UNITED STATES SECURITIES AND
    EXCHANGE COMMISSION
 Washington, D.C.
    20549
 Form 10-K
  þ

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)  OF THE
    SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended
    December 31, 2008oro

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)  OF
    THE SECURITIES EXCHANGE ACT OF 1934For the transition period
    from          to   Commission
    file number:
    000-51686
 NUCRYST Pharmaceuticals
    Corp.
 (Exact name of registrant as
    specified in its charter)
  Alberta, Canada

Not Applicable(State or other jurisdiction
    of
    incorporation or organization)

(I.R.S. Employer
    Identification No.)101 College Road East, Princeton, NJ

08540(Address of principal executive
    offices)

(Zip Code)   (609) 228-8210
 (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 shares, no par value

The NASDAQ Stock Market LLC
    The Toronto Stock Exchange   Securities registered pursuant to Section 12(g) of the
    Act:
 None
  o þ
  o þ
  þ o
  Regulation S-K Form 10-K Form 10-K. þ
  Rule 12b-2
  Large accelerated filer o

Accelerated filer o

Non-accelerated filer o

Smaller reporting company þ(Do not check if a smaller reporting company)   Rule 12b-2 o þ
      Class

Outstanding at February 13, 2009Common Shares, no par value

18,320,531 shares   Documents incorporated by reference: None.




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TABLE OF
    CONTENTS
  Part IItem 1.

Business


5Item 1A.

Risk Factors


19Item 2.

Properties


34Item 3.

Legal Proceedings


35Item 4.

Submission of Matters to a Vote of Security Holders


35Part IIItem 5.

Market for the Registrants Common Equity; Related
    Stockholder Matters and Issuer Purchases of Equity Securities


35Item 6.

Selected Financial Data


38Item 7.

Managements Discussion and Analysis of Financial Condition
    and Results of Operations


40Item 7A.

Quantitative and Qualitative Disclosures About Market Risk


52Item 8.

Financial Statements and Supplementary Data


53Item 9.

Changes in and Disagreements With Accountants on Accounting and
    Financial Disclosure


69Item 9A.

Controls and Procedures


69Item 9B.

Other Information


70Part IIIItem 10.

Directors and Executive Officers of the Registrant


70Item 11.

Executive Compensation


73Item 12.

Security Ownership of Certain Beneficial Owners and Management
    and Related Stockholder Matters


88Item 13.

Certain Relationships and Related Transactions; and Director
    Independence


89Item 14.

Principal Accountant Fees and Services


92Part IVItem 15.

Exhibits, Financial Statements Schedules


93Signatures


98Index to Exhibits      Form 10-K, Form 10-K,
 2




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FORWARD-LOOKING
    STATEMENTS
  Form 10-K
    
    the effect of our recently announced distribution of capital to
    our shareholders on our ability to operate the business;
    future shareholder actions with respect to our capitalization
    and strategic direction;
    the performance of the stock markets generally;
    our ability to satisfy regulatory and stock exchange standards
    and requirements to maintain our exchange listings;
    the uncertainty of our future operating results, which are
    likely to fluctuate;
    our reliance on and ability to maintain our collaboration with
    Smith & Nephew, plc (Smith &
    Nephew);
    our reliance on sales of
    Acticoattm

    products with our
    SILCRYSTtm

    coatings by Smith & Nephew;
    the future financial and operating performance of
    Smith & Nephew;
    our ability to achieve cost savings and operating efficiencies
    sufficient to substantially or to completely offset the
    manufacturing cost rebate we have agreed to pay
    Smith & Nephew;
    our ability to achieve cost reductions from office, facility and
    program consolidations;
    our ability to successfully implement our business model,
    strategic plans for our business, product candidates and
    technology;
    our ability to establish successful commercialization programs,
    through corporate collaborations or otherwise, for our NPI 32101
    barrier cream and other development programs;
    our ability to protect our intellectual property rights covering
    our product candidates and technology;
    our ability to operate our business without infringing the
    intellectual property rights of others;
    the impact of competition from other medical device and
    pharmaceutical companies;
    our ability to retain skilled and experienced personnel;
    our ability to comply with applicable governmental regulations
    and standards;
    the availability, timing or likelihood of regulatory filings and
    approvals for our new products and our ability to maintain
    regulatory compliance with respect to our existing products;
    changes in currency exchange rates;
    changes in regulation or tax laws applicable to us;
    changes in accounting policies or practices;
    changes in general economic and capital market conditions;
    other risks and uncertainties that have not been identified at
    this time; and
    managements response to these factors. 3




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Form 10-K
 4




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PART I ITEM 1. BUSINESS  Overview
    and Current Years Developments
  tm
  tm tm tm tm tm tm tm tm
  tm tm tm tm tm
     5




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Company
    Information
  (609) 228-8210.
    Our
    Nanocrystalline Technology
     6




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tm tm
        tm tm tm tm
  Market
    Overview
  Industry
    and Market Data
    Wound
    Care Market
  tm tm difficult-to-heal
 7




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##### 



tm tm tm tm
  tm
  Pharmaceutical
    Market
  in vitro in vivo
  Pseudomonas
    aeruginosa Staphyloccocus aureus,
 8




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mild-to-moderate 5-ASAs 5-ASAs,
  in vivo
  Clostridium difficile
  ActicoattmProducts With Our
    SILCRYSTtmCoatings
  tm tm tm tm tm tm tm
  tm tm tm Staphylococcus aureus,
 9




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tm tm tm
  tm tm tm
  Acticoattm3/ActicoattmBurn Dressings
  tm tm tm tm tm tm
  Acticoattm 7 Dressings
  tm tm tm tm seven-day tm tm
  Acticoattm Absorbent Dressings
  tm tm tm tm
  Acticoattm Moisture Control Dressings
  tm tm tm tm tm tm
 10




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ActicoattmSite
  tm
  ActicoattmPost-Op
  tm tm tm
  ActicoattmFlex
  tm tm difficult-to-protect
  Smith &
    Nephew Agreements
  tm tm
  Amended
    License and Development Agreement
  tm tm tm
  tm tm tm tm
  tm
 11




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tm tm 3/Acticoat tm tm
  tm tm tm
  tm tm tm tm tm tm
    tm
  Supply
    Agreement
  tm tm
   12




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tm
  tm tm tm
  out-of-pocket
  tm
  Manufacturing
    and Technology Escrow Agreement
  tm tm tm
  Security
    Trust Agreement and Trust Indenture
  tm tm
  Indemnities
   13




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tm tm
  Manufacturing
  tm tm
  tm
    Intellectual
    Property
           14




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##### 



Competition
  tm tm tm tm tm tm tm
  tm
  tm
  Third-Party
    Reimbursement and Pricing Controls
  tm
   15




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##### 



tm
  Government
    Regulation
  tm
  United
    States
    Medical Device Regulation.
  tm tm tm tm
    New Drug Approval Process.
   16




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Manufacturing cGMP Requirements.
    European
    Union Regulation
  Marketing Authorizations for Drugs.
     17




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European GMP.
  Medical Devices. tm
    Environmental
    and Occupational Safety and Health Regulations
      Employees
   18




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Financial
    Information by Business Segment and Geographic Data
  Segmented Information Form 10-K.
 ITEM 1A. RISK
    FACTORS    Risks
    Related to Our Business and Industry
  Risks
    Related to Our Capital Structure and Operations
  We
    have a history of net losses and negative cash flow from
    operations; this will likely continue in the future and our cash
    may not be adequate to accomplish our objectives.
    Westaim
    controls and may continue to control us and may have conflicts
    of interest with us or you in the future.
    The
    recently approved distribution of share capital may
    significantly deplete our available cash on hand, which could
    adversely affect our financial condition and ability to operate
    our business.
   19




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
    reduce available cash and adversely affect our ability to
    satisfy liabilities;
    make it difficult or impossible to obtain financing, from
    institutional lenders or otherwise;
    require us to reduce the resources devoted towards our research
    and development initiatives;
    adversely affect our ability to engage in strategic transactions;
    decrease investor confidence in us;
    substantially decrease the market price of our shares;
    decrease trading volume in our shares; and
    prevent us from regaining and/or maintaining compliance with
    NASDAQ market capitalization requirements, causing our common
    shares to be delisted from trading on the NASDAQ Global Market.  If we
    are not able to regain compliance with applicable listing
    standards, our common shares may be delisted from the NASDAQ
    Global Market.
            
    the liquidity of our common shares;
    the market price of our common shares;
    the number of institutional investors and investors in general
    that will consider investing in our common shares;
    the number of market makers in our common shares;
    the availability of information concerning the trading prices
    and volume of our common shares;
    the number of broker-dealers willing to execute trades in our
    common shares; and
    our ability to obtain financing for the continuation of our
    operations.   20




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Over-The-Counter
  We are
    no longer able to rely upon Westaim for financial support, and
    must now rely on third parties for financing.
    Risks
    Related to our Relationship with Smith &
    Nephew
  We are
    dependent on our relationship with Smith & Nephew, our
    only customer.
  tm tm tm
  tm tm
    tm
  tm
 21




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Our
    industry is highly competitive, and introduction of lower-cost,
    higher margin products may adversely affect our
    revenues.
  tm tm tm tm tm tm tm tm
  If we
    are unable to effectively manage our production capacity, our
    results of operations and our relationship with
    Smith & Nephew may be adversely
    affected.
  tm tm scale-up
    tm tm
  If we
    cannot meet Smith & Nephews demand forecasts,
    our agreements may give Smith & Nephew the right to
    use our technology and facilities to manufacture
    Acticoattm products.
  tm tm tm tm
 22




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Our
    agreements with Smith & Nephew may limit our ability
    to enter into agreements to transfer certain of our assets or to
    collaborate with third parties in new product
    development.
  tm
    We may
    be unable to sell our existing products to other parties, even
    if our agreements with Smith & Nephew expire or
    terminate.
  tm tm tm tm tm
  tm
  tm tm tm tm tm tm
  We may
    be unable to achieve the cost savings required to offset the
    manufacturing cost rebate we agreed to pay Smith &
    Nephew in 2007, 2008 and 2009.
      General
    Risks Related to Our Business and Industry
  Our
    operating results may be adversely impacted by the current
    worldwide economic conditions.
   23




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Recent
    changes in senior management may divert attention and resources
    from the core activities of our business and may adversely
    affect our relationships with customers, suppliers, employees
    and other constituencies.
          Our
    ability to develop and sell future products is critical to our
    success, and if we fail to do so, our business and financial
    condition will suffer.
  tm
 24




