Exhibit 99.1









ANNUAL INFORMATION FORM



FOR THE YEAR ENDED DECEMBER 31, 2014



March 31, 2015



Cipher Pharmaceuticals Inc.2014 Annual Information Form







TABLE OF CONTENTS



|EXPLANATORY NOTES                                               | i 
|--------------------------------------------------------------- | --
|Trademarks                                                      | i 
|Currency                                                        | i 
|Market Data                                                     | i 
|CAUTION REGARDING FORWARD-LOOKING STATEMENTS                    | i 
|CORPORATE STRUCTURE                                             | 1 
|GENERAL DEVELOPMENT OF THE BUSINESS                             | 1 
|History of the Company                                          | 1 
|Developments in 2014                                            | 2 
|Developments in 2015                                            | 3 
|THE BUSINESS                                                    | 4 
|General                                                         | 4 
|Technology Partnerships                                         | 4 
|Drug Delivery Technologies                                      | 5 
|Products                                                        | 5 
|CIP-ISOTRETINOIN (AbsoricaTM/Epuris®)                           | 5 
|CIP-FENOFIBRATE (Lipofen®)                                      | 6 
|CIP-TRAMADOL ER (Conzip® / Durela®)                             | 7 
|BETEFLAM                                                        | 8 
|Recently Acquired Products                                      | 8 
|Specialized Skill and Knowledge                                 | 10
|Strategy                                                        | 11
|Competitive Conditions                                          | 11
|Environmental, Health and Safety Matters                        | 11
|Manufacturing, Supply and Production                            | 11
|Employees                                                       | 12
|Liquidity and Capital Resources                                 | 12
|Revenues for the Last Two Financial Years                       | 12
|RISK FACTORS                                                    | 13
|Risks Related to Cipher and its Business Operations             | 13
|Risks Related to Our Intellectual Property                      | 22
|Risks Related to Our Common Shares                              | 26
|DIVIDENDS                                                       | 27
|DESCRIPTION OF CAPITAL STRUCTURE                                | 27
|Common Shares                                                   | 27
|Preference Shares                                               | 28
|MARKET FOR SECURITIES                                           | 28
|DIRECTORS AND OFFICERS                                          | 28
|LEGAL PROCEEDINGS                                               | 29
|TRANSFER AGENT AND REGISTRAR                                    | 30
|MATERIAL CONTRACTS                                              | 30
|Master Licensing and Clinical Supply Agreement                  | 30
|Lipofen® Distribution and Supply Agreement                      | 30
|CIP-ISOTRETINOIN Development, Distribution and Supply Agreement | 30
|ConZip® Distribution and Supply Agreement                       | 31
|AUDIT COMMITTEE INFORMATION                                     | 31
|Relevant Education and Experience of Audit Committee Members    | 31
|Pre-Approval Policies and Procedures                            | 33
|External Auditor Service Fees                                   | 33
|INTEREST OF EXPERTS                                             | 33
|ADDITIONAL INFORMATION                                          | 33



Schedule A  CHARTER OF THE AUDIT COMMITTEE OF CIPHER PHARMACEUTICALS INC.



Cipher Pharmaceuticals Inc.2014 Annual Information Form







EXPLANATORY
NOTES



Unless otherwise stated,
the information in this Annual Information Form (“AIF”) is stated as of December 31, 2014, and all references to the
Company’s fiscal year are to the year ended December 31, 2014. In this AIF, references to the “Company”, “Cipher”,
“we”, “us” and “our” refer to Cipher Pharmaceuticals Inc.



Information contained
on, or otherwise accessed through, the website of the Company, www.cipherpharma.com shall not be deemed to be a part of
this AIF and such information is not incorporated by reference herein and should not be relied upon by readers for the purpose
of determining whether to invest in the common shares of the Company (the “Common Shares”) or any other securities
of the Company.



Unless otherwise indicated,
all charts, tables and figures are prepared by the Company’s management.



Trademarks



This AIF includes trademarks
which are protected under applicable intellectual property laws and are the property of the Company or its affiliates. Solely for
convenience, the trademarks of the Company referred to in this AIF may appear with or without the ® or TM symbol, but
such references or the absence thereof are not intended to indicate, in any way, that the Company or its affiliates will not assert,
to the fullest extent under applicable law, their respective rights or the right of the applicable licensor to these trademarks.
Any other trademarks used in this Annul Information Form are the property of their respective owners.



Currency



All references to “$”
in this AIF refer to Canadian dollars and all references to “US$” are to United States dollars, unless otherwise indicated.



Market Data



This AIF contains statistical
data, market research and industry forecasts that were obtained, unless otherwise indicated, from independent industry and government
publications and reports or based on estimates derived from such publications and reports and management’s knowledge of,
and experience in, the markets in which the Company operates. Industry and government publications and reports generally indicate
that they have obtained their information from sources believed to be reliable, but do not guarantee the accuracy and completeness
of their information. While the Company believes this data to be reliable, market and industry data is subject to variation and
cannot be verified due to limits on the availability and reliability of raw data, the voluntary nature of the data gathering process
and other limitations and uncertainties inherent in any statistical survey. The Company has not independently verified the accuracy
or completeness of such information contained herein. In addition, projections, assumptions and estimates of the Company’s
future performance and the future performance of the industry in which the Company operates are necessarily subject to a high degree
of uncertainty and risk due to a variety of factors, including those described under the heading “Risk Factors” in
this AIF.



CAUTION
REGARDING FORWARD-LOOKING STATEMENTS



This document includes forward-looking
statements within the meaning of applicable Canadian and United States securities laws, including the “safe harbour”
provisions of the Securities Act (Ontario) and other provincial securities law in Canada and the U.S. Private Securities
Litigation Reform Act of 1995. These forward-looking statements include, among others, statements with respect to our objectives,
goals and strategies to achieve those objectives and goals, as well as statements with respect to our beliefs, plans, objectives,
expectations, anticipations, estimates and intentions. The words “may”, “will”, “could”, “should”,
“would”, “suspect”, “outlook”, “believe”, “plan”, “anticipate”,
“estimate”, “expect”, “intend”, “forecast”, “objective”, “hope”
and “continue” (or the negative thereof), and words and expressions of similar import, are intended to identify forward-looking
statements.





Cipher Pharmaceuticals Inc.2014 Annual Information FormI







By their very nature, forward-looking statements
involve inherent risks and uncertainties, both general and specific, which give rise to the possibility that predictions, forecasts,
projections and other forward-looking statements will not be achieved. Certain material factors or assumptions are applied in making
forward-looking statements and actual results may differ materially from those expressed or implied in such statements. We caution
readers not to place undue reliance on these statements as a number of important factors, many of which are beyond our control,
could cause our actual results to differ materially from the beliefs, plans, objectives, expectations, anticipations, estimates
and intentions expressed in such forward-looking statements. These factors include, but are not limited to our ability to enter
into in-licensing, development, manufacturing and marketing and distribution agreements with other pharmaceutical companies and
keep such agreements in effect; our  dependency on three products;  integration difficulties and other risks if we acquire
or in-license technologies or product candidates;  reliance on third parties for the marketing of our products; the product
approval process is highly unpredictable;  the timing of completion of clinical trials; reliance on third parties to manufacture
our products; we may be subject to product liability claims; unexpected product safety or efficacy concerns may arise; generate
revenue from a limited number of distribution and supply agreements; the pharmaceutical industry is highly competitive; requirements
for additional capital to fund future operations; dependence on key managerial personnel and external collaborators;  no assurance
that we will receive regulatory approvals in the U.S., Canada or any other jurisdictions;  limitations on reimbursement in
the healthcare industry; limited reimbursement for products by government authorities and third-party payor policies;  various
laws pertaining to health care fraud and abuse; reliance on the success of strategic investments and partnerships; the publication
of negative results of clinical trials; unpredictable development goals and projected time frames; rising insurance costs; ability
to enforce covenants not to compete; risks associated with the industry in which it operates; foreign currency risk; the potential
violation of intellectual property rights of third parties; our efforts to obtain, protect or enforce our patents and other intellectual
property rights related to our products; changes in U.S., Canadian or foreign patent law; litigation in the pharmaceutical industry
concerning the manufacture and supply of novel versions of existing drugs that are the subject of conflicting patent rights; inability
to protect our trademarks from infringement; shareholders may be further diluted; volatility of our share price; a significant
shareholder; we do not currently intend to pay dividends; and our operating results may fluctuate significantly.



