Supreme Court for Cyan, Inc. v. Beaver County Employees Retirement Fund. At issue in this is case is whether
state courts lack subject matter jurisdiction over covered class actions that allege only Securities Act of 1933 claims. Arguments
before the Supreme Court were held in November 2017. A decision from the Court is expected in the first half of 2018, at which
time we will learn more about its impact on whether plaintiffs may return to litigate Rezko v. XBiotech in state court.








10. Subsequent Events  On January 16, 2018, Daniel Vasella resigned from the Board of Directors of XBiotech Inc. effective immediately.
On January 16th, 2018, the Company promptly notified the NASDAQ Listing Qualifications Department (“NLQD”) of this
event. Subsequently, the Company received a letter from the NLQD which noted the Company’s non-compliance with NASDAQ’s
independent director and audit committee composition requirements set forth in Listing Rules 6505(b)(1) and 5605(c)(2), respectively.
The Company was given 45 days to submit a plan to regain compliance related to NASDAQ’s independent director requirement
and a cure period to regain compliance with the compensation committee requirements.  As described in a Form 8-K filing on March 1, 2018, on February 27,
2018, Mr. Jan-Paul Waldin was elected as a member of the Board of Directors the Company, as well as appointed as a member of the
Company’s Audit Committee and Compensation Committee, to serve until his successor is duly elected and qualified or until
his earlier resignation, removal or death. With the addition of Mr. Waldin to the Company’s Board of Directors, Audit Committee
and Compensation Committee, the Company has regained compliance and is no longer subject to the requirements set forth in the Letter
from NASDAQ dated January 18, 2018 and referenced in a Form 8-K filing on January 19, 2018. Therefore, the Company is currently
only subject to the requirements set forth in the Letter from NASDAQ dated November 9, 2017 and referenced in the Company’s
Form 10-Q filing on that same day in which it has been given a cure period until the earlier of the Company’s next annual
shareholders’ meeting or November 8, 2018 in order to regain compliance with NASDAQ’s audit committee requirements
as set forth in Listing Rule 5605. The Company plans to fill the vacancy and regain compliance on this matter within the cure period
provided by NASDAQ.








11. Selected Quarterly Financial Data (Unaudited)



Selected Quarterly Financial Data
(Unaudited) for the year ended December 31, 2017 and 2016 is presented below (in thousands except per share data):



|2017                                 |  | First Quarter |         | Second Quarter |  | Third Quarter |        | Fourth Quarter
|------------------------------------ |  | ------------- | ------- | -------------- |  | ------------- | ------ | --------------
|Loss from operations                 |  |               | (10,271 | )              |  |               | (9,688 | )             
|Net Loss                             |  |               | (10,563 | )              |  |               | (9,133 | )             
|Net loss per share—basic and diluted |  |               | (0.32   | )              |  |               | (0.26  | )             



|2016                                 |  | First Quarter |         | Second Quarter |  | Third Quarter |         | Fourth Quarter
|------------------------------------ |  | ------------- | ------- | -------------- |  | ------------- | ------- | --------------
|Loss from operations                 |  |               | (10,248 | )              |  |               | (13,615 | )             
|Net Loss                             |  |               | (10,257 | )              |  |               | (13,622 | )             
|Net loss per share—basic and diluted |  |               | (0.32   | )              |  |               | (0.42   | )             





22







|ITEM 9A. |  | CONTROLS AND PROCEDURES.
|-------- |  | ------------------------



Management's Evaluation of our Disclosure Controls and Procedures



As of the end of the year covered by this Annual Report on Form 10-K,
an evaluation was carried out by the Company’s management, with the participation of the Chief Executive Officer and Principal
Financial Officer, of the effectiveness of the Company’s disclosure controls and procedures, as defined in Rule 13a-15(e)
and 15d-15(e) under the Securities Exchange Act of 1934. Based on such evaluation, the Chief Executive Officer and Principal Financial
Officer concluded that the Company’s disclosure controls and procedures are effective to ensure that information required
to be disclosed in the reports the Company files or furnishes under the Securities Exchange Act of 1934 is recorded, processed,
summarized and reported within the time periods specified in the SEC’s rules and regulations, and are operating in an effective
manner.