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The
    market for advanced wound care and pharmaceutical products is
    intensely competitive and many of our competitors have
    significantly more resources and experience than we do, which
    may limit our commercial opportunities and
    revenues.
  tm
  tm
      We
    currently purchase most of our raw materials from single
    suppliers. If we are unable to obtain raw materials and other
    products from our suppliers that we depend on for our
    operations, our ability to deliver our products to market may be
    impeded.
    tm tm
  If we
    are not successful in establishing collaborations with prominent
    health care companies, we may not be able to grow our
    business.
   25




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We may
    face increased risk of product liability due to the
    nanocrystalline nature of our technology. If product liability
    lawsuits are brought against us, they could result in costly
    litigation and significant liabilities.
        We
    have agreed to indemnify Smith & Nephew for claims
    under our agreements, which could result in significant costs to
    us.
  tm
  Our
    insurance may not cover any or all of the costs of product
    liability claims that may be brought against us or others we may
    be required to indemnify.
      If a
    natural or man-made disaster strikes one or more of our
    facilities, or facilities upon which we depend, we may be unable
    to manufacture certain products for a substantial amount of time
    and our revenue could decline.
   26




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We are
    listed on both the Toronto Stock Exchange and the NASDAQ Global
    Market, and could incur significant compliance expenses as a
    result.
    We may
    incur losses associated with currency fluctuations and may not
    be able to effectively hedge our exposure.
    Failure
    to comply with workplace safety legislation could adversely
    affect our financial condition.
    Risks
    Related to Regulatory Matters
  Our
    industry is heavily regulated, and if existing regulatory
    approvals for our products are not maintained, or regulatory
    approvals for any new products are delayed or denied, it could
    have a material adverse effect on our business.
  tm tm
  
    delays in commercialization;
    refusal by the FDA or other regulatory agencies to review
    pending applications or supplements to approved applications;
    warning letters;
    product recalls or seizures; 27




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
    suspension of manufacturing;
    withdrawals of previously approved marketing applications;
    fines and other civil penalties;
    injunctions, suspensions or revocations of marketing licenses;


    refusals to permit products to be imported to or exported from
    the U.S. and other countries; and
    civil litigation and criminal prosecutions.    tm tm
      
    delay or prevent the commercialization of any product that we
    develop for new indications or any product within an already
    approved indication for which the submission of additional
    clinical trial data is required;
    in the case of delays, materially and adversely increase the
    cost of completing the development of such product and obtaining
    regulatory approval to market it;
    diminish any competitive advantages; and
    adversely affect our ability to attract new collaborators.  If
    government and third-party payors fail to provide coverage and
    adequate reimbursement rates for
    Acticoattm products or our future products, our revenues and
    potential for profitability will be reduced.
  tm tm tm
 28




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Our
    business involves the use, handling, storage and disposal of
    hazardous materials and may subject us to environmental
    liability, and any future environmental liability could
    seriously harm our financial condition. We do not maintain
    insurance covering these risks.
    clean-up
  Risks
    Related to Intellectual Property
  The
    protection of our intellectual property rights is critical to
    our success and any failure on our part to adequately protect
    those rights would materially adversely affect our
    business.
  Patents.
     29




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tm
  Trade Secrets and Proprietary Know-how.
  Trademarks. tm tm
    Enforcement.
     30




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The
    ability to market
    Acticoattm products and any other products we develop is subject to
    the intellectual property rights of third parties.
  tm
  We may
    be subject to damages resulting from claims that we or our
    employees have wrongfully used or disclosed alleged trade
    secrets of their former employers.
    Risks
    Related to Our Common Shares
  There
    has been limited trading in our common shares and, as a result,
    the market price of our common shares may be highly
    volatile.
     31




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
    variations in our operating performance and the performance of
    our competitors or companies that are perceived to be similar to
    us;
    actual or anticipated fluctuations in our quarterly or annual
    operating results;
    results of pre-clinical and clinical trials by us and our
    competitors;
    changes in estimates or recommendations by securities analysts;
    publication of research reports by securities analysts about us
    or our competitors or our industry;
    our failure or the failure of our competitors to meet
    analysts projections or guidance that we or our
    competitors may give to the market;
    strategic decisions by us, our controlling shareholder, or our
    competitors, such as acquisitions, divestitures, spin-offs,
    joint ventures, strategic collaborations or investments or
    changes in business strategy;
    the passage of legislation or other regulatory developments
    affecting us or our industry;
    speculation in the media or investment community;
    changes in accounting principles;
    litigation; and
    changes in general market and economic conditions.    Future
    sales of currently restricted shares could cause the market
    price of our common shares to decrease significantly, even if
    our business is doing well.
    The
    amount of our net operating loss carryovers may be
    limited.
     32




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If we
    are classified as a passive foreign investment company, it could
    have adverse tax consequences to investors.
  non-U.S.
  As a
    foreign private issuer under the U.S. securities
    laws, we are subject to different laws and rules than a domestic
    U.S. issuer, which may limit the information publicly available
    to our shareholders.
  www.sedi.ca
  We may
    choose to rely on exemptions under the NASDAQ rules for
    controlled companies and foreign private issuers, which may
    affect the amount and type of information available to
    investors.
  case-by-case
  You
    may be unable to enforce actions against us or certain of our
    directors and officers under U.S. federal securities
    laws.
  non-U.S.
 33




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We
    have outstanding share options that have the potential to dilute
    shareholder value and cause the price of our common shares to
    decline.
    Our
    articles and certain Canadian laws could delay or deter a change
    of control.
         ITEM 2. PROPERTIES    tm tm
   34




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ITEM 3. LEGAL
    PROCEEDINGS   ITEM 4. SUBMISSION
    OF MATTERS TO A VOTE OF SECURITY HOLDERS   PART II  ITEM 5.
    MARKET
    FOR THE REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER
    MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES  Market
    Price
    NASDAQ


TSXHigh


Low


High


Low(U.S.$)


(U.S.$)


(CDN$)


(CDN$)2008First Quarter

$
2.14


$
1.01


$
2.02


$
1.24Second Quarter

$
1.65


$
0.97


$
1.40


$
1.00Third Quarter

$
1.10


$
0.52


$
1.10


$
0.68Fourth Quarter

$
1.08


$
0.46


$
1.26


$
0.602007First Quarter

$
5.58


$
3.15


$
6.50


$
3.67Second Quarter

$
3.62


$
1.95


$
5.92


$
1.99Third Quarter

$
5.84


$
1.91


$
5.92


$
2.01Fourth Quarter

$
2.95


$
1.40


$
2.96


$
1.41   Number of
    Shareholders
    Dividends
    and Return of Capital
     35




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Recent
    Sales of Unregistered Securities
    Repurchases
    of Equity Securities
    ISSUER PURCHASES OF EQUITY SECURITIES(d)Maximum Number(c)


(or ApproximateTotal Number of


Dollar Value) of(a)





Shares Purchased


Shares that MayTotal Number


(b)


as Part of Publicly


Yet Be Purchasedof Shares


Average Price


Announced Plans


Under the PlansPeriod

Purchased


Paid per Share


or Programs


or ProgramsOctober 1 to October 31, 2008


50,400


$
0.79



50,400



849,600November 1 to November 30, 2008


14,700


$
0.92



14,700



834,900December 1 to December 31, 2008














834,900Total


65,100


$
0.82



65,100



834,900   Tax
    consequences to U.S. shareholders
  Canada-United
  Regulation S-K
 36




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Share
    Price Performance Graph
    NASDAQ

NASDAQDate

Healthcare Index

Composite Index

NCST2005


100



100



1002006


100



110



452007


111



120



132008


92



72



9
   
  Information
    about our Annual Meeting
  1 3
 37




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ITEM 6.
    SELECTED FINANCIAL DATA      Year Ended December 31,2008


2007


2006


2005


2004Amounts in ThousandsResults of Operations Data:Revenue:Wound care product revenue

$
20,907


$
20,092


$
24,369


$
18,636


$
14,682Milestone
    revenue(1)






10,000







5,000



10,000Total revenue


20,907



30,092



24,369



23,636



24,682Costs:Manufacturing


12,842



14,477



16,053



10,015



7,141Research and development


4,955



6,303



11,162



8,520



8,971General and administrative


9,062



9,481



7,195



4,245



4,122Write down of capital assets


174



1,173



1,049







(Loss) income from operations


(6,126
)


(1,342
)


(11,090
)


856



4,448Other income (expenses):Foreign exchange gains (losses)


2,819



(3,283
)


(298
)


193



82Interest income


347



744



1,165



12



66Interest
    expense(2)










(310
)


(3,540
)


(3,229
)(Loss) income before income taxes and cumulative effect of a
    change in accounting principle


(2,960
)


(3,881
)


(10,533
)


(2,479
)


1,367Current income tax (expense)
    recovery(3)


(11
)


(140
)


41



(162
)


(19
)(Loss) income before cumulative effect of a change in accounting
    principle


(2,971
)


(4,021
)


(10,492
)


(2,641
)


1,348Cumulative effect of a change in accounting principle










(7
)






Net (loss) income

$
(2,971
)

$
(4,021
)

$
(10,499
)

$
(2,641
)

$
1,348Net (loss) income per common share  basic and diluted

$
(0.16
)

$
(0.22
)

$
(0.58
)

$
(0.27
)

$
0.14Weighted average number of common shares outstanding basic


18,365,053



18,333,810



17,964,332



9,764,486



9,727,500 diluted


18,365,053



18,333,810



17,964,332



9,764,486



9,905,464    (1)
    Certain milestone revenue may relate in part to sales activity
    in prior periods.(2)
    Prior to our initial public offering, Westaim provided all of
    the external funding necessary to operate our business, and all
    of the indebtedness reflected on our consolidated balance sheets
    for periods through December 31, 2005 reflects funding from
    Westaim. 38




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(3)
    Although we are currently a majority owned subsidiary of
    Westaim, Canadian tax laws do not allow for the filing of a
    consolidated income tax return with Westaim. Accordingly, we
    have filed our own tax returns and the income tax expenses
    reflected in the above financial data reflect our actual
    consolidated income tax expense for the applicable periods.  As of December 31,2008


2007


2006


2005


2004Amounts in ThousandsConsolidated Balance Sheet Data:Cash and cash equivalents

$
23,388


$
17,841


$
18,926


$
35,901


$
948Current assets


31,751



37,618



33,591



48,992



8,002Total assets


41,800



51,299



45,892



59,460



15,597Current
    liabilities(1)


2,949



3,828



2,306



45,691



37,181Working capital (deficiency)