We caution that the foregoing list of important
factors that may affect future results is not exhaustive. When reviewing our forward-looking statements, investors and others should
carefully consider the foregoing factors and other uncertainties and potential events. Additional information about factors that
may cause actual results to differ materially from expectations, and about material factors or assumptions applied in making forward-looking
statements, may be found in the “Risk Factors” section hereof, under “Business Risks” and elsewhere in
our Management’s Discussion and Analysis of Operating Results and Financial Position for the year ended December 31, 2014
and elsewhere in our filings with Canadian securities regulators and the U.S. Securities and Exchange Commission. Except as required
by Canadian or United States securities law, we do not undertake to update any forward-looking statements, whether written or oral,
that may be made from time to time by us or on our behalf; such statements speak only as of the date made. The forward-looking
statements included in this Annual Information Form are, unless otherwise indicated, made as of December 31, 2014 and are expressly
qualified in their entirety by this cautionary language.



Cipher Pharmaceuticals Inc.2014 Annual Information FormII







Except where otherwise indicated or
where the context otherwise requires, all references in this annual information form (“AIF”) to the “Company”
or “Cipher” are to Cipher Pharmaceuticals Inc. Unless otherwise indicated, all dollar amounts are expressed in Canadian
dollars and the statistical and financial data and other information contained in this AIF are presented as at December 31, 2014.



CORPORATE
STRUCTURE



Cipher Pharmaceuticals
Inc. was formed by articles of incorporation under the Business Corporations Act (Ontario) (the “OBCA”) on January
9, 2004. The Company’s head and registered office is located at 5650 Tomken Road, Unit 16, Mississauga, Ontario, L4W 4P1.
The Company is the successor to the drug development and pharmaceutical research business of CML HealthCare Inc. (“CML”).
On October 31, 2008, the Company’s three wholly-owned subsidiaries, Cipher Canada Inc., Cipher Pharmaceuticals Ltd. and Cipher
Holdings (Barbados) Ltd., were wound up by way of voluntary dissolution under the OBCA. Since January 1, 2008, all operating activities
have been carried out by Cipher Pharmaceuticals Inc. Prior to December 31, 2007, research and development activities were carried
out by Cipher Pharmaceuticals Ltd.



GENERAL
DEVELOPMENT OF THE BUSINESS



History of the Company



This section describes
the important developments for the Company in general and for its products over the last three completed financial years. Additional
details related to the Company’s products are included in the “Products” section of this document.



On January 30, 2012,
the Company’s New Drug Submission (“NDS”) for CIP-ISOTRETINOIN, the novel, patented formulation of the acne medication
isotretinoin, was accepted for review by Health Canada.



On March 19, 2012,
Durela® was launched in Canada by Medical Futures. As a result of the launch, Cipher received a $150,000 payment
from Medical Futures. Cipher’s 50% share of the milestone was reflected in its financial results for the first quarter of
fiscal 2012.



On May 27, 2012, the
Company received final U.S. Food and Drug Administration (“FDA”) approval for CIP-ISOTRETINOIN. As a result of the
FDA approval, Cipher received a US$9.0 million milestone from Ranbaxy Laboratories Inc. (“Ranbaxy”), approximately
US$4.5 million of which was shared with Galephar Pharmaceutical Research, Inc. (“Galephar”).



In August 2012, the
Company reached agreement with Institut Biochimique SA (“IBSA”), a privately-owned, global pharmaceutical company headquartered
in Lugano, Switzerland, to obtain exclusive license and distribution rights in Canada to market the Betesil® Patch
(now called the Beteflam Patch), a novel, patent-protected, self-adhesive medicated plaster containing 0.1% betamethasone valerate,
for the treatment of inflammatory skin conditions such as plaque psoriasis.



On November 19, 2012,
the Company received NDS approval from Health Canada for CIP-ISOTRETINOIN.



On November 26, 2012,
the Company announced that Ranbaxy had launched AbsoricaTM, the trade name for CIP-ISOTRETINOIN in the U.S. market.



In April 2013, Cipher
entered into a distribution and supply agreement with Tecnofarma International Ltd. (“Tecnofarma”) under which Tecnofarma
was granted the exclusive right to market, sell and distribute CIP-TRAMADOL ER in Latin America. Tecnofarma, headquartered in Uruguay,
operates in 18 Latin American countries and plans to launch the product in certain territories, including Brazil and Mexico. Under
the terms of the agreement, Cipher will receive an upfront payment and is eligible for additional milestones based upon regulatory
approval in Brazil and Mexico. Cipher will supply product to Tecnofarma and product manufacturing will be fulfilled by Galephar.





Cipher Pharmaceuticals Inc.2014 Annual Information Form-1-







In June 2013, Cipher
launched Epuris® (CIP-ISOTRETINOIN) capsules in the Canadian market. Cipher introduced the product at the 88th annual
Canadian Dermatology Association Conference.



On September 17, 2013,
Ranbaxy received a Paragraph IV Certification Notice of filing from Watson Laboratories Inc. (“Watson”) of an Abbreviated
New Drug Application (“ANDA”) to the FDA for a generic version of AbsoricaTM (isotretinoin capsules). Ranbaxy
and Cipher announced their intention to vigorously defend Absorica’s intellectual property rights and pursue all available
legal and regulatory pathways in defense of the product. AbsoricaTM is protected by three issued patents listed in the FDA’s
Approved Drug Products List (Orange Book), which expire in September 2021. A patent infringement lawsuit against Watson was filed
by Ranbaxy, Cipher and Galephar on October 29, 2013 and, as a result, the ANDA is subject to a 30-month stay of FDA approval, beginning
on the date the notification letter was received. The stay of FDA approval lasts until there is a final court ruling, or a settlement,
or the 30-month stay expires. A Markman hearing is currently scheduled for early April 2015 in the U.S. Federal Court located in
New Jersey. Please see “Risk Factors”.



Effective September
20, 2013, the Toronto Stock Exchange added the shares of Cipher to the S&P/TSX SmallCap Index.



Developments in 2014



On January 21, 2014,
Cipher announced that its marketing partner for Absorica® reached a cumulative sales milestone in accordance with
the parties’ commercial agreement, triggering a one-time US$5.0 million (net) payment to Cipher. This revenue was included
in Cipher’s Q4 2013 financial results.



On February 5, 2014,
Gerald McDole was appointed as Chair of the Board of Directors of the Company. Mr. McDole has been a member of Cipher’s Board
since 2004.



On March 14, 2014,
the Company announced that Larry Andrews would be stepping down from his position as President and Chief Executive Officer. To
ensure a smooth transition of responsibilities, Mr. Andrews remained with the Company until June 30, 2014 at which time Shawn Patrick
O’Brien was named President and Chief Executive Officer following which Mr. Andrews continued working with Cipher in a consulting
capacity.



On March 25, 2014,
Cipher announced that Thomas G. Wellner was appointed to the Board of Directors of the Company. Mr. Wellner, former co-Chief Executive
Officer of LifeLabs LP, was responsible for leading the integration of CML HealthCare Inc. into LifeLabs’ organization. Mr.
Wellner became President and Chief Executive Officer of Revera Inc. shortly after his appointment to the Cipher Board.



On June 18, 2014, Cipher
Pharmaceuticals announced it entered into a definitive distribution and supply agreement with Laboratorios Andrómaco S.A.
(“Andrómaco”) under which Cipher granted Andrómaco the exclusive right to market, sell and distribute
Cipher’s isotretinoin capsules in Chile. Andrómaco is a leader in the production and marketing of pharmaceutical products
in Chile and certain other Latin American countries. Once regulatory approval is granted, it is expected that Cipher’s product
will be marketed under the brand name Lisacne-CIP, replacing Andrómaco’s current isotretinoin product, Lisacne. The
branded dermatology products currently marketed by Andrómaco in Chile include Fucidin® and Daivonex®.
Andrómaco is majority owned by Grünenthal GmbH, Germany. Under the terms of the agreement, Cipher will supply product
to Andrómaco. Product manufacturing will be fulfilled by Cipher’s partner, Galephar.