Management’s Annual Report on Internal Control over Financial Reporting



Our management is responsible for establishing and maintaining adequate
internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act). We conducted an assessment of
the effectiveness of our internal control over financial reporting based on the criteria set forth in Internal Control –
Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework). Based on
our assessment, we have concluded that our internal control over financial reporting was effective as of December 31, 2017, to
provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance
with GAAP.



Changes in Internal Control Over Financial Reporting



There was no change in our internal control over financial reporting
that occurred during the fourth quarter of the year ended December 31, 2017 that has materially affected, or is reasonably likely
to materially affect, our internal control over financial reporting.



Limitations on Effectiveness of Controls and Procedures



In designing and evaluating the disclosure controls and procedures,
management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance
of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact
that there are resource constraints and that management is required to apply judgment in evaluating the benefits of possible controls
and procedures relative to their costs.





23





EXHIBIT INDEX





|ExhibitNumber |  | Description                                                                                                                                                                                                                                                                                                                                                                                                                   
|------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|3.1           |  | Certificate of Continuation dated September 23, 2005, issued by the Registrar of Companies, Province of British Columbia, Canada (incorporated by reference to Exhibit 3.1 to the Company’s Registration Statement on Form S-1 filed with the SEC on February 2, 2015)                                                                                                                                                        
|              |  |                                                                                                                                                                                                                                                                                                                                                                                                                               
|3.2           |  | Notice of Articles, dated December 8, 2005, issued by the Registrar of Companies, Province of British Columbia, Canada (incorporated by reference to Exhibit 3.2 to the Company’s Registration Statement on Form S-1 filed with the SEC on February 2, 2015)                                                                                                                                                                  
|              |  |                                                                                                                                                                                                                                                                                                                                                                                                                               
|3.3           |  | Articles of XBiotech Inc. (incorporated by reference to Exhibit 3.3 to the Company’s Registration Statement on Form S-1 filed with the SEC on February 2, 2015)                                                                                                                                                                                                                                                               
|              |  |                                                                                                                                                                                                                                                                                                                                                                                                                               
|10.1+         |  | Executive Employment Agreement dated as of March 22, 2005 between XBiotech and John Simard (incorporated by reference to Exhibit 10.1 to the Company’s Registration Statement on Form S-1 filed with the SEC on February 2, 2015)                                                                                                                                                                                             
|              |  |                                                                                                                                                                                                                                                                                                                                                                                                                               
|10.2+         |  | Change in Control Agreement dated as of March 22, 2005 between XBiotech and John Simard (incorporated by reference to Exhibit 10.2 to the Company’s Registration Statement on Form S-1 filed with the SEC on February 2, 2015)                                                                                                                                                                                                
|              |  |                                                                                                                                                                                                                                                                                                                                                                                                                               
|10.3          |  | Confidentiality and Assignment of Inventions Agreement dated as of March 22, 2005 between XBiotech and John Simard (incorporated by reference to Exhibit 10.3 to the Company’s Registration Statement on Form S-1 filed with the SEC on February 2, 2015)                                                                                                                                                                     
|              |  |                                                                                                                                                                                                                                                                                                                                                                                                                               
|10.4+         |  | XBiotech 2005 Incentive Stock Option Plan (incorporated by reference to Exhibit 10.4 to the Company’s Registration Statement on Form S-1 filed with the SEC on February 2, 2015)                                                                                                                                                                                                                                              
|              |  |                                                                                                                                                                                                                                                                                                                                                                                                                               
|10.5+         |  | Form of indemnification agreement between XBiotech and each director of XBiotech (incorporated by reference to Exhibit 10.5 to the Company’s Registration Statement on Form S-1 filed with the SEC on February 2, 2015)                                                                                                                                                                                                       
|              |  |                                                                                                                                                                                                                                                                                                                                                                                                                               
|10.6          |  | Agreement of Lease by and between NNN Met Center 4-9, LP and XBiotech USA, Inc. dated January 14, 2008 and the First Amendment dated January 17, 2008, the Second Amendment dated August 2010 and the Third Amendment dated March 2013 and the Fourth Amendment dated February 28, 2015 (incorporated by reference to Exhibit 10.6 to the Company’s Registration Statement on Form S-1/A filed with the SEC on March 10, 2015)
|              |  |                                                                                                                                                                                                                                                                                                                                                                                                                               
|10.7          |  | Agreement of Lease by and between NNN Met Center 4-9, LLP and XBiotech USA, Inc. for Suite 600 dated August 16, 2010 and First Amendment dated March 2013 and the Second Amendment dated February 28, 2015 (incorporated by reference to Exhibit 10.7 to the Company’s Registration Statement on Form S-1/A filed with the SEC on March 10, 2015)                                                                             
|              |  |                                                                                                                                                                                                                                                                                                                                                                                                                               
|10.9          |  | Licensing Agreement dated January 16, 2015 between XBiotech USA, Inc. and Lonza Sales AG (portions of this exhibit have been omitted pursuant to a request for confidential treatment under Rule 406 of the Securities Act. incorporated by reference to Exhibit 10.9 to the Company’s Registration Statement on Form S-1/A filed with the SEC on March 10, 2015)                                                             
|              |  |                                                                                                                                                                                                                                                                                                                                                                                                                               
|10.10         |  | Research and Collaboration Agreement dated December 15, 2014 by and between XBiotech USA, Inc. and the South Texas Blood & Tissue Center (portions of this exhibit have been omitted pursuant to a request for confidential treatment under Rule 406 of the Securities Act of 1933. incorporated by reference to Exhibit 10.10 to the Company’s Registration Statement on Form S-1/A filed with the SEC on March 10, 2015)    
|              |  |                                                                                                                                                                                                                                                                                                                                                                                                                               