28,802



33,790



31,285



3,301



(29,179
)Shareholders capital


84,954



84,287



83,154



42,629



3,534Accumulated other comprehensive income (loss)


5,528



557



(5,490
)


(5,281
)


(4,180
)Accumulated deficit


(41,070
)


(38,099
)


(34,078
)


(23,579
)


(20,938
)Total shareholders equity (deficit)


38,356



46,745



43,586



13,769



(21,584
)    (1)
    Includes indebtedness to Westaim of $39,642, $33,482, as of
    December 31, 2005 and 2004, respectively.  Year Ended December 31,2008


2007


2006


2005


2004Amounts in ThousandsAdditional Revenue and Gross Margin Details:Wound care product revenue

$
25,407


$
24,592


$
24,369


$
18,636


$
14,682Manufacturing cost rebate


(4,500
)


(4,500
)










Total revenue excluding milestone
    revenue(1)


20,907



20,092



24,369



18,636



14,682Manufacturing costs


12,842



14,477



16,053



10,015



7,141Gross margin excluding milestone
    revenue(1)

$
8,065


$
5,615


$
8,316


$
8,621


$
7,541Gross margin percent excluding milestone
    revenue(1)


39%



28%



34%



46%



51%Milestone
    revenue(2)






10,000







5,000



10,000Total revenue


20,907



30,092



24,369



23,636



24,682    (1)
    Total revenue excluding milestone revenue equals wound care
    product revenue and the manufacturing cost rebate. Gross margin
    excluding milestone revenue is equal to total revenue excluding
    milestone revenue minus manufacturing costs and gross margin
    percent excluding milestone revenue is equal to gross margin
    excluding milestone revenue divided by total revenue excluding
    milestone revenue. These non-GAAP measures are used by
    management to evaluate how effective our manufacturing
    operations are compared to the revenues generated. We believe
    this measure is useful to investors for the reasons discussed
    under Critical Accounting Policies and Significant
    Judgments and Estimates on page 49. We believe that
    these measurements should be considered in addition to the full
    GAAP presentation of our results.(2)
    Certain milestone revenue may relate in part to sales activity
    in prior periods. 39




---



##### 



ITEM 7.
    MANAGEMENTS
    DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
    OPERATIONS  Overview &
    Current Developments
  tm tm
  tm tm tm tm tm tm tm tm tm tm tm
      tm tm tm tm
 40




---



##### 



tm tm tm tm tm
  tm tm tm tm tm
      Revenue
    Recognition
  tm tm tm tm tm
  tm tm tm
 41




---



##### 



tm period-to-period
  tm
  Product
    Development
    . In vitro Pseudomonas aeruginosa,
    Staphyloccocus aureus,
     42




---



##### 



Results
    of Operations
    Year Ended December 31,2008


2007


2006Amounts in ThousandsWound care product revenue

$
25,407


$
24,592


$
24,369Manufacturing cost rebate


(4,500
)


(4,500
)


Total revenue excluding milestone revenue


20,907



20,092



24,369Manufacturing costs


12,842



14,477



16,053Gross margin excluding milestone
    revenue(1)

$
8,065


$
5,615


$
8,316Gross margin percent excluding milestone
    revenue(1)


39%



28%



34%Milestone
    revenue(2)






10,000



Total revenue


20,907



30,092



24,369    (1)
    Total revenue excluding milestone revenue equals wound care
    product revenue and the manufacturing cost rebate. Gross margin
    excluding milestone revenue is equal to total revenue excluding
    milestone revenue minus manufacturing costs and gross margin
    percent excluding milestone revenue is equal to gross margin
    excluding milestone revenue divided by total revenue excluding
    milestone revenue. These non-GAAP measures are used by
    management to evaluate how effective our manufacturing
    operations are compared to the revenues generated. We believe
    this measure is useful to investors for the reasons discussed
    under Critical Accounting Policies and Significant
    Judgments and Estimates on page 49. We believe that
    these measurements should be considered in addition to the full
    GAAP presentation of our results.(2)
    Certain milestone revenue may relate in part to sales activity
    in prior periods.  Year
    Ended December 31, 2008 and December 31,
    2007
  Revenue
    and Gross Margin
         43




---



##### 



Other
    Operating Costs
        Non-Operating
    Items
      Year
    Ended December 31, 2007 and December 31,
    2006
  Revenue
    and Gross Margin
       44




---



##### 



Other
    Operating Costs
        Non-Operating
    Items
    Liquidity
    and Capital Resources
         45




---



##### 



tm
    Income
    Taxes
       46




---



##### 



47




---



##### 



Contractual
    Commitments and Obligations at December 31, 2008
    Payments Due by PeriodLess than








More than1 year


1-3 years


3-5 years


5 years


Total(in millions)Consolidated Obligations and CommitmentsFacilities operating leases

$
0.7


$
1.5


$
1.5


$
1.6


$
5.3Contractual
    Obligations(1)


4.7















4.7Purchase Obligations


1.0















1.0Total obligations and commitments

$
6.4


$
1.5


$
1.5


$
1.6


$
11.0    (1)
    This commitment relates primarily to our obligation under our
    supply agreement to pay Smith & Nephew a manufacturing
    cost rebate in the amount of $4.5 million in 2009.    Other
    Agreements with Westaim
    Off-Balance
    Sheet Commitments as of December 31, 2008
     48




---



##### 



Critical
    Accounting Policies and Significant Judgments and
    Estimates
      Revenue
    Recognition
    Research
    and Development Costs
   49




---



##### 



Income
    Taxes
    Translation
    of Foreign Currencies
      Year Ended December 31,

Period End Rate


Period Average Rate


High Rate


Low Rate2004


1.2034



1.3017



1.3970



1.17752005


1.1656



1.2115



1.2703



1.15072006


1.1652



1.1340



1.1726



1.09892007


0.9881



1.0742



1.1852



0.91682008


1.2246



1.0660



1.3008



0.9711Monthly 2008January


1.0022



1.0111



1.0369



0.9851February


0.9798



0.9991



1.0199



0.9711March


1.0279



1.0020



1.0295



0.9765April


1.0095



1.0139



1.0328



0.9998May


0.9942



0.9994



1.0245



0.9824June


1.0186



1.0167



1.0320



0.9948July


1.0257



1.0127



1.0274



0.9975August


1.0626



1.0544



1.0716



1.0237September


1.0599



1.0583



1.0821



1.0298October


1.2165



1.1848



1.2995



1.0585November


1.2372



1.2182



1.2952



1.1477December


1.2246



1.2345



1.3008



1.1872  50




---



##### 



Stock
    Based Compensation
          Recently
    Adopted Accounting Pronouncements
  SFAS 159
    EITF
    07-3
  No. 07-3, 07-3). 07-3 07-3 07-3
  Recently
    Pending Accounting Pronouncements
  SFAS 161
   51




---



##### 



EITF
    07-1
  No. 07-1 07-1). 07-1 07-1 07-1
  FASB
    Business Combinations
    i.
    Statement No. 141(R), Business Combination; andii.
    Statement No. 160, Noncontrolling Interests in Consolidated
    Financial Statements  an amendment of ARB No. 51.    
    More assets acquired and liabilities assumed to be measured at
    fair value as of the acquisition date;
    Liabilities related to contingent consideration to be remeasured
    at fair value in each subsequent reporting period;
    An acquirer in preacquisition periods to expense all acquisition
    related costs; and
    Noncontrolling interests in subsidiaries initially to be
    measured at fair value and classified as a separate component of
    equity.   ITEM 7A.
    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
    RISKS     52




---



##### 



ITEM 8.
    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA   Report of
    Independent Registered Chartered Accountants
  To the Board
    of Directors and Shareholders of
      NUCRYST
    Pharmaceuticals Corp.
          Deloitte &
    Touche Llp
    
 53




---



##### 



NUCRYST
    Pharmaceuticals Corp.
  Consolidated
    Balance Sheets
  December 31


December 312008


2007(thousands of U.S. dollars, except share data)ASSETSCurrentCash and cash equivalents

$
23,388


$
17,841Accounts receivable  net (note 4)


5,062



14,924Inventories (note 5)


2,887



4,426Prepaid expenses


414



42731,751



37,618Restricted cash (note 2g)


145



140Capital assets  net (note 6)


9,379



12,734Intangible assets  net (note 7)


525



807$
41,800


$
51,299LIABILITIES AND SHAREHOLDERS EQUITYCurrentAccounts payable and accrued liabilities (note 8)

$
2,859


$
3,650Accounts payable and accrued liabilities to related party
    (note 12)






67Deferred lease inducement (note 2m)


90



1112,949



3,828Long term deferred lease inducement (note 2m)


495



7263,444



4,554Guarantees (note 13)Commitments (note 14)SHAREHOLDERS EQUITYCommon shares no par value, unlimited shares authorized:issued and outstanding  18,320,531 and
    18,367,563 shares atDecember 31, 2008 and 2007, respectively (note 10)


82,776



82,776Additional paid-in capital


2,178



1,511Accumulated other comprehensive (loss) income (note 2d)


(5,528
)


557Accumulated deficit


(41,070
)


(38,099
)Total shareholders equity


38,356



46,745$
41,800


$
51,299   The accompanying notes are an integral part of these
    consolidated financial statements.
 54




---



##### 



NUCRYST
    Pharmaceuticals Corp.
  Consolidated
    Statements of Operations
  Year Ended


Year Ended


Year EndedDecember 31


December 31


December 312008


2007


2006(thousands of U.S. dollars except share andper share data)RevenueWound care product revenue (note 3)

$
20,907


$
20,092


$
24,369Milestone revenue (note 3)






10,000



20,907



30,092



24,369CostsManufacturing


12,842



14,477



16,053Research and development


4,955



6,303



11,162General and administrative


9,062



9,481



7,195Write down of capital assets, net of proceeds (note 6)


174



1,173



1,049Loss from operations


(6,126
)


(1,342
)


(11,090
)Foreign exchange gains (losses)


2,819



(3,283
)


(298
)Interest income


347



744



1,165Interest expense (note 9)










(310
)Loss before income taxes and cumulative effect of a change in
    accounting principle


(2,960
)


(3,881
)


(10,533
)Current income tax (expense) recovery (note 11)


(11
)


(140
)


41Loss before cumulative effect of a change in accounting principle


(2,971
)


(4,021
)


(10,492
)Cumulative effect of a change in accounting principle
    (note 2p)










(7
)Net loss

$
(2,971
)

$
(4,021
)

$
(10,499
)Loss per common share (note 17)Net loss  basic and diluted

$
(0.16
)