Shawn Patrick O’Brien
was appointed as Chief Executive Officer of Cipher, effective June 30, 2014. Mr. O’Brien brings 30 years global executive
leadership experience in the pharmaceutical and biotechnology sectors. He was one of the three founders of AltheRx Pharmaceuticals,
President and Chief Executive Officer of Profectus BioSciences Inc., as well as President and Chief Executive Officer of Solstice
Neurosciences, Inc. Previously, Mr. O’Brien spent 17 years with AstraZeneca Pharmaceuticals, where he held multiple senior-level
positions in Canada and the U.S. Mr. O’Brien began his career at The Upjohn Company of Canada.



On July 24, 2014, Cipher
entered into a definitive distribution and supply agreement with Ranbaxy Laboratories Ltd. (“Ranbaxy India”) under
which Cipher granted them the exclusive right to market, sell and distribute Cipher’s isotretinoin capsules in Brazil. Ranbaxy
India plans to promote the product through a brand dermatology division in Brazil. Cipher’s isotretinoin formulation is expected
to be the flagship product in Ranbaxy India’s dermatology franchise in Brazil, once it achieves regulatory approval.





Cipher Pharmaceuticals Inc.2014 Annual Information Form-2-







In October 2014, Ranbaxy
Launched Absorica® (isotretinoin) 25 mg and 35 mg capsules in the U.S. market. Absorica has become the most prescribed
branded oral isotretinoin in the U.S., as per a recent independent survey conducted with dermatologists.



Cipher’s common
shares were approved for listing and trading on the NASDAQ Global Market (the “NASDAQ”) commencing at the start of
trading on November 24, 2014, under the trading ticker symbol “CPHR”. Cipher’s common shares continued to be
listed in Canada on the Toronto Stock Exchange, however, the Company’s ticker symbol changed to “CPH” effective
November 24, 2014.



On December 18, 2014,
Cipher announced that its Board of Directors approved a By-law (the “Advance Notice By-law”) that requires advance
notice to the Company where director nominations are made by shareholders of the Company, subject to specified exceptions. The
Advance Notice By-law is similar to the Advance notice by-laws adopted by many other Canadian public companies and is intended
to ensure that all shareholders receive adequate notice of the nominations to be considered at a meeting and can thereby exercise
their voting rights in an informed manner. While the Advance Notice By-law is now effective, shareholders will be asked at the
next shareholder meeting to confirm and ratify the Advance Notice By-law, a copy of which has been filed under the Company’s
profile at www.sedar.com.



In late December 2014,
Cipher acquired the assets of Melanovus Oncology Inc. (“Melanovus”), a Pennsylvania-based life sciences company. The
assets include seven pre-clinical compounds for the treatment of melanoma and other cancers. Founded in 2012, Melanovus acquired
an exclusive global license to a library of compounds and related intellectual property from the Penn State Research Foundation.
The compounds originate from work done by Dr. Gavin Robertson, professor of pharmacology, pathology, dermatology and surgery at
Penn State University, and director of the Penn State Hershey Melanoma Center. Melanovus’ lead product candidate, Nanolipolee-007,
is a liposomal formulation of a plant-derived compound that is a first-in-class cholesterol-transport inhibitor which has demonstrated
anti-proliferative activity against certain melanoma cell lines (including B-raf resistant strains) in vitro as well as in early
in vivo mouse studies. Cipher will pursue pre-clinical studies leading to Investigational New Drug status with the FDA, Health
Canada and other health authorities. The plan for the development of the remaining compounds in the portfolio has not yet been
established. The transaction included an upfront payment to Melanovus of US$500,000, as well as the payment of certain IP expenses
related to patent prosecution and maintenance.



Developments in 2015



On January 7, 2015,
Cipher announced that it had licensed the Canadian rights to Ozenoxacin, a topical treatment for adult and paediatric patients
with impetigo, from Ferrer Internacional S.A. (“Ferrer”), a privately-held Spanish pharmaceutical company. In 2013,
Ferrer successfully completed a first phase III clinical trial of Ozenoxacin in adult and paediatric patients aged two years and
older with impetigo. The study demonstrated the superiority of Ozenoxacin one per cent cream versus a placebo, applied topically
twice daily for five days, on both the clinical and bacteriological endpoints by end of therapy visit. In addition, Ozenoxacin
demonstrated a superior bacteriological cure compared to placebo by the second visit (day three-four). The trial also demonstrated
that Ozenoxacin is safe and very well tolerated in the adult and paediatric populations. Ferrer commenced a second phase III trial
of Ozenoxacin in June 2014. The multicenter, randomized, double-blinded, clinical study comparing Ozenoxacin one per cent cream
versus placebo will be conducted in approximately 412 patients aged two months and older with a clinical diagnosis of non-bullous
or bullous impetigo. Ferrer anticipates that the second phase III trial will be completed by the end of Q1 2015. Ferrer obtained
exclusive worldwide rights (except China, Japan, Korea and Taiwan) to Ozenoxacin from Toyama. Ozenoxacin formulated as a one per
cent topical cream is the subject of a number of granted and pending patent applications. Under the terms of the agreement, Ferrer
will receive an upfront payment and is eligible for development milestones and revenues from product sales in Canada. Ferrer will
manufacture Ozenoxacin and deliver finished product to Cipher.





Cipher Pharmaceuticals Inc.2014 Annual Information Form-3-







On February 12, 2015,
Cipher announced that the Beteflam Patch (previously called the Betesil® Patch) was accepted for review by Health
Canada. The Beteflam Patch is a novel, patent-protected, self-adhesive medicated plaster containing 0.1% betamethasone valerate,
for the treatment of inflammatory skin conditions such as chronic plaque psoriasis. Cipher licensed the Canadian rights to the
Beteflam Patch in 2012 from Institut Biochimique SA (“IBSA”), a pharmaceutical company based in Switzerland. The efficacy
and safety of the product has been established in two successful phase III trials and one successful phase IV trial conducted by
IBSA. IBSA recently published positive results from a large non-inferiority study, which compared the product to Dovobet (betamethasone
plus calcipotriol), a commonly prescribed combination product containing a corticosteroid and a vitamin D analogue. Acceptance
for review by Health Canada resulted in a $150,000 milestone payment from Cipher to IBSA.



On February 26, 2015,
Cipher announced the acquisition of the worldwide rights to three products from Astion Pharma (“Astion”), a Denmark-based
specialty pharmaceutical company. The three products are focused on inflammatory dermatological diseases: DermadexinTM, PruridexinTM,
and ASF-1096.



On March 23, 2015,
Cipher announced the licensing of the Canadian distribution rights to CF101, a novel chemical entity being developed by Can-Fite
Biopharma Ltd. (“Can-Fite”) for moderate to severe plaque psoriasis and rheumatoid arthritis.



See the “Products”
section below for additional information on the history of the Company’s products.



THE
BUSINESS



General



Cipher is a growing
specialty pharmaceutical dermatology company, with a portfolio of commercial and late stage products. Cipher acquires best-in-class
products and transformative compounds that fulfill high unmet medical needs in dermatology. Our experienced management team has
a proven track record of successfully managing the required clinical development and regulatory approval processes and marketing
products either directly or through partners.



Our core capabilities
include clinical and regulatory affairs, product licensing, supply chain management, and marketing and sales. Cipher’s products
include a novel version of the acne medication isotretinoin, which is marketed as AbsoricaTM in the United States and Epuris®in Canada.



Technology Partnerships



The Company currently
in-licensed four products based on two proprietary drug delivery technologies of Galephar and one proprietary technology from IBSA.
The licensed drug delivery technologies have been applied successfully to a variety of active ingredients. The Company has established
a strong collaborative partnership with Galephar, a Puerto Rico-based company with oral and pulmonary drug delivery technology,
formulation, manufacturing and quality control expertise. Galephar has licensed the commercial rights for three compounds to the
Company for certain geographical regions.