24







|10.11 |  | XBiotech Inc. 2015 Equity Incentive Plan (incorporated by reference to Exhibit 10.11 to the Company’s Registration Statement on Form S-1/A filed with the SEC on March 10, 2015)                                                                                                                                                                                                                                                          
|----- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                           
|10.12 |  | Common Stock Sales Agreement with H.C. Wainwright & Co. LLC which establishes an at-the-market equity program (filed as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on September 26, 2016 (File No. 001-37347) and incorporated herein by reference)                                                                                                                                                                
|      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                           
|10.13 |  | Subscription agreements with accredited investors (the “Subscription Agreements”) providing for the issuance and sale by the Company of approximately $31 million of common shares in a registered direct offering(filed as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on March 03, 2017 (File No. 001-37347) and incorporated herein by reference)                                                                
|      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                           
|21.1  |  | List
    of subsidiaries                                                                                                                                                                                                                                                                                                                                                                                                                  
|      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                           
|23.1  |  | Consent
    of Ernst & Young LLP                                                                                                                                                                                                                                                                                                                                                                                                          
|      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                           
|31.1* |  | Certification of the Principal Executive Officer Required Under Rules 13a-14(a) and 15d-14(a) of the Securities Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                             
|      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                           
|31.2* |  | Certification of the Principal Financial Officer Required Under Rules 13a-14(a) and 15d-14(a) of the Securities Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                             
|      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                           
|32.1  |  | Certification
    of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
    Act of 2002                                                                                                                                                                                                                                                                                 
|      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                           
|32.2  |  | Certification
    of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
    Act of 2002                                                                                                                                                                                                                                                                                 
|      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                           
|101   |  | The following financial statements from the Xbiotech, Inc. Annual Report on Form 10-K for the year ended December 31, 2017, formatted in Extensive Business Reporting Language (XBRL): (i) consolidated balance sheets, (ii) consolidated statements of operations, (iii) consolidated statements of stockholders’ equity, (iv) consolidated statements of cash flows, and (v) notes to consolidated financial statements (detail tagged).
|      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                           
|      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                           
|+     |  | Indicates management contract or compensatory plan                                                                                                                                                                                                                                                                                                                                                                                        
|*     |  | Filed herewith                                                                                                                                                                                                                                                                                                                                                                                                                            











25





SIGNATURES



Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on September
4, 2018.







| | XBIOTECH INC.,    
| | ------------------
| |                   
| | /S/    JOHN SIMARD
| | Name:             
| | Title:            
| |                   

































25