$
(0.22
)

$
(0.58
)Weighted average number of common shares outstanding: basic and diluted


18,365,053



18,333,810



17,964,332   The accompanying notes are an integral part of these
    consolidated financial statements.
 55




---



##### 



NUCRYST
    Pharmaceuticals Corp.
  Consolidated Statement of Cash Flows
  Year Ended


Year Ended


Year EndedDecember 31


December 31


December 312008


2007


2006(thousands of U.S. dollars)Operating activitiesNet loss

$
(2,971
)

$
(4,021
)

$
(10,499
)Items not affecting cashDepreciation and amortization


1,825



1,638



1,656Stock-based compensation expense


722



1,121



496Amortization of lease inducement (note 6)


(102
)


(71
)


Write down of capital assets


174



1,173



1,049Foreign exchange loss










(356
)Cumulative effect of a change in accounting principle










7Changes in non cash working capitalAccounts receivable


8,938



(7,009
)


(606
)Inventories


757



4,001



(777
)Prepaid expenses


(63
)


(13
)


(212
)Accounts payable and accrued liabilities


581



668



(2,376
)Accounts payable and accrued liabilities to related party
    (note 12)


(64
)


(177
)


(969
)Cash provided from (used in) operating activities


9,797



(2,690
)


(12,587
)Investing activitiesRestricted cash


(5
)


(5
)


(5
)Purchase of short-term investments










(22,191
)Maturity of short-term investments










22,748Capital expenditures


(1,206
)


(1,920
)


(4,978
)Proceeds on sale of capital assets


53







Intangible assets


(36
)


(66
)


(153
)Cash used in investing activities


(1,194
)


(1,991
)


(4,579
)Financing activitiesIssuance of common shares, net of share issuance costs
    (note 10)






12



286Repurchase of common shares (note 10)


(54
)






Deferred lease inducement






822



Cash (used in) provided from financing activities


(54
)


834



286Effect of exchange rate changes on cash and cash equivalents


(3,002
)


2,762



(95
)Net increase (decrease) in cash and cash equivalents


5,547



(1,085
)


(16,975
)Cash and cash equivalents at beginning of year


17,841



18,926



35,901Cash and cash equivalents at end of year

$
23,388


$
17,841


$
18,926Cash and cash equivalents is comprised of:Cash

$
1,553


$
7,563


$
1,324Cash equivalents

$
21,835


$
10,278


$
17,602Supplemental disclosure of cash flow information:Non-cash capital asset additions included in accountspayable and accrued liabilities at end of year

$
4


$
458


$
243Cash paid for interest

$



$



$
310Cash paid for income taxes

$
151


$



$
72   The accompanying notes are an integral part of these
    consolidated financial statements.
 56




---



##### 



NUCRYST
    Pharmaceuticals Corp.
  Consolidated
    Statements of Shareholders Equity
  AccumulatedCommon Shares


Additional


Other





Total


TotalStated


Paid-in


Comprehensive


Accumulated


Comprehensive


ShareholdersNumber


Amount


Capital


(Loss) Income


Deficit


Loss


Equity(thousands of U.S. dollars, except share data)December 31, 2005


14,227,500


$
42,629


$



$
(5,281
)

$
(23,579
)





$
13,769Issuance of common shares upon conversion of indebtedness to
    related party (note 9)


3,964,200



39,642














$




39,642Issuance of common shares in connection with restricted shares
    and exercises of stock options and share appreciation rights


117,913



401



















401Stock-based compensation










482















482Foreign currency translation adjustments














(209
)






(209
)


(209
)Net loss


















(10,499
)


(10,499
)


(10,499
)December 31, 2006


18,309,613



82,672



482



(5,490
)


(34,078
)


(10,708
)


43,586Issuance of common shares in connection with restricted shares
    and exercises of stock options


57,950



104



















104Stock-based compensation










1,029















1,029Foreign currency translation adjustments














6,047







6,047



6,047Net loss


















(4,021
)


(4,021
)


(4,021
)December 31, 2007


18,367,563



82,776



1,511



557



(38,099
)


2,026



46,745Issuance of common shares in connection with restricted shares
    and exercises of stock options


18,068



54



















54Repurchase of common shares


(65,100
)


(54
)


















(54
)Stock-based compensation










667















667Foreign currency translation adjustments














(6,085
)






(6,085
)


(6,085
)Net loss


















(2,971
)


(2,971
)


(2,971
)December 31, 2008


18,320,531


$
82,776


$
2,178


$
(5,528
)

$
(41,070
)

$
(9,056
)

$
38,356   The accompanying notes are an integral part of these
    consolidated financial statements.
 57




---



##### 



NUCRYST
    Pharmaceuticals Corp.
  Notes to
    Consolidated Financial Statements
 For the
    years ended December 31, 2008, 2007 and 2006
    1.
    DESCRIPTION
    OF BUSINESS    TM
  tm tm tm tm tm
      2
    SUMMARY
    OF SIGNIFICANT ACCOUNTING PRINCIPLES  a)
    Basis of presentation    b)
    Use of estimates    c)
    Translation of foreign currencies      d)
    Accumulated other comprehensive (loss) income   58




---



##### 



e)
    Revenue recognition    f)
    Product warranty    g)
    Cash and cash equivalents      h)
    Short-term investments  held-to-maturity Held-to-maturity
  i)
    Allowance for doubtful accounts    j)
    Inventories    k)
    Capital assets    Machinery and equipment


5 to 10 yearsComputer hardware and software


2 to 5 yearsLeasehold improvements


Term of lease  5 to 20 years
     l)
    Intangible assets     59




---



##### 



m)
    Deferred lease inducement    n)
    Research and development costs    o)
    Income taxes    p)
    Stock-based compensation plans          q)
    Earnings per share    r)
    Employee future benefits    s)
    Recently adopted accounting pronouncements  FIN 48
   60




---



##### 



and measurement of a tax position
    taken or expected to be taken in a tax return. FIN 48
    requires that the Corporation recognize the impact of a tax
    position in the financial statements if that position is more
    likely than not of being sustained on audit, based on the
    technical merits of the position. FIN 48 also provides
    guidance on derecognition, classification, interest and
    penalties, accounting in interim periods and disclosure. The
    provisions of FIN 48 were effective beginning
    January 1, 2007. (Note 11)
  SFAS 157
    SFAS 159
    EITF
    07-3
  No. 07-3, 07-3). 07-3 07-3 07-3
  t)
    Recently pending accounting pronouncements  SFAS 161
    EITF
    07-1
  No. 07-1 07-1). 07-1 07-1 07-1
  FASB Business Combinations
    i.
    Statement No. 141(R), Business Combination; andii.
    Statement No. 160, Noncontrolling Interests in Consolidated
    Financial Statements  an amendment of ARB No. 51.    
    More assets acquired and liabilities assumed to be measured at
    fair value as of the acquisition date;
    Liabilities related to contingent consideration to be remeasured
    at fair value in each subsequent reporting period;
    An acquirer in preacquisition periods to expense all acquisition
    related costs; and
    Noncontrolling interests in subsidiaries initially to be measure
    at fair value and classified as a separate component of equity.   61




---



##### 



3
    AGREEMENTS
    WITH SMITH & NEPHEW  tm tm
    4
    ACCOUNTS
    RECEIVABLE    5
    INVENTORIES  December 31, 2008


December 31, 2007Raw materials

$
2,226


$
2,793Materials in process


316



1,394Finished product


345



239$
2,887


$
4,426
   6
    CAPITAL
    ASSETS  AccumulatedDecember 31, 2008

Cost


Depreciation


Net Book ValueMachinery and equipment

$
11,394


$
3,565


$
7,829Leasehold improvements


1,772



527



1,245Computer hardware and software


569



564



5Construction in progress


300







300$
14,035


$
4,656


$
9,379Machinery and equipment

$
9,044


$
2,875


$
6,169Leasehold improvements


2,734



1,542



1,192Computer hardware and software


880



632



248Construction in progress


5,125







5,125$
17,783


$
5,049


$
12,734
       7
    INTANGIBLE
    ASSETS  December 31, 2008


December 31, 2007Patents

$
2,165


$
2,642Less accumulated amortization


(1,640
)


(1,835
)$
525


$
807
    62




---



##### 



2009

$
1372010


1182011


892012


642013 and thereafter


117Total

$
525
   8
    ACCOUNTS
    PAYABLE AND ACCRUED LIABILITIES  December 31, 2008


December 31, 2007Compensation liabilities

$
897


$
1,737Royalty liabilities


193



340Professional services liabilities


670



179Production liabilities


736



311Capital project liabilities


7



458Facility liabilities


231



236Other trade payables and accrued liabilities


125



389$
2,859


$
3,650
   9
    INDEBTEDNESS
    TO RELATED PARTY    10
    SHARE
    CAPITAL    a)
    Common shares issued and outstanding    Number


Stated Capital2008


2007


2008


2007Balance at beginning of year


18,367,563



18,309,613


$
82,776


$
82,672Stock options exercised






4,540







12Restricted shares


18,068



53,410



54



92Repurchase of shares


(65,100
)






(54
)


Balance at end of year


18,320,531



18,367,563


$
82,776


$
82,776
       b)
    Stock-based compensation plans     63




---



##### 



1,000 restricted shares available
    for sale on the first anniversary date and the remaining 4,000
    restricted shares upon retirement from the board. Each
    independent director is entitled to a subsequent annual grant of
    3,000 restricted share units, 50% of which is subject to a
    one-year vesting and the remaining 50% to a two-year vesting.
    Employees are granted options in the quarter of their hire and
    subsequently upon the approval by the board of directors.
      Weighted AverageNumber of Options


Exercise PriceDecember 31


December 312008


2007


2006


2008


2007


2006Balance at beginning of year


1,405,638



766,352



713,770


$
3.72


$
5.04


$
3.07Granted


684,458



821,757



209,849



1.83



2.90



12.35Exercised






(4,540
)


(105,303
)






2.51



2.52Forfeited


(493,897
)


(177,931
)


(51,964
)


3.91



5.70



12.61Balance at end of year


1,596,199



1,405,638



766,352


$
2.85


$
3.72


$
5.04
       Options Outstanding


Options ExercisableWeighted-Number


Average


Weighted-





Number


Weighted-Outstanding at


Remaining


Average


Aggregate


Exercisable at


Average


AggregateDecember 31,


Contractual


Exercise


Intrinsic


December 31,


Exercise


IntrinsicRange of Exercise Prices

2008


Life (Years)