In particular, the
Company entered into a Master Licensing and Clinical Supply Agreement with Galephar in February 2002 for rights to sell, market
and distribute, on a perpetual basis, as follows:



| | · | exclusive rights throughout the world for Galephar’s capsule formulation of Tramadol;
| | - | -------------------------------------------------------------------------------------



| | · | exclusive rights in North, South and Central America, the Caribbean and Bermuda for Galephar’s
capsule formulation of Isotretinoin and non-exclusive rights in certain other countries; and
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | exclusive rights in North, South and Central America, the Caribbean and Bermuda for Galephar’s
capsule formulation of Fenofibrate and non-exclusive rights in certain other countries.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





Cipher Pharmaceuticals Inc.2014 Annual Information Form-4-







The Master Licensing
and Clinical Supply Agreement gives the Company the right to conduct all studies and tests required by the FDA and other regulatory
authorities in the geographic area where the pharmaceutical product is being packaged, tested, approved and/or marketed, as well
as the right to prepare, file and prosecute any regulatory submissions for approval in such geographic area. Milestone payments
for these products have been paid in full.



Cipher is also obliged
to pay Galephar fifty percent (50%) of any (i) distribution fees it receives, (ii) net sales revenue less manufacturing costs
and (iii) royalties received, except that prior to issuance of a patent for a product, only 30% of royalties are payable. If Cipher
or its affiliates are directly selling to wholesalers, 12% of net sales received by Cipher is payable to Galephar, or 7% prior
to issuance of a patent. No payments are required with respect to a sale of a product occurring 20 years after the first sale of
the product in the country or if a patent is obtained when the patents lapse in that country for the product, whichever is later.
Galephar also supplies product to Cipher through commercial supply agreements for each product.



Drug Delivery Technologies



The Company’s
currently marketed products utilize the following drug delivery technologies licensed from Galephar:



Oral Lidose®
Technology. Galephar’s oral semi-liquid capsule drug delivery technology is a patent-protected drug delivery system.
Active ingredients are incorporated in semi-solid or liquid compositions, contained in capsules. This delivery system facilitates
low manufacturing costs, while delivering super-bioavailability for relatively water-insoluble compounds. CIP-FENOFIBRATE and CIP-ISOTRETINOIN
are based on the Lidose drug delivery system.



Oral Controlled-Released
Bead Technology. Galephar’s multiple particle controlled release capsule technology (“MPCRC”), is based on
unique extrusion and spheronization methods, and produces beads containing up to 80% active ingredient. Each coated bead is a controlled
release system in itself, and the multi-particulate system provides smooth consistent plasma levels over an extended period of
time. The system is virtually pH-independent enabling the product to be taken with or without food. MPCRC enables CIP-TRAMADOL
ER.



The Company has also
licensed a product from IBSA that utilizes the following drug delivery technology:



Self-Adhesive Medicated
Plaster. IBSA’s technology is based on a unique self-adhesive medicated patch providing twenty four hour delivery of
medication to the affected skin area. The self-adhesive plaster is 75cm2 (7.5 x 10 cm) and is composed of multiple layers,
including a transparent plastic film layer, an intermediate tissue layer, an adhesive layer containing the drug and a protective
layer (to be removed prior to application). The plaster acts as an occlusive dressing and provides a continuous sustained release
of the drug. The plaster can be trimmed to exactly cover the affected area, delivering a uniform concentration of the drug specifically
to the affected area, thereby reducing the risk of exposure of the drug outside the treated area. The plaster also acts as a barrier,
preventing further damage of the area from trauma or scratching, which may aid in the healing process. Beteflam is based on IBSA’s
self-adhesive medicated plaster technology.



Products



The following is a
description of the Company’s currently marketed products:



CIP-ISOTRETINOIN (AbsoricaTM/Epuris®)



Isotretinoin is used
in the treatment of severe acne. CIP-ISOTRETINOIN is based on Galephar’s Lidose drug delivery technology. The Company’s
marketing rights to CIP-ISOTRETINOIN include the Americas and a majority of the Pacific Rim. CIP-ISOTRETINOIN provides more consistent
absorption under fed and fasted conditions. Our formulation offers more consistent absorption day-in and day-out over the course
of a typical three- to five-month treatment period. According to the IMS, the U.S. isotretinoin market was US$630 million in 2014.





Cipher Pharmaceuticals Inc.2014 Annual Information Form-5-







In August 2008, the
Company entered into a definitive development, distribution and supply agreement with Ranbaxy (the “CIP-ISOTRETINOIN Development,
Distribution and Supply Agreement”), under which Ranbaxy was granted the exclusive right to market, sell and distribute CIP-ISOTRETINOIN
in the U.S. Under the terms of the agreement, the Company received an initial upfront payment of $1 million. The agreement also
provided for additional pre- and post-commercialization milestone payments of up to $23 million, all of which have been received
by us to date. We also receive a royalty percentage in the mid-teens on net sales. After product-related expenses are deducted,
approximately 50% of net revenue received by Cipher under the agreement is paid to Galephar. The Company is responsible for product
supply and manufacturing, which is fulfilled by our partner, Galephar.



In the fourth quarter
of 2008, a product patent was issued by the U.S. Patent and Trademark Office for CIP-ISOTRETINOIN.



On May 27, 2012, the
Company received final FDA approval for CIP-ISOTRETINOIN, marketed by Ranbaxy as AbsoricaTM in the United States. On
November 26, 2012, the Company announced that Ranbaxy had launched AbsoricaTM in the U.S. market.



On November 19, 2012,
we received NDS approval from Health Canada for CIP-ISOTRETINOIN. In June 2013, we launched Epuris® (CIP-ISOTRETINOIN)
capsules in the Canadian market.



On September 17, 2013,
Ranbaxy, received a Paragraph IV Certification Notice of filing from Watson of an ANDA to the FDA for a generic version of AbsoricaTM
(isotretinoin capsules). A Paragraph IV Certification Notice is when the sponsor company of the ANDA believes that it is not infringing
the patent and/or the patent is not valid. Ranbaxy and Cipher are vigorously defending Absorica's intellectual property rights
and pursuing all available legal and regulatory pathways in defense of the product. AbsoricaTM is currently protected
by three issued patents listed in the Orange Book, which expire in September 2021. A patent infringement lawsuit against Watson
was filed by Ranbaxy, Cipher and Galephar on October 29, 2013 and as a result the ANDA is subject to a 30-month stay of FDA approval,
beginning on the date the notification letter was received. The stay of FDA approval lasts until there is a final court ruling,
or a settlement, or the 30-month stay expires. A Markman hearing is currently scheduled for early April 2015 in the U.S. Federal
Court located in New Jersey. A Markman hearing is a pretrial hearing in a U.S. District Court during which a judge examines evidence
from the parties on the appropriate meanings of relevant key words used in a patent infringement claim. See “Risk Factors”.



In June 2014, the Company
entered into a definitive distribution and supply agreement with Andrómaco under which Cipher has granted Andrómaco
the exclusive right to market, sell and distribute Cipher's isotretinoin capsules in Chile. Once regulatory approval is granted,
it is expected that our product will be marketed under the brand name Lisacne-CIP, replacing Andrómaco's current isotretinoin
product, Lisacne. Under the terms of the agreement, we will supply product to Andrómaco and product manufacturing will be
fulfilled by Galephar.



In July 2014, the Company
entered into a definitive distribution and supply agreement with Ranbaxy under which we granted Ranbaxy the exclusive right to
market, sell and distribute our isotretinoin capsules in Brazil. Ranbaxy plans to promote the product through a brand dermatology
division in Brazil. Ranbaxy has indicated that Cipher's isotretinoin formulation is expected to be a flagship product in Ranbaxy's
dermatology franchise in Brazil, once it achieves regulatory approval. Under the terms of this agreement with Ranbaxy, we will
receive an upfront payment and be eligible for additional pre-commercial milestone payments. Cipher will supply the product to
Ranbaxy and product manufacturing will be fulfilled by Galephar. Ranbaxy will be responsible for all regulatory related activities
associated with gaining and maintaining regulatory approval of the product in Brazil.



CIP-FENOFIBRATE (Lipofen®)



CIP-FENOFIBRATE was
in-licensed from Galephar in November 2000. CIP-FENOFIBRATE is a novel patented formulation of the active ingredient fenofibrate,
which is used in the treatment of Hyperlipidemia, a cholesterol disorder. Hyperlipidemia is a condition characterized by high levels
of low-density lipoprotein (“LDL”) cholesterol and/or triglycerides (a type of fat found in the blood). Fenofibrate
is known to lower LDL cholesterol and triglycerides and increase high-density lipoproteins (“HDL”), known as “good
cholesterol”.