Price


Value


2008


Price


Value$0.62 to $0.93


29,486



9.98


$
0.81


$
3






$



$
$0.94 to $1.41


500,810



9.27


$
1.10


$




2,000


$
1.40


$
$1.42 to $2.13


237,269



8.92


$
1.99


$




25,756


$
1.97


$
$2.13 to $3.20


603,364



8.15


$
2.56


$




424,697


$
2.56


$
$3.21 to $4.81


122,662



7.42


$
4.03


$




77,275


$
4.01


$
$4.82 to $7.23


8,885



7.07


$
5.50


$




6,507


$
5.46


$
$7.24 to $15.50


93,723



7.11


$
11.18


$




82,482


$
10.89


$
$0.62 to $15.50


1,596,199



8.53


$
2.85


$
3



618,717


$
3.85


$

   in-the-money
      Year ended December 31Stock options

2008


2007


2006Expected volatility


93
%


66
%


58
%Dividend yield










Expected life


7 years



7 years



7 yearsRisk free rate


4.05
%


4.63
%


3.89
%
    64




---



##### 



Weighted AverageNumber of RSUs


Grant Date Fair ValueDecember 31


December 312008


2007


2008


2007Balance at beginning of year


39,200



9,000


$
3.02


$
3.85Granted


12,000



49,700



1.00



3.27Exercised


(18,068
)


(4,500
)


3.00



3.85Forfeited


(5,133
)


(15,000
)


4.08



4.08Balance at end of year


27,999



39,200


$
1.98


$
3.02
   11
    INCOME
    TAXES   Year Ended December 312008


2007


2006Loss before income taxes and cumulative effect of a change in
    accounting principle

$
(2,960
)

$
(3,881
)

$
(10,533
)Statutory income tax rate


29.50
%


32.12
%


32.12
%Expected income tax recovery


(873
)


(1,247
)


(3,383
)Losses and temporary differences  valuation allowance


884



1,387



3,347Large corporations tax










(5
)Income tax expense (recovery)

$
11


$
140


$
(41
)
       December 31, 2008


December 31, 2007Deferred income tax assets:Tax benefit of loss carry-forwards and tax credits

$
16,673


$
21,138Less valuation allowance


(16,122
)


(20,896
)551



242Deferred income tax liabilities:Capital, intangible and other assets


(551
)


(242
)Deferred income tax assets, net

$



$

          65




---



##### 



Any reassessments to be issued by
    the CRA, on an aggregate basis, could result in a material
    effect on the Corporations consolidated financial
    statements, although at this time, the potential impact cannot
    be reasonably estimated by the Corporation. The Corporation has
    provided notification to the U.S. Internal Revenue Service of
    its intention to seek competent authority assistance with
    respect to the 2001 and 2002 taxation years.
      (in thousands)Balance at December 31, 2007

$
Additions for tax positions of prior years


3,023Reductions for tax positions of prior years


(2,567
)Additions for tax positions of current year


1,204Reductions for tax positions of current year


(1,429
)Settlements


Balance at December 31, 2008

$
231
       12
    RELATED
    PARTY TRANSACTIONS    Year Ended December 312008


2007


2006Building rent, including operating costs

$



$
593


$
1,606Services


347



530



1,033$
347


$
1,123


$
2,639
       13
    GUARANTEES      14
    COMMITMENTS    2009

2010

2011

2012

2013$5,454

$737

$737

$739

$741
  66




---



##### 



15
    FINANCIAL
    INSTRUMENTS    Fair
    value of financial instruments
      Foreign
    currency risk
    Concentration
    of credit risk
    16
    EMPLOYEE
    BENEFIT PLAN      17
    LOSS PER
    SHARE      Year Ended December 312008


2007


2006Weighted average number of common shares outstanding 
    basic


18,365,053



18,333,810



17,964,332Effect of dilutive securities










Weighted average number of common shares outstanding 
    diluted


18,365,053



18,333,810



17,964,332
     18
    SEGMENTED
    INFORMATION    a)
    Assets by geographic segment  December 31, 2008


December 31, 2007Canada

$
29,436


$
37,251United States


12,364



14,048$
41,800


$
51,299
  67




---



##### 



b)
    Capital assets and intangible assets by geographic
    segment  December 31, 2008


December 31, 2007Canada

$
9,871


$
12,800United States


33



741$
9,904


$
13,541
     19
    SUBSEQUENT
    EVENTS     68




---



##### 



ITEM 9.
    CHANGES
    IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
    FINANCIAL DISCLOSURE   ITEM 9A. CONTROLS
    AND PROCEDURES  Evaluation
    of disclosure controls and procedures.
  Rule 13a-15(e)
      Managements
    annual report on internal control over financial
    reporting
    
    Pertain to the maintenance of records that in reasonable detail
    accurately and fairly reflect the transactions and dispositions
    of the assets of the issuer;
    Provide reasonable assurance that transactions are recorded as
    necessary to permit preparation of financial statements in
    accordance with generally accepted accounting principles, and
    that receipts and expenditures of the issuer are being made only
    in accordance with authorizations of management and directors of
    the issuer; and
    Provide reasonable assurance regarding prevention or timely
    detection of unauthorized acquisition, use or disposition of the
    issuers assets that could have a material effect on the
    financial statements.  Internal Control-Integrated Framework
  Attestation
    report of the registered public accounting firm
  Form 10-K Form 10-K
 69




---



##### 



Changes
    in internal control over financial reporting
   ITEM 9B.
    OTHER MATTERS   PART III ITEM 10.
    DIRECTORS AND EXECUTIVE OFFICERS AND CORPORATE
    GOVERNANCE    Name

Age

PositionDavid B. Holtz


42


Interim President and Chief Executive Officer,
    Chief Financial OfficerCarol L. Amelio


47


Vice President, General Counsel and Corporate SecretaryDavid C. McDowell


53


Vice President, OperationsBarry M. Heck


47


DirectorNeil
    Carragher(1)(2)(3)


70


Director and Chairman of the BoardRoger G.H. Downer,
    Ph.D.(2)(3)


66


DirectorDavid Poorvin,
    Ph.D.(1)(2)(3)


62


DirectorRichard W.
    Zahn(1)(3)


57


DirectorG.A. (Drew) Fitch


56


Director    (1)
    Member of our Audit Committee.(2)
    Member of our Human Resources and Compensation Committee.(3)
    Member of our Corporate Governance and Nominating Committee.  David B. Holtz start-up
  Carol L. Amelio
  David C. McDowell
  Barry M. Heck
 70




---



##### 



Neil Carragher
  Roger G.H. Downer, Ph.D
  David Poorvin, Ph.D Executive-in-Residence
  Richard W. Zahn
  G.A. (Drew) Fitch
    Code of
    Ethics
  www.sedar.com www.sec.gov. www.nucryst.com
  Composition
    of our Board of Directors
   71




---



##### 



Director
    Independence
    Audit
    Committee and Financial Expert
  www.nucryst.com
  Nomination
    of Directors
    Section 16(a)
    Beneficial Ownership Reporting Compliance
  Rule 3a12-3 www.sedi.ca
  Scientific
    Advisory Board
   72




---



##### 



ITEM 11.
    EXECUTIVE COMPENSATION  Compensation
    Disclosure
  Regulation S-K Form 20-F. 51-102)
  STATEMENT
    OF EXECUTIVE COMPENSATION
    Compensation
    Discussion and Analysis
  Overview
    Oversight
    of Executive Compensation Program
    Executive
    Compensation Objectives and Philosophy
    
    to attract, retain and reward highly qualified executives that
    demonstrate the ability to achieve business success; and
    to motivate those individuals to create and enhance long-term
    shareholder value and to achieve corporate objectives.    Role of
    Committee and Executive Officers in Compensation
    Decisions
   73




---



##### 




    the named executives performance;
    the nature, scope and level of the named executives
    responsibilities;
    level of experience of the named executive in his or her
    respective field; and
    the prevailing market rates for individuals performing similar
    functions at comparable companies.  Compensation
    Consultant
      
    competitive base salaries, short term cash incentive and
    long-term incentives in the form of equity awards for the named
    executives and other officer positions;
    short-term and long-term incentive plan design; and
    trends and issues in executive compensation.          Elements
    of Our Compensation Program
   74




---



##### 



Base Salary.
    Performance-Based Incentive
    Compensation.
  
    40% Earnings Target
    25% New Product Development Target
    15% Business Development Target
    10% Intellectual Property Target
    10% Investor Relations Target          Threshold:
    the minimum level of performance required to receive a payout
    and for which there is at least a 50% chance of achieving the
    target      Target:
    the expected level of performance and for which there is a good
    probability of achieving the target      Stretch:
    performance beyond Target and for which there is a low
    probability of achieving the target   75




---



##### 



Long-Term Equity Incentive Compensation.
  
    enhancing the link between the interests of our named executives
    and those of our shareholders by creating an incentive for our
    named executives to maximize shareholder value;
    providing an opportunity for increased equity ownership by named
    executives and fostering a long term business perspective; and
    retaining our named executives despite very competitive labor
    markets by maintaining competitive levels of total compensation.       76




---



##### 



Other Benefits.
  Compensation
    Committee Interlocks and Insider Participation
      Share
    Price Performance Graph
  Share Price Performance
    Graph.
  Human
    Resources and Compensation Committee Report
  The information contained in this report shall not be deemed
    to be soliciting material or filed with
    the SEC or subject to the liabilities of Section 18 of the
    Exchange Act, except to the extent that we specifically
    incorporate it by reference into any document filed under the
    Securities and Exchange Act.
  Form 10-K
    Roger G.H. Downer
 Neil Carragher
 David W. Poorvin
 77




---



##### 



Summary
    Compensation Table
    Non-equityOption-


Annual Incentivebased


Plan


All Other


TotalFiscal


Salary


Awards(4)


Compensation(5)


Compensation(6)


CompensationName and Principal Position

Year


($)


($)


($)


($)


($)Thomas E. Gardner


2008



400,000



206,969



112,208







719,177Former Chairman, President and Chief Executive OfficerDavid B.
    Holtz(1)


2008



145,817



212,123



58,327







416,267Interim President & Chief Executive Officer Chief
    Financial OfficerEliot M. Lurier,
    CPA(2)


2008



49,875











90,446



140,321Former Vice President, Finance & Administration, Chief
    Financial OfficerDavid C.
    McDowell(3)


2008



234,280



162,174



52,479



42,797



491,730Vice President, Manufacturing OperationsEdward Gaj, Jr.


2008



210,000







30,000



124,829



364,829Former Vice President, Corporate DevelopmentCarol L.
    Amelio(3)


2008



196,795



81,087



44,082



32,643



354,607Vice President, General Counsel and Corporate Secretary    (1)
    Mr. Holtz was appointed our Vice President and Chief
    Financial Officer on May 7, 2008 at an annual salary of
    $225,000. Mr. Holtz was appointed to the additional role of
    Interim President and Chief Executive Officer in January 2009.(2)
    Mr. Luriers employment ceased on April 15, 2008.(3)
    Mr. McDowells and Ms. Amelios compensation
    is denominated in Canadian dollars and has been translated into
    U.S. dollars for purposes of this table at an average 2008
    exchange rate of U.S. $1.00 = C$1.0671.(4)
    Amounts shown in this column do not reflect compensation
    actually received by the named executive. These compensation
    costs reflect option awards granted in the year pursuant to our
    Equity Plan. The fair value of each stock-based award is
    estimated on the date of grant using the Black-Scholes option
    pricing model. Assumptions used in calculation of this amount
    are included in Note 10 in our audited financial statements
    for the fiscal year ended December 31, 2008 included in
    this Annual Report on
    Form 10-K.(5)
    Amounts in this column reflect amounts earned in each year under
    our variable pay program. The awards are paid to the executive
    in the following calendar year. A discussion of the material
    terms of our variable pay program can be found in the
    Compensation Discussion and Analysis section of this document.(6)
    Mr. Lurier received payment of $3,946 for vacation earned
    but not taken, $85,500 for severance and $1,000 for transition
    services. Mr. McDowell received a cash allowance of $18,742
    in lieu of perquisites, payment of $15,404 to our registered
    retirement savings plan and $8,651 for vacation earned but not
    taken. Mr. Gaj received payment of $16,154 for vacation
    earned but not taken, payment of $3,675 to our 401(k) plan and
    payment of severance in the amount of $135,000. Ms. Amelio
    received payment of $17,950 for vacation earned but not taken
    and payment of $14,693 to our registered retirement savings plan.  Summary
    of Employment Agreements for each named executive
    officer
    David
    B. Holtz
   78




---



##### 



Thomas
    E. Gardner
    Eliot
    M. Lurier
    David
    C. McDowell
    Ed
    Gaj, Jr.
    Carol
    L. Amelio
   79




---



##### 



Incentive
    Plan Awards
  Outstanding
    Share-Base Awards and Option Base Awards
    Option-Based Awards

Share-Based AwardsMarket orNumber of

Payout ValueValue of

Shares or

of Share-Number of





Unexercised

Units of

BasedSecurities





In-the-

Shares That

Awards ThatUnderlying

Option

Option

Money

Have Not

Have NotUnexercised

Exercise

Expiration

Options

Vested

VestedNamed Executive

Options (#)

Price
    ($)(1)

Date

($)

(#)

($)Thomas E. Gardner


500,000



2.57


August 22, 2017


250,000



2.57


April 10, 2018










David B. Holtz


240,000



1.09


May 8, 2018










David C. McDowell


38,910



4.16


July 11, 2015


30,000



4.08


February 21, 2017


100,000



2.00


February 21, 2018






3,333



13,599Edward Gaj, Jr.


70,000



2.00


June 1, 2017






3,333



6,666Carol L. Amelio


10,000



9.16


March 16, 2016


35,000



4.08


February 21, 2017


50,000



2.00


February 21, 2018






3,333



13,599    Notes:
  (1)
    Exercise prices for David McDowells first option is
    denominated in Canadian dollars and has been translated into
    U.S. dollars for purposes of this table at the noon rate on
    December 31, 2008 of U.S.$1.00 = C$1.2246.  Incentive
    Plan Awards  Value Vested or Earned During the
    Year
    Option-Based Awards 

Share-Based Awards 

Non-Equity Incentive PlanValue Vested During the

Value Vested During the

Compensation  ValueNamed Executive

Year ($)

Year ($)

Earned During the Year ($)Thomas E. Gardner










112,028David B. Holtz










58,327Eliot M. Lurier










David C. McDowell






6,800



52,479Edward Gaj, Jr.






3,334



30,000Carol L. Amelio






6,800



44,082   Summary
    of 1998 Equity Incentive Plan
  Form 8-K
  Eligible Participants.
  Options.
 80




---



##### 



Share Appreciation Rights.
  
    Tandem Rights.A tandem right is a
    SAR granted in connection with an option that is subject to the
    same terms and conditions applicable to the particular option
    grant to which it pertains with the following exceptions: the
    tandem right shall require the holder to elect between the
    exercise of the underlying option to purchase common shares and
    the surrender, in whole or in part, of such option in exchange
    for a payment of cash or, if provided in the award agreement, at
    our option in common shares, in an amount equal to the excess of
    (A) the fair market price of the number of common shares
    covered by that portion of the surrendered option in which the
    option holder is vested over (B) the aggregate exercise
    price payable for such vested shares. For the purposes of tandem
    rights, fair market price shall be equal to the closing price
    immediately preceding the date of the option surrender.
    Concurrent Rights.A concurrent
    right is a SAR granted in connection with an option that
    applies to all or a portion of common shares subject to the
    underlying option and which is subject to the same terms and
    conditions applicable to the particular option grant to which it
    pertains with the following exceptions: a concurrent right shall
    be exercised automatically at the same time the underlying
    option is exercised with respect to the common shares to which
    the concurrent right pertains and, on exercise, entitles the
    holder to receive a payment of cash or, if provided in the award
    agreement, at our option in common shares, in an amount equal to
    the excess of (A) the aggregate fair market price of the
    common shares purchased under the underlying option over
    (B) the aggregate exercise price paid for such shares. For
    the purposes of concurrent rights, fair market price shall be
    equal to the closing price immediately preceding the date of the
    exercise of the concurrent right.
    Independent Rights.An independent
    right means a SAR granted independently of any option but
    that is subject to the same terms and conditions applicable to
    an option with the following exceptions: an independent right
    shall be denominated in share equivalents. Upon exercise,
    independent rights will be payable in cash or, if provided in
    the award agreement, at our option in common shares, in an
    amount equal to the excess of (A) the aggregate fair market
    price of a number of common shares equal to the number of share
    equivalents in which the holder is vested under such independent
    right, and with respect to which the holder is exercising the
    independent right on such date, over (B) the aggregate
    exercise price for the independent right exercised. For the
    purposes of independent rights, fair market price shall be equal
    to the closing price immediately preceding the date of exercise
    of the independent right.  Restricted Share Units.
  Other Stock-Based Awards.
  Incentive Awards.
  Shares Reserved; Equity Plan Limits.
 81




---



##### 



Termination
    and Change of Control Benefits
    David
    B. Holtz
  Resignation or Retirement.
  Termination with or without Cause.
  Constructive Termination Without Cause.
  Change in Control.
  Termination due to Death or Disability.
  Non-Competition
    Restrictions.
   82




---



##### 



Thomas
    E. Gardner
  Resignation or Retirement.
  Termination with or without
    Cause.
  Change in Control.
  Non-Competition
    Restrictions.
  Eliot
    M. Lurier
  Resignation or Retirement.
  Termination with or without
    Cause.
  Non-Competition
    Restrictions.
  David
    C. McDowell
  Resignation or Retirement.
  Termination with or without Cause.
  Non-Competition
    Restrictions.
 83




---



##### 



Ed
    Gaj, Jr.
  Resignation or Retirement.
  Termination with or without
    Cause.
  Non-Competition
    Restrictions.
  Carol
    L. Amelio
  Resignation or Retirement.
  Non-Competition
    Restrictions.
 84




---



##### 



Termination
    and Change of Control Benefits
  Vesting of StockBased

Employee

TotalIncentive

Compensation(4)

Benefits

CompensationNamed Executive

Type of Payment

Salary ($)

Payment ($)

($)

($)

($)Thomas Gardner

Termination without Cause or ConstructiveTermination


400,000



112,028
(2)










512,028Change in Control


800,000















800,000Death


100,000



112,028











212,028Disability






112,028











112,028David Holtz

Termination without Cause or ConstructiveTermination


112,500



58,327
(3)










170,827Change in Control


225,000



58,327











283,327Death


56,250















56,250Disability






58,327











58,327David McDowell

Termination without Cause


234,281















234,281Change in Control


234,281















234,281Edward Gaj, Jr.

Termination without Cause


105,000 (1
)














105,000Change in Control


105,000











8,952



113,952    (1)
    Pursuant to his employment agreement, Mr. Gaj was entitled
    to a lump-sum payment equal to six months of base salary. In
    addition, we agreed to pay $30,000 relative to our
    performance-based incentive program and the cost associated with
    Mr. Gajs continued participation in our health and
    dental benefit plans for a period of 6 months.(2)
    Mr. Gardners payout range under the variable pay
    program is set as a percentage of his 2008 base salary at 30% at
    Threshold, 50% at Target and 100% at Stretch. For the year ended
    December 31, 2008, a payout of approximately 28% of base
    salary was achieved.(3)
    In the event of termination without cause, Mr. Holtz is
    entitled to payment of a pro-rata performance bonus for the year
    of termination. However, for the calendar year 2008, in lieu of
    an annual incentive award, Mr. Holtz was entitled to be
    paid a bonus of 40% of base salary prorated from the effective
    date of May 7, 2008.(4)
    In respect of each of the named executives, the closing market
    price of our common shares on the NASDAQ Global Market as at
    December 31, 2008 was less than the exercise price of the
    vested options. 85




---



##### 



DIRECTOR
    COMPENSATION
    Director
    Compensation Table
  Non-equityShare-





AnnualFees


Based


Option-based


Incentive Plan


All Other


TotalEarned


Awards
    (1)


Awards
    (2)


Compensation


Compensation


CompensationName

($)


($)


($)


($)


($)