Cipher Pharmaceuticals Inc.2014 Annual Information Form-6-







According to IMS in
2014, the Hyperlipidemia market in the U.S. alone exceeded US$12.6 billion and is made up of three primary groups of drugs: statins,
fibrates and the prescription DHA/EPA (omega 3) market. Fibrates have proven to be superior in lowering triglycerides and raising
HDL levels. The use of fenofibrates has escalated rapidly in recent years, with increased patient demand expected to continue.
The market for existing fenofibrate formulations in the U.S. exceeded US$1.26 billion during 2014, down from US$1.68 billion in
the previous year.



CIP-FENOFIBRATE is
based on the Lidose delivery system and is subject to a patent in the U.S., which was obtained in 1996, and a patent in Canada,
which was allowed in the second quarter of 2006, in each case held by Galephar. FDA approval for the product was received in January,
2006. The drug was approved under the label Lipofen® in three unique dosages: 50 mg, 100 mg, and 150 mg. Health
Canada’s Therapeutic Products Directorate (the “TPD”)approvalof the product
was granted under a Notice of Compliance from Health Canada in February 2006, following the successful resolution of patent litigation
in Canada, however the product is not currently sold in Canada.



In July 2007, Cipher
entered into a distribution and supply agreement (the “Lipofen®Distribution and Supply Agreement”)
with ProEthic Pharmaceuticals Inc. (“ProEthic”). ProEthic was subsequently acquired by Kowa Company Ltd., a multinational
Japanese company actively engaged in manufacturing and trading activities in various fields, including pharmaceuticals and life
sciences. ProEthics name was changed to Kowa Pharmaceuticals America Inc. (“Kowa”). Under the agreement, Kowa is granted
the exclusive right to market, sell and distribute Lipofen® in the United States. In late 2007, Kowa launched Lipofen®
150 mg and 50 mg capsules in the U.S. market with the full effort of its sales and marketing teams.



Cipher’s agreement
with Kowa is for a period of ten years and Kowa has the right to extend the term for two additional two year periods. Under the
terms of the agreement, Cipher received a $2 million up-front licensing payment and has received other milestone payments totaling
$2 million. The Company also receives a royalty on a percentage of net sales, which escalates from the mid-teens to the mid-twenties
based on annual sales levels and the amount of promotional effort by Kowa. After product-related expenses are deducted, approximately
50% of net revenue received by Cipher under the agreement is paid to Galephar.



Since the date of launch
of Lipofen®, monthly prescriptions have shown steady growth as Kowa increased its penetration of the primary care
physicians in its targeted regions and expanded its sales force. Kowa’s sales force has grown to approximately 250 sales
representatives. During Q2 2014, Cipher and Kowa agreed to preemptively launch an authorized generic version of Lipofen in advance
of the expiration of the product patent in January 2015. Combined performance for the product during 2014 was encouraging and total
prescriptions (Lipofen plus the authorized generic) remained stable compared to the preceding period. As of March 31, 2015, there
has been no market entry of a generic version of Lipofen.



CIP-TRAMADOL ER (Conzip® / Durela®)



CIP-TRAMADOL ER was
in-licensed from Galephar on an exclusive worldwide basis in January 2001. CIP-TRAMADOL ER is a novel, sustained-release formulation
of the active ingredient tramadol, which is used for the management of moderate to moderately severe pain. Tramadol is a synthetic
opioid molecule which was developed to have the analgesic efficacy of the opioid family of drugs without the well-known side effects,
including addiction. Tramadol was launched in the U.S. in 1995 by Johnson & Johnson as Ultram®and reached over
US$600 million in sales prior to the entry of brand generic competitors. According to IMS, the U.S. market in 2014 for extended
release formulations of tramadol exceeded US$76 million which represents 1.8% of the total tramadol immediate release and extended
release prescription market.



CIP-TRAMADOL ER is
enabled by oral controlled-release beads, a sustained-release drug delivery technology licensed from Galephar. The novel formulation
means that CIP-TRAMADOL ER delivers sustained-release drug delivery properties, with once-daily dosing, supporting ease-of-use
for physicians, and a high level of compliance among chronic pain sufferers. Until the launch of Ultram ER in early 2006, pain
sufferers typically required 3 to 5 doses of tramadol per day. While Cipher is one of two companies with a once-daily dose, the
Company believes there is sufficient opportunity in the pain relief market for its sustained-release tramadol capsule due to the
size of the market and CIP-TRAMADOL ER’s profile, including rapid absorption and no food effect.





Cipher Pharmaceuticals Inc.2014 Annual Information Form-7-







On March 26, 2010,
our NDS to Health Canada for CIP-TRAMADOL ER, was accepted for review. On May 10, 2010, the FDA approved CIP-TRAMADOL ER and in
October 2010, the U.S. Patent and Trademark Office issued a patent for the product.



On June 28, 2011, Cipher
entered into a distribution and supply agreement with Vertical Pharmaceuticals Inc. (“Vertical”), a U.S.-based specialty
pharmaceutical company, under which we granted Vertical the exclusive right to market, sell and distribute CIP-TRAMADOL ER under
the trade name ConZip® in the U.S. (the “ConZip® Distribution and Supply Agreement”). The Company
received an up-front payment of $0.5 million and a payment of $0.75 million upon launch of the product in 2011. The agreement provides
for additional milestone payments of up to $3.75 million based upon the achievement of certain net sales targets. We also receive
a royalty on the percentage of net sales in the mid-teens.



On August 31, 2011,
Cipher received Health Canada approval for CIP-TRAMADOL ER.



On September 30, 2011,
Cipher entered into a distribution and supply agreement with Medical Futures Inc. (“Medical Futures”), a Canadian-based
pharmaceutical company, under which Cipher granted Medical Futures the exclusive right to market, sell and distribute CIP-TRAMADOL
ER under the trade name Durela® in Canada. Upon launch, we received a $150,000 payment from Medical Futures. For
this agreement, and for the Vertical agreement, after product-related expenses are deducted, approximately 50% of net revenue received
by Cipher is paid to Galephar.



In April 2013, Cipher
entered into a distribution and supply agreement with Tecnofarma International Ltd. (“Tecnofarma”) under which Tecnofarma
was granted the exclusive right to market, sell and distribute CIP-TRAMADOL ER in Latin America. Tecnofarma, headquartered in Uruguay,
operates in 18 Latin American countries and plans to launch the product in certain territories, including Brazil and Mexico. Under
the terms of the agreement, Cipher will receive an upfront payment and is eligible for additional milestones based upon regulatory
approval in Brazil and Mexico. Cipher will supply product to Tecnofarma and product manufacturing will be fulfilled by Galephar.



BETEFLAM



In Q3 2012, Cipher
obtained exclusive license and distribution rights in Canada to market the Beteflam Patch, a novel, patent-protected, self-adhesive
medicated plaster for the treatment of inflammatory skin conditions such as plaque psoriasis. Based on initial feedback from Canadian
dermatologists, the Beteflam Patch is expected to provide distinct advantages over existing treatment options, particularly for
patients who suffer from plaque psoriasis in hard to treat areas such as knees and elbows. The efficacy and safety of the Beteflam
Patch has been established in three successful phase III trials, and the product is currently marketed in several European countries.
In Q4 2014, Cipher submitted the Beteflam regulatory package, which successfully passed screening and is under review by Health
Canada.



Recently Acquired Products



Melanovus Assets



In December 2014, Cipher
acquired the assets of Melanovus, a Pennsylvania-based life sciences company. The assets include seven pre-clinical compounds for
the treatment of melanoma and other cancers. Founded in 2012, Melanovus acquired an exclusive global license to a library of compounds
and related intellectual property from the Penn State Research Foundation. The compounds originate from work done by Dr. Gavin
Robertson, professor of pharmacology, pathology, dermatology and surgery at Penn State University, and director of the Penn State
Hershey Melanoma Center.  Melanovus' lead product candidate, Nanolipolee-007, is a liposomal formulation of a plant-derived
compound that is a first-in-class cholesterol-transport inhibitor which has demonstrated anti-proliferative activity against certain
melanoma cell lines (including B-raf resistant strains) in vitro as well as in early in vivo mouse studies. Cipher will
pursue pre-clinical studies leading to Investigational New Drug status with the U.S. Food and Drug Administration, Health Canada
and other health authorities. The plan for the development of the remaining compounds in the portfolio has not yet been established,
however, the other six compounds consist of oral and topical applications, which could have potential as adjuvant therapies in
skin cancer. The transaction includes an upfront payment to Melanovus of US$500,000, as well as the payment of certain IP expenses
related to patent prosecution and maintenance.





Cipher Pharmaceuticals Inc.2014 Annual Information Form-8-







Ozenoxacin



On January 7, 2015,
Cipher announced that it has licensed the Canadian rights to Ozenoxacin, a topical treatment for adult and paediatric patients
with impetigo, from Ferrer, a privately-held Spanish pharmaceutical company. In 2013, Ferrer successfully completed a first phase
III clinical trial of Ozenoxacin in adult and paediatric patients aged two years and older with impetigo. The study demonstrated
the superiority of Ozenoxacin one per cent cream versus a placebo, applied topically twice daily for five days, on both the clinical
and bacteriological endpoints by end of therapy visit. In addition, Ozenoxacin demonstrated a superior bacteriological cure compared
to placebo by the second visit (day three-four). The trial also demonstrated that Ozenoxacin is safe and very well tolerated in
the adult and paediatric populations. Ferrer commenced a second phase III trial of Ozenoxacin in June 2014. The multicenter, randomized,
double-blinded, clinical study comparing Ozenoxacin one per cent cream versus placebo will be conducted in approximately 412 patients
aged two months and older with a clinical diagnosis of non-bullous or bullous impetigo. Ferrer anticipates that the second phase
III trial will be completed by the end of Q2 2015. Ferrer obtained exclusive worldwide rights (except China, Japan, Korea and Taiwan)
to Ozenoxacin from Toyama. Ozenoxacin formulated as a one per cent topical cream is the subject of a number of granted and pending
patent applications. Under the terms of the agreement, Ferrer will receive an upfront payment and is eligible for development milestones
and revenues from product sales in Canada. Ferrer will manufacture Ozenoxacin and deliver finished product to Cipher.



The Astion Portfolio



In February, 2015,
Cipher announced the acquisition of the worldwide rights to three products from Astion (the “Astion Acquisition”).
The three products are focused on inflammatory dermatological diseases and are as follows:



| | · | Dermadexin is a patent-protected topical barrier-repair cream containing the pharmacologically
active ingredient P3GCM, which has dual mechanisms of action. Firstly, P3GCM inhibits fatty acid amide hydrolase (FAAH), which
is induced in dermal inflammation. FAAH breaks down the anti-pruritic and anti-inflammatory dermal endocannabinoids; thus P3GCM
gives rise to enhanced dermal endocannabinoid levels which exert anti-inflammatory and anti-itch effects via cannabinoid receptors
on peripheral sensory nerve endings and various inflammatory cells. In addition, P3GCM inhibits Nuclear Factor Kappa B (NF-kB)
mediated inflammatory gene expression, giving rise to lower dermal levels of inflammation.. The product was approved in the European
Union (EU) in 2014 as a Class III medical device for the treatment of seborrheic dermatitis, an inflammatory skin disorder affecting
the scalp, face, and torso. Dermadexin SD Cream has been tested in two placebo-controlled, multicenter clinical trials (436 patients)
where it displayed a marked and statistically significant effect on the symptoms of facial seborrhoeic dermatitis with a fast onset
of action and an increasing effect over time.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Pruridexin is a patent-protected topical cream for the treatment of chronic pruritis (itching),
which is a significant unmet need. Pruridexin was submitted to the European Medicines Agency in 2014 as a Class III medical device
and is under active review with a response expected in the first half of 2015. Pruridexin Cream has been tested in two placebo-controlled,
multicenter clinical trials (352 patients) and displayed a marked and statistically significant effect on the pruritus with a fast
onset of action and an increasing effect over time. Pruridexin exerts its therapeutic effects via similar mechanisms of action
as Dermadexin.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





Cipher Pharmaceuticals Inc.2014 Annual Information Form-9-







| | · | ASF-1096 is a product candidate in phase II that is being investigated as a treatment for discoid
lupus erythematosus, a severe, chronic, inflammatory and disfiguring skin disease that affects about 3 out of 10,000 in the general
population. ASF-1096 has been awarded orphan drug status in the EU. Moreover, the European Medicines Agency has agreed that a phaseII/III
trial followed by a phase III confirmatory trial are required for approval. ASF-1096 is predicated on the discovery that the R-enantiomer
of the β2-andrenergenic receptor agonist, salbutamol, has anti-inflammatory effects. S-salbutamol counteracts this anti-inflammatory
activity and is thought to cause contact sensitivity reactions. ASF-1096 contains purified R-salbutamol formulated into a cream.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The terms of the Astion Acquisition included
an upfront payment to Astion of $6.0 million, which was funded from Cipher's current cash resources. A subsequent $2.5 million
milestone will be paid upon regulatory approval and commercialization of Dermadexin or Pruridexin in the U.S, which is where Cipher
will focus its commercialization efforts. The agreement includes approximately $31.5 million in additional payments contingent
upon clinical milestones, regulatory approvals, commercialization and sales milestones in the both the U.S. and other regions.
Over time, Cipher expects to out-license the products to partners in certain other regions.



CF101



On March 23, 2015 Cipher
announced the licensing of the Canadian distribution rights to CF101, a novel chemical entity being developed by Can-Fite for moderate
to severe plaque psoriasis and rheumatoid arthritis.



CF101 recently completed
a Phase II/III double-blind, placebo-controlled study, which was designed to test the efficacy of CF101 in patients with moderate
to severe plaque psoriasis. Can-Fite enrolled 326 patients through 17 clinical centers in the U.S., Europe, and Israel. Top-line
results from the trial will be published by Can-Fite at the end of March 2015. Interim results from this Phase II/III trial and
final results from the prior Phase II trial in psoriasis were both positive showing that CF101 effectively improved disease symptoms. In
addition, at the end of 2013, CF101 completed a Phase IIb study for active rheumatoid arthritis, and Can-Fite has completed the
study design for a Phase III program. Additional detail on the CF101 technology and clinical studies can be found at www.canfite.com.



Approximately 500,000
people in Canada receive treatment for psoriasis. In moderate to severe cases, the most common treatment options are systemic
biologic drugs, which are delivered by injection or intravenous (IV) infusion and have well-known shortcomings, including increased
risk of infection. CF101 is an oral small molecule drug formulated in a tablet and has an excellent human safety profile, demonstrated
in more than 1,000 patients.



The timeline to regulatory
submissions to Health Canada will be determined by the completion of the remaining clinical trial program.



Under the terms of
the agreement, Can-Fite will receive an upfront payment of $1.65 million and is eligible for milestone payments of up to $2 million
and royalties from product sales in Canada. The agreement provides that Can-Fite will deliver finished product to Cipher.



Specialized Skill and Knowledge



The Company has extensive
knowledge in identifying, evaluating and selecting currently marketed drugs and combining them with proven drug delivery technologies.
We search for, and acquire/in-license, best in class and first to market compounds in the dermatology space. By enlisting the support
of experienced clinical trial, regulatory and legal consultants, the Company is able to use expert knowledge to assist in the successful
development of its products and the protection of its intellectual property. Cipher has strengthened its internal resources and
may continue to add talented senior professionals to its team as needed to support growth.