($)Neil Carragher


69,450


















$
69,450Roger Downer


60,400



2,430



1,313











64,143Richard Zahn


112,000



2,430



1,313











115,743David Poorvin


103,200



3,570



1,930











108,700Barry Heck


84,000



3,570



1,930











89,500    (1)
    Messrs. Downer & Zahn were each granted 3,000
    Restricted Stock Units (RSUs) on the anniversary
    date of their appointment to our board being December 21,
    2008, 50% of which vest on the first anniversary of the grant
    date and the remaining 50% of which vest on the second
    anniversary date of the grant date. The trading price of our
    common shares on NASDAQ on the grant date was $0.81.
    Messrs. Poorvin & Heck were each granted 3,000
    Restricted Stock Units (RSUs) on the anniversary
    date of their appointment to our board being May 30, 2008,
    50% of which vest on the first anniversary of the grant date and
    the remaining 50% of which vest on the second anniversary date
    of the grant date. The trading price of our common shares on
    NASDAQ on the grant date was $1.19.(2)
    Pursuant to our board compensation plan,
    Messrs. Downer & Zahn were each granted 2,000
    options to purchase our common shares on the anniversary date of
    their appointment to our board, being December 21, 2008.
    The options vest each as to 1/3 on the first, second and third
    anniversary of the grant date and have an exercise price of
    $0.81. Messrs. Poorvin & Heck were granted 2,000
    options on May 30, 2008 with the same vesting schedule and
    with an exercise price of $1.19    Director
    Fees
  out-of-pocket
  
    each non-employee director receives an annual retainer of
    $15,000 and a further $2,000 for each board meeting attended
    (attendance for purposes of the policy includes attendance in
    person, by teleconference or by video);
    the chairman of our Audit Committee receives a $7,500 retainer
    and a further $1,500 for each committee meeting attended, while
    each other member of such committee receives $1,200 per
    committee meeting attended;
    the chairmen of each of the Human Resources and Compensation
    Committee and Corporate Governance and Nominating Committee
    receives a $5,000 retainer and a further $1,000 per committee
    meeting attended, while each other member of such committees
    receives $800 per committee meeting attended;
    the chairman of any special committees of the board receives a
    $20,000 retainer, each special committee member receives a
    $10,000 retainer, and each special committee member receives
    $2,000 for each special committee meeting attended;
    non-management directors receive a daily fee of $1,500 when
    carrying out, at the request of our board or committees of our
    board, additional directors duties or services on behalf of our
    board or committees;
    any non-management director receives payment of $1,000 if such
    director is required to travel more than four hours by air
    one-way in North America to attend a board meeting and payment
    of $2,000 if such director is required to travel from another
    continent. 86




---



##### 



Director
    Equity Incentive
    1 3 1 2
      Share-based
    Awards, Option-based Awards and Non-equity Incentive Plan
    Compensation for Directors.
  Outstanding
    Share-Base Awards and Option Base Awards
    Option-Based Awards

Share-Based AwardsMarket orNumber of

Payout ValueNumber of







Shares or

of Share-Securities





Value of

Units of

BasedUnderlying

Option



Unexercised

Shares That

Awards ThatUnexercised

Exercise

Option Expiration

In-the-Money

Have Not

Have NotName

Options (#)

Price ($)

Date

Options ($)

Vested (#)

Vested ($)Neil Carragher


20,000



10.00


December 29, 2015


2,000



3.95


December 21, 2016


2,000



1.40


December 21, 2017






1,500



2,100Roger Downer


20,000



10.00


December 29, 2015


2,000



3.95


December 21, 2016


2,000



1.40


December 21, 2017


2,000



0.81


December 24, 2018


180



4,500



4,530Richard Zahn


20,000



10.00


December 29, 2015


2,000



3.95


December 21, 2016


2,000



1.40


December 21, 2017


2,000



0.81


December 24, 2018


180



4,500



4,530David Poorvin


8,000



14.66


May 30, 2016


2,000



2.13


May 30, 2017


2,000



1.19


May 30, 2018






4,500



6,765Barry Heck


8,000



2.13


May 30, 2017


2,000



1.19


May 30, 2018






3,000



3,570  87




---



##### 



Incentive
    Plan Awards  Value Vested or Earned During the
    Year
    Incentive
    Plan Awards  Value Vested or Earned During the
    Year
  Option-Based Awards 


Share-Based Awards 


Non-Equity Incentive PlanValue Vested During the


Value Vested During the


Compensation  ValueName

Year ($)


Year ($)


Earned During the Year ($)Neil Carragher






7,875



Roger Downer






7,875



Richard Zahn






7,875



David Poorvin






3,195



Barry Heck










   ITEM 12.
    SECURITY
    OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
    RELATED STOCKHOLDER MATTERS    
    each person known by us to be the beneficial owner of more than
    5% of our common shares;
    our named executive officers;
    our directors; and
    our directors and executive officers as a group.       Number of


Percentage ofShares Beneficially


Shares BeneficiallyName and Address of Beneficial Owner

Owned


Owned(2)The Westaim Corporation 
    10102 114 Street 
    Fort Saskatchewan, Alberta
    T8L 3W4


13,691,700



74.7
%Thomas E. Gardner


43,910



*Eliot M. Lurier


1,667



*David B. Holtz


14,300



*David C.
    McDowell(1)


95,577



*Carol L. Amelio
    (1)


53,334



*Edward Gaj, Jr.


1,667



*Barry M.
    Heck(1)


17,567



*Neil
    Carragher(1)


35,750



*Roger G.H. Downer,
    Ph.D(1)


28,250



*Richard W.
    Zahn(1)


37,250



*David Poorvin,
    Ph.D(1).


13,250



*All directors and executive officers as a group (10 persons)


342,522



1.9
%    *
    Less than one percent.(1)
    Includes options to purchase common shares exercisable within
    60 days of as follows: 22,000 shares for
    Mr. Carragher, 22,000 shares for Mr. Zahn,
    22,000 shares for Dr. Downer, 6,000 shares for
    Dr. Poorvin, 2,667 shares for Mr. Heck,
    50,000 shares for Mr. McDowell and 35,00 shares
    for Ms. Amelio.(2)
    For each person and group included in this table, percentage
    ownership is calculated by dividing the number of shares
    beneficially owned by such person or group by the sum of
    18,320,531 common shares outstanding at, plus the number of
    common shares that such person or group had the right to acquire
    within 60 days after February 13, 2009. 88




---



##### 



Securities
    Authorized for Issuance Under Equity Compensation
    Plans
   Number ofNumber of





securities remainingsecurities to be





available for futureissued upon


Weighted-average


issuance underexercise of


exercise price of


equity compensationoutstanding


outstanding


plans (excludingoptions, warrants


options, warrants


securities reflectedEquity compensation plans

and rights


and rights


in column
    (a)(1)approved by security holders

(a)


(b)


(c)1998 Equity Incentive Plana) Options


1,596,199


$
2.85



1,123,882b) Restricted Stock Units


27,999    (1)
    The maximum number of shares reserved for issuance under the
    Equity Plan is an amount equal to 15% of our issued and
    outstanding common shares. Common shares issued upon the
    exercise of awards under the Equity Plan will again become
    available for issuance under the Equity Plan.  1998
    Equity Incentive Plan (as amended)
    Grant Committee.
  (a)
    The aggregate number of all shares granted pursuant to all
    awards to any one permitted participant by the grant committee
    shall not exceed 25,000 per annum; and(b)
    The aggregate number of all shares granted pursuant to all
    awards to all permitted participants by the grant committee
    shall not exceed 150,000 per annum.    Form 8-K
  ITEM 13 
    CERTAIN
    RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
    INDEPENDENCE  Certain
    Relationships and Related Transactions
    Employment
    Agreements
    Director
    and Officer Indemnification
   89




---



##### 




    is or was our director or officer; or
    is or was a director or officer of another corporation, of which
    we are or were a shareholder or creditor, at our request;
    against all costs, charges and expenses, including an amount
    paid to settle an action or satisfy a judgment, reasonably
    incurred by the director or officer in respect of any civil,
    criminal or administrative action or proceeding, in which such
    eligible party is involved because of that association with us
    or the other entity.    
    such eligible party did not act honestly and in good faith with
    a view to our best interests (or the best interests of the other
    entity, as the case may be); and
    in the case of a criminal or administrative proceeding that is
    enforced by monetary penalty, such eligible party did not have
    reasonable grounds for believing that such persons conduct
    was lawful.        Relationship
    with Westaim
    Services Agreement.
 90




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##### 



Director and Officer
    Indemnification
  Master Separation Agreement.
  Registration Rights Agreement.
  Westaim Directors and Officers.
  Distribution of Capital.
  Policies
    and Procedures for Review, Approval or Ratification of
    Transactions with Related Persons
  Business
    Corporations Act
 91




---



##### 



ITEM 14. PRINCIPAL
    ACCOUNTANT FEES AND SERVICES    2008


2007(in thousands)Audit Fees

$
252


$
200Audit-Related Fees


13



26Tax Fees


105



39All Other Fees


55



   Audit
    Fees
  Form 10-Q
  Audit-Related
    Fees
    Tax
    Fees
    All Other
    Fees
          92




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##### 



PART IV ITEM 15. EXHIBITS,
    FINANCIAL STATEMENTS AND SCHEDULES  1.
    Consolidated
    Financial Statements  The following documents are filed as part of this Annual
    Report on
    Form 10-K:
  Report of Deloitte & Touche LLP, Independent
    Registered Chartered Accountants
  Financial Statements
  Consolidated Balance Sheets
  Consolidated Statements of Operations
  Consolidated Cash Flows Statements
  Consolidated Statements of Shareholders Equity
    (Deficit)
  Notes to Consolidated Financial Statements
  2.
    Financial
    Statement Schedules    3.
    Exhibits  Exhibit









FiledNo.

Description

Form

Exhibit

Date

Herewith2
.1

Asset Purchase Agreement, dated May 8, 2001, between the
    Registrant and Smith & Nephew, Inc.

Form F-1 Amendment No. 3

2.1

19-12-053
.1

Articles of the Registrant

Form F-1 Amendment No. 2

3.1

16-12-053
.2

Articles of Amendment

Form F-1 Amendment No. 2

3.2

16-12-053
.3

By-laws of the Registrant

Form F-1 Amendment No. 2

3.3

16-12-054
.1

Specimen certificate evidencing common shares

Form F-1 Amendment No. 2

4.1

16-12-0510
.1

Form of Master Separation Agreement between the Registrant and
    The Westaim Corporation (Westaim)

Form F-1 Amendment No. 2

10.1

16-12-0510
.2

Form of Services Agreement between the Registrant and Westaim

Form F-1 Amendment No. 2

10.2

16-12-0510
.3

Form of Registration Rights Agreement between the Registrant and
    Westaim

Form F-1 Amendment No. 3

10.3

19-12-0510
.4

Amended and Restated License and Development Agreement, dated as
    of February 20, 2002, among the Registrant, NUCRYST
    Pharmaceuticals Inc., Smith & Nephew, Inc. and T.J.
    Smith & Nephew Limited

Form F-1 Amendment No. 3

10.6

19-12-0510
.5

Letter Agreement, dated March 14, 2002, among the
    Registrant, NUCRYST Pharmaceuticals Inc., Smith &
    Nephew, Inc. and T.J. Smith & Nephew Limited

Form F-1 Amendment No. 3

10.7

19-12-0510
.6

Amending Agreement, dated November 3, 2003, among the
    Registrant, NUCRYST Pharmaceuticals Inc., Smith &
    Nephew, Inc. and T.J. Smith & Nephew Limited

Form F-1 Amendment No. 3

10.8

19-12-05 93




---



##### 



Exhibit









FiledNo.

Description

Form

Exhibit

Date

Herewith10
.7

Supply Agreement, dated May 8, 2001, among the Registrant,
    Smith & Nephew, Inc. and T.J. Smith & Nephew
    Limited

Form F-1 Amendment No. 3

10.9

14-12-0510
.8

Manufacturing Technology Escrow Agreement, dated May 8,
    2001, among the Registrant, Smith & Nephew, Inc., T.J.
    Smith & Nephew Limited and Montreal Trust Company
    of Canada, as escrow agent

Form F-1 Amendment No. 1

10.10

14-12-0510
.9

Security Trust Agreement, dated as of May 8, 2001,
    between the Registrant and Montreal Trust Company of
    Canada, as trustee

Form F-1 Amendment No. 1

10.11

14-12-0510
.10

Trust Indenture, dated May 8, 2001, among the
    Registrant, NUCRYST Pharmaceuticals Inc. and Montreal
    Trust Company of Canada, as trustee

Form F-1 Amendment No. 3

10.12

19-12-0510
.11

Subordination and Non-Disturbance Agreement, dated as of
    May 8, 2001, among the Registrant, NUCRYST Pharmaceuticals
    Inc., Smith & Nephew, Inc., T.J. Smith &
    Nephew Limited and Montreal Trust Company of Canada

Form F-1 Amendment No. 1

10.13

14-12-0510
.12

Memorandum of Lease Agreement, dated as of July 1, 2005,
    between the Registrant and The Westaim Corporation

Form F-1 Amendment No. 2

10.14

16-12-0510
.13*

1998 Equity Incentive Plan

Form F-1 Amendment No. 2

10.16

16-12-0510
.14*

Form of Stock Option Agreements under the 1998 Equity Incentive
    Plan

Form F-1 Amendment No. 2

10.17

16-12-0510
.15*

Form of Amended and Restated 1998 Equity Incentive Plan

Form F-1 Amendment No. 2

10.18

16-12-0510
.16*

Form of Stock Option Agreement under the Amended and Restated
    1998 Equity Incentive Plan

Form F-1 Amendment No. 3

10.19

19-12-0510
.17*

Letter Agreement, dated March 16, 2005, between the
    Registrant and Mr. Eliot M. Lurier

Form F-1 Amendment No. 2

10.22

16-12-0510
.18*

Letter Agreement, dated June 15, 2005, between the
    Registrant and Mr. David C. McDowell

Form F-1 Amendment No. 2

10.23

16-12-0510
.19*

Summary of Non-Employee Director Compensation

Form F-1 Amendment No. 3

10.25

19-12-0510
.20

Form of Indemnification Agreement

Form F-1 Amendment No. 2

10.26

16-12-0510
.21*

Summary of Changes to 2008 Compensation of Named Executive
    Officers 94




---



##### 



Exhibit









FiledNo.

Description

Form

Exhibit

Date

Herewith10
.22*

Summary of Employment arrangement between Registrant and
    Mr. Barry M. Heck, effective May 23, 2007.

Form 10-Q/A

10.2

7-11-0710
.23*

Letter Agreement between Registrant and Dr. Katherine
    Turner dated May 19, 2006.

Form 10-Q/A

10.4

7-11-0710
.24*

Summary of Amendments made effective July 1, 2007 to Letter
    Agreement between Registrant and Dr. Katherine Turner dated
    May 19, 2006

Form 10-Q/A

10.5

7-11-0710
.25*

Summary of Non-Employee Director Compensation, as amended
    effective May 2, 2006

Form 10-Q/A

10.6

7-11-0710
.26*

Deferred Share Unit Plan adopted by Registrant effective
    March 16, 2006

Form 10-Q/A

10.7

7-11-0710
.27*

Summary of Non-Employee Director Compensation, as amended
    effective June 14, 2007

Form 10-Q/A

10.8

7-11-0710
.28*

Summary of 2007 Named Executive Performance Targets under
    Registrants variable pay program

Form 10-Q/A

10.9

7-11-0710
.29*

Form of Director Restricted Stock Unit Award Agreement

Form 8-K

99.1

20-12-0610
.30*

Form of Restricted Stock Unit Award Agreement 
    Executive Officer

Form 10-Q/A

10.12

7-11-0710
.31*

Employment Agreement between the Registrant and Mr. Thomas
    E. Gardner dated Aug 21, 2007

Form 8-K

10.29

23-08-0710
.32*

Summary of Termination of employment arrangement with
    Mr. Barry M. Heck effective August 22, 2007

Form 10-Q

10.6

7-11-0710
.33

Amended and Restated Supply Agreement, dated September 30,
    2007, among the Registrant, Smith & Nephew, Inc. and
    T.J. Smith & Nephew Limited, effective
    January 1, 2007

Form 8-K/A

99.1

6-11-0710
.34

Second Amended and Restated License and Development Agreement,
    dated September 30, 2007, among the Registrant, NUCRYST
    Pharmaceuticals Inc., Smith & Nephew, Inc., and T.J.
    Smith & Nephew Limited

Form 8-K/A

99.2

6-11-0710
.35*

Letter Agreement made effective September 1, 2007 amending
    the Letter Agreement between the Registrant and Mr. David
    C. McDowell dated June 15, 2005

Form 10-K

10.46

28-02-08 95




---



##### 



Exhibit









FiledNo.

Description

Form

Exhibit

Date

Herewith10
.36*

Letter Agreement made effective January 1, 2008 amending
    the Letter Agreement between the Registrant and Mr. Eliot
    Lurier dated March 16, 2005

Form 10-K

10.47

28-02-0810
.37*

Letter Agreement made effective January 1, 2008 amending
    the Letter Agreement between the Registrant and
    Dr. Katherine Turner dated May 19, 2006

Form 10-K

10.48

28-02-0810
.38*

Form of Employee Incentive Program

Form 10-K

10.49

28-02-0810
.39*

Letter Agreement between Ms. Carol L. Amelio and the
    Registrant dated February 1, 2006.

Form 10-K

10.50

28-02-0810
.40*

Summary of 2008 Variable Pay Targets

Form 10-K

10.51

28-02-0810
.41*

Stock Option Award Agreement dated April 10, 2008 between
    the Registrant and Thomas E. Gardner

Form 8-K

10.52

10-04-0810
.42*

Confidential Separation and General Release Agreement dated
    April 15, 2008 between the Registrant and Eliot M. Lurier

Form 8-K

99.1

29-04-0810
.43*

Employment Agreement dated May 8, 2008 between the
    Registrant and David B. Holtz

Form 8-K

10.53

7-05-0810
.44*

Stock Option Award Agreement dated May 8, 2008 between the
    Registrant and David B. Holtz

Form 8-K

10.54

7-05-0810
.45*

1998 Equity Incentive Plan As further amended

Form 8-K

10.55

8-05-0810
.46

Registration of Securities dated May 14, 2008

Form S-8

5.1 
    23.1 
    23.2 
    24.1

14-05-0810
.47

Post Effective Amendment No. to
    Form S-8

Form S-8

4.1

14-05-0810
.48*

Confidential Separation and General Release Agreement dated
    April 30, 2008 between the Registrant and Katherine J.
    Turner

Form 8-K

10.56

21-05-0810
.49*

Summary of Non Employee Director Compensation, as amended
    effective June 6, 2008

Form 10-Q

10.58

30-06-0810
.50*

1998 Equity Incentive Plan as further amended on May 8, 2008

Form 10-Q

10.59

30-06-0810
.51

Letter Agreement dated August 18, 2008 between T.J.
    Smith & Nephew Limited and Smith & Nephew
    Inc. and the Registrant

Form 10-Q

10.60

30-09-08 96




---



##### 



Exhibit









FiledNo.

Description

Form

Exhibit

Date

Herewith10
.52

Amendment to Lease #2 dated September 4, 2008 between
    Cummings Properties, LLC and the Registrant

Form 10-Q

10.61

30-09-0810
.53*

Amended and Restated Employment Agreement dated
    December 18, 2008 between Thomas E. Gardner and the
    Registrant

Form 8-K

10.56

18-12-0810
.54*

Amending Agreement to Stock Option Award Agreement dated
    December 18, 2008 between Thomas E. Gardner and the
    Registrant

Form 8-K

10.57

18-12-0810
.55*

Confidential Separation and General Release Agreement dated
    December 24, 2008 between Edward Gaj, Jr. and the Registrant

Form 8-K/A

10.58

9-12-0810
.56

Consulting Agreement dated effective January 1, 2009
    between Edward Gaj, Jr. and the Registrant

Form 8-K/A

10.59

9-12-0810
.57

Confidential Separation Agreement and General Release dated
    effective February 11, 2009 between Thomas E. Gardner and
    the Registrant

Form 8-K

99.1

18-02-0921
.1

Subsidiaries of the Registrant

Form F-1

21.1

2-12-0523
.1

Consent of Deloitte & Touche LLP







X24
.1

Power of Attorney (included on signature page hereto)31
.1

Certification pursuant to Section 302 of the Sarbanes-Oxley
    Act of 2002







X32
.1

Certification Pursuant to 18 U.S.C. Section 1350, as
    Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act
    of 2002







X    

    Confidential treatment has been granted for portions of this
    exhibit.  *
    Indicates management compensatory plan, contract or arrangement. 97




---



##### 



SIGNATURES    NUCRYST PHARMACEUTICALS CORP.
  By:
    /s/  David
    B. Holtz   Interim President and Chief Executive Officer
 Chief Financial Officer
  POWER OF
    ATTORNEY
  Form 10-K,
  Name

Title/s/  David
    B. HoltzDavid
    B. Holtz

Interim President and Chief Executive Officer
    Chief Financial Officer
    (Principal Executive Officer, Principal Financial Officer and
    Principal Accounting Officer)/s/  Richard
    ZahnRichard
    Zahn

Director/s/  Barry
    M. HeckBarry
    M. Heck

Director/s/  Neil
    CarragherNeil
    Carragher

Director/s/  Roger
    G.H. DownerRoger
    G.H. Downer

Director/s/  David
    PoorvinDavid
    Poorvin

Director/s/  G.A.
    (Drew) FitchG.A.
    (Drew) Fitch

Director  98