Cipher Pharmaceuticals Inc.2014 Annual Information Form-10-







Strategy



The Company intends
to expand and become a leading specialty pharmaceutical company, in the dermatology space. We intend to achieve this goal by:



| | · | further commercializing our products;
| | - | -------------------------------------



| | · | acquiring or in-licensing additional products and product candidates;
| | - | ---------------------------------------------------------------------



| | · | further developing our product candidates; and
| | - | ----------------------------------------------



| | · | building our own sales and marketing capabilities in North America.
| | - | -------------------------------------------------------------------



Competitive Conditions



The Company competes
for both for in-licensing and out-licensing opportunities. The pharmaceutical industry is intensely competitive and includes a
range of players from large top-tier multinational companies to a smaller group of mid-tier companies and a large number of smaller,
regional companies, often owned and operated by researchers. The Company believes that competition in the pharmaceutical industry
will continue to increase as disease management and patient compliance become more important in the overall strategy of cost containment
in the healthcare sector. In addition, pharmaceutical companies are increasingly taking steps to extend market exclusivity for
their products by utilizing new drug delivery technologies and then filing patents on the resulting new formulations. Many of the
Company’s major drug development competitors have more experience in developing products and obtaining regulatory approvals
and many are better capitalized.



The Company believes
that its competitive strengths include the sophistication and complexity of its licensed technology, its cost effectiveness and
wide applicability, management’s expertise evaluating drug candidates and forming product licensing agreements, experience
with clinical studies and regulatory matters, and the quality and reputation of its strategic partners and management team.



Environmental, Health and Safety Matters



Currently, we do not
manufacture any of our products. However, the operations of our subcontractors and suppliers are subject to various laws and regulations
relating to environmental, health and safety matters, and their failure to comply with such laws and regulations could have a material
adverse effect on our business and reputation, result in an interruption or delay in the development or manufacture of our product
candidates, or increase the costs for the development or manufacture of our product candidates.



Manufacturing, Supply and Production



We do not own or operate
manufacturing facilities for the production of our products. We currently rely on third-party contract manufacturers for all of
our required raw materials, active ingredients and finished products.



Development and commercial
quantities of any products that we develop will need to be manufactured in facilities, and by processes, that comply with the requirements
of the FDA and the regulatory agencies of other jurisdictions in which we are seeking approval. We employ internal resources to
manage our manufacturing contractors and we play an active role in working with manufacturers to maintain the quality of the products
that we supply to our distribution partners. The manufacturers of our drugs have advised us that they are compliant with both current
Good Laboratory Practices (“cGLP”) and Good Manufacturing Practices (“cGMP”).



We and our contract manufacturers are,
and will be, subject to extensive governmental regulation in connection with the manufacture of any pharmaceutical products or
medical devices. We and our contract manufacturers must ensure that all of the processes, methods and equipment are compliant with
cGMP and cGLP for drugs on an ongoing basis, as mandated by the FDA and foreign regulatory authorities, and conduct extensive audits
of vendors, contract laboratories and suppliers. Please see “Risk Factors”.





Cipher Pharmaceuticals Inc.2014 Annual Information Form-11-







Employees



At December 31, 2014,
the Company had 15 full-time employees. The distribution of our full-time employees according to main areas of activities is set
forth in the following table:





|                                    | Employees
|----------------------------------- | ---------
|Area of Activity:                   |          
|Business development                | 3        
|Regulatory                          | 5        
|Selling, general and administrative | 7        
|Total                               | 15       



The Company also uses
senior consultants, hired on a contract basis and outsources its clinical development programs to various Contract Research Organizations
(“CRO”), as needed. The Company also has seven Canadian sales representatives, contracted from a Contract Sales Organization.



The Company has never
experienced any employment-related work stoppages and believe our relationships with our employees are good.



Liquidity and Capital Resources



The development of
pharmaceutical products is a process that requires significant investment. The Company expects to incur research and development
expenses, including expenses related to personnel and clinical trials. The Company also expects that its selling, general and administrative
expenses will increase in the future as it expands its selling and business development activity, adds infrastructure and incurs
additional costs in connection with being a public company, including directors’ and officers’ insurance, investor
relations programs and professional fees.



The Company’s
future capital requirements will depend on a number of factors, including the continued progress of its research and development
of product candidates, the timing and outcome of clinical trials and regulatory approvals, payments received or made under licensing
or other collaborative agreements, the costs involved in preparing, filing, prosecuting, maintaining, defending and enforcing patent
claims and other intellectual property rights, defending against patent infringement claims, the acquisition of licenses to new
products or technologies, the status of competitive products and the success of the Company in developing and maintaining markets
for its products and services.



As at December 31,
2014, the Company had cash of $52.6 million. The Company expects these funds will be sufficient to fund current product development
and operating costs.



Revenues for the Last Two Financial Years



The Company reported total revenue of $27.0
million in 2013 and $32.3 million in 2014, an increase of 20%, however, revenue in 2013 included a non-recurring milestone of $5.3
million. Adjusting for the impact of this non-recurring item, year-over-year total revenue growth was 49%. The Company had three
products on the market in the U.S. and one in Canada for both years. In addition, Epuris was launched in Canada in June 2013.



Absorica revenue in 2013 was $21.2 million
and in 2014 was $22.5 million, with 2013 revenue including the above noted $5.3 million non-recurring item. Lipofen revenue was
$3.4 million in 2013 and $5.6 million in 2013. Revenue for ConZip and Durela was $2.0 million in 2013 and $2.1 million in 2014.
The Company also reported product revenue in 2013 following the launch of Epuris in Canada in the amount of $0.4 million, with
$2.1 million reported in 2014. All product revenue is derived from Canada, while virtually all licensing revenue is derived from
the United States.





Cipher Pharmaceuticals Inc.2014 Annual Information Form-12-







RISK
FACTORS



Risks Related to Cipher and its Business
Operations



Our success depends, in large measure,
on our ability to enter into in-licensing, development, manufacturing and marketing and distribution agreements with other pharmaceutical
companies and keep such agreements in effect.



Currently, our marketed
product pipeline is in-licensed from Galephar. If we breach our underlying agreement, Galephar could terminate the agreement in
its entirety, or with respect to any particular product. Additionally, the Company works with other partners in the specialty pharmaceutical
industry.



Factors that may affect
the success of our collaborative efforts with pharmaceutical company partners (including Galephar) include, but are not limited
to, the following:



| | · | our partners may be pursuing alternative technologies or developing alternative products, either
on their own or in collaboration with others, that may be competitive with the products as to which they are collaborating with
us, which could affect their commitment to our product development efforts;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | our partners may not be able to adequately supply its products in commercial quantities, which
would adversely affect revenues;
| | - | -------------------------------------------------------------------------------------------------------------------------------



| | · | reductions in marketing or sales efforts or a discontinuation of marketing or sales of our products
by our commercial partners may reduce future revenues, which will be based on a percentage of net sales by these partners; and
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | our partners may terminate their collaborations with the Company, which could make it difficult
for us to attract new partners or adversely affect how we are perceived in the business and financial communities.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



While the Company attempts
to minimize risk by maintaining strong relationships with its partners and focusing on improving products that have already had
market success, the development, marketing and commercialization of pharmaceutical products is a process that requires large investments
and can take years to complete. Projects can be abandoned along the way or regulatory authorities can refuse to approve new products.



Our current revenues are dependent
on three products.



Our current revenue
is totally dependent on CIP-Fenofibrate, CIP-Tramadol and CIP-Isotretinoin. Each of these products faces competition and the ability
to grow the market and our market share is limited.



If in the future we acquire or in-license
technologies or product candidates, we may incur various costs, may have integration difficulties and may experience other risks
that could harm our business and results of operations.



Any product candidate
or technologies we in-license or acquire will likely require additional development efforts prior to commercial sale, approval
by the FDA, Health Canada and/or applicable foreign regulatory authorities. All product candidates are prone to risks of failure
inherent in pharmaceutical product development, including the possibility that the product candidate, or product developed based
on in-licensed technology, will not be shown to be sufficiently safe and effective for approval by regulatory authorities. If intellectual
property related to product candidates or technologies we in-license is not adequate, we may not be able to commercialize the affected
products even after expending resources on their development. In addition, we may not be able to manufacture economically or successfully
commercialize any product candidate that we develop based on acquired or in-licensed technology that is granted regulatory approval,
and such products may not gain wide acceptance or be competitive in the marketplace. Moreover, integrating any newly acquired or
in-licensed product candidates could be expensive and time-consuming. If we cannot effectively manage these aspects of our business
strategy, our business may not succeed.





Cipher Pharmaceuticals Inc.2014 Annual Information Form-13-







We rely on third parties for the marketing
of our products.



Currently, our products
(other than Epuris®) are marketed by third parties by way of license arrangements. Even if acceptable and timely
marketing arrangements are available, the products we develop may not be accepted in the marketplace, and even if such products
are initially accepted, sales may thereafter decline.



Additionally, our distribution
partners may make important marketing and other commercialization decisions with respect to products they develop without our input
or may not perform in the manner expected. As a result, many of the variables that may affect the Company’s revenues, cash
flows and net income may not be exclusively within its control. The termination of any such contracts or services with such third
parties could also have a material adverse effect on our business, financial condition and operating results.



The product approval process is highly
unpredictable and may take longer than expected.



We currently have three
approved products in the U.S. and Canada. We are also seeking product approvals in other foreign jurisdiction and approval for
the Beteflam Patch in Canada.Approvals may be refused or delayed for a number of reasons, including the requirement for
additional clinical studies or the challenges of notices of infringement by patent holders. Challenges of this type are not uncommon
and may delay NDA approval by up to 30 months.



The timing of completion of clinical
trials, anticipated regulatory approvals, pricing approvals, obtaining reimbursement codes or the timing of product launch may
vary due to factors such as delays or setbacks in the conducting of our clinical trials, regulatory approvals or in the manufacturing
and marketing of an approved product.



We may experience numerous
unforeseen events that could delay or prevent our ability to receive regulatory approval, including:



| | · | regulatory requests for additional analyses, reports, data, non-clinical studies, and clinical
trials;
| | - | ------------------------------------------------------------------------------------------------------



| | · | clinical trials could produce negative or inconclusive results;
| | - | ---------------------------------------------------------------



| | · | clinical trials may enroll slower than we anticipate;
| | - | -----------------------------------------------------



| | · | regulators may not authorize commencement of a clinical trial on a timely basis or at all;
| | - | ------------------------------------------------------------------------------------------



| | · | we may elect to suspend or terminate clinical trials due a potential health risk;
| | - | ---------------------------------------------------------------------------------



| | · | the supply or quality of product necessary to conduct clinical trials of the product candidates
may be insufficient or inadequate;
| | - | ----------------------------------------------------------------------------------------------------------------------------------



| | · | we may not be able to demonstrate that a product candidate’s clinical and other benefits
outweigh its safety risks; and
| | - | -----------------------------------------------------------------------------------------------------------------------



| | · | there may be changes in governmental regulations or guidelines that render our data insufficient
for approval.
| | - | --------------------------------------------------------------------------------------------------------------



If we do not meet our
timelines within the projected timeframe, our business, financial condition and operating results could be materially adversely
affected. Also, a delay in the launch of a product could negatively impact overall revenues and profitability relating to a product,
particularly because the lifespan of our products is expected to be considerably shorter than the average lifespan of new chemical
entities.





Cipher Pharmaceuticals Inc.2014 Annual Information Form-14-







We have no experience manufacturing
products and rely, and intend to rely, on third parties to manufacture our products. The development and commercialization of our
products could be stopped or delayed if any such third party fails to provide us with sufficient quantities of product or fails
to do so at acceptable quality levels or prices or fails to maintain or achieve satisfactory regulatory compliance.



We lack the resources
and the capability to manufacture our products. Instead, we rely on our third-party contract manufacturers. The facilities used
by our third-party contract manufacturers may undergo pre-approval inspections by the applicable regulatory authorities, including
the FDA, after we submit our NDA to the FDA, and must be able to demonstrate readiness for commercial marketing and conformance
with FDA cGMP regulations and related requirements of other applicable regulatory authorities.



Our third-party manufacturers
may not perform as agreed, may be unable to comply with FDA cGMP regulations, applicable guidelines, state and foreign regulatory
requirements or may terminate their agreements with us. If any of our third-party manufacturers cannot successfully manufacture
material that conforms to our specifications and the applicable regulatory authorities’ strict regulatory requirements, or
undergo successful governmental regulatory inspection, our business will be adversely affected. We have no direct day-to-day control
over our third-party manufacturers’ ability to maintain adequate quality control, quality assurance and qualified personnel.
If our third-party manufacturers are unable to satisfy the regulatory requirements for the manufacture of our products, or if our
suppliers or third-party manufacturers decide they no longer want to manufacture our products, we may need to find alternative
manufacturing facilities. The number of third-party manufacturers with the necessary manufacturing and regulatory expertise and
facilities is limited, and it could be expensive and take a significant amount of time to arrange for alternative suppliers, which
could have a material adverse effect on our business, financial condition and operating results. Changes in the manufacturing site
of our product will require prior FDA approval before the products may be marketed in the U.S. We might be unable to identify manufacturers
for long-term commercial supply on acceptable terms or at all.



Manufacturers are subject
to ongoing periodic announced and unannounced inspections by the FDA and other governmental authorities to ensure compliance with
government regulations. If the FDA or other regulatory authority has any concerns following an inspection of these manufacturing
facilities, the facility may be order to cease operations until such issues are resolved, which could have a material adverse effect
on the Company’s business, financial condition and operating results.



Manufacturers of pharmaceutical
products often encounter difficulties in production, particularly in scaling up and validating initial production. These problems
include difficulties with production costs and yields, quality control, including stability of the product, quality assurance testing,
operator error, shortages of qualified personnel, as well as compliance with strictly enforced U.S. federal, state, Canadian and
foreign regulations. Furthermore, if microbial, viral or other contaminations are discovered in our products or in the manufacturing
facilities in which our products are made, such manufacturing facilities may need to be closed for an extended period of time to
investigate and remedy the contamination. We cannot be assured that any stability or other issues relating to the manufacture of
any of our products will not occur in the future. Additionally, our contract manufacturers may experience manufacturing difficulties
due to resource constraints or as a result of labor disputes or unstable political environments. If our contract manufacturers,
component fabricators or secondary service providers were to encounter any of these difficulties, or otherwise fail to comply with
their contractual obligations, our ability to provide any product candidates to patients in clinical trials would be jeopardized.
Any delay or interruption in the supply of clinical trial supplies could delay the completion of clinical trials, increase the
costs associated with maintaining clinical trial programs and, depending upon the period of delay, require us to commence new clinical
trials at additional expense or terminate clinical trials completely.



Any adverse developments
affecting commercial manufacturing of our products may result in shipment delays, inventory shortages, lot failures, product withdrawals
or recalls, or other interruptions in the supply of our products or product candidates. We may also have to take inventory write-offs
and incur other charges and expenses for products or product candidates that fail to meet specifications, undertake costly remediation
efforts or seek more costly manufacturing alternatives. Accordingly, failures or difficulties faced at any level of our supply
chain could materially adversely affect our business and delay or impede the development and commercialization of any of our products
or product candidates and could have a material adverse effect on the Company’s business, financial condition and operating
results.





Cipher Pharmaceuticals Inc.2014 Annual Information Form-15-







We may be subject to product liability
claims, which can be expensive, difficult to defend and may result in large judgments or settlements.



Drug development involves
the testing of approved and experimental drugs on human subjects. Such studies create a risk of liability for personal injury or
death to participants as a result of an unexpected adverse reaction to the tested drug or as a result of negligence or misconduct.
Furthermore, the administration of drugs to humans after marketing clearance is obtained can result in product liability claims.
Product liability claims can be expensive, difficult to defend and may result in large judgments or settlements against us. In
addition, third party collaborators and licensees may not protect us from product liability claims.



We currently maintain
product liability insurance in connection with the marketing of our products. The Company may not be able to obtain or maintain
adequate protection against potential liabilities arising from product sales. In addition, we could become subject to potential
liabilities as successor owner of an asset, product or business (even if not specifically assumed by us). In such circumstances,
the Company’s insurance policies may not provide enough coverage for such liabilities. If we are unable to obtain sufficient
levels of insurance at acceptable cost or otherwise protect against potential product liability claims, the Company will be exposed
to product liability claims. A successful product liability claim in excess of the Company’s insurance coverage could have
a material adverse effect on our business, financial condition and results of operations. In addition, any successful claim may
prevent the Company from obtaining adequate product liability insurance in the future on commercially desirable terms or at all.
Even if a claim is not successful, defending such a claim may be time-consuming and expensive. Product liability claims, whether
or not merited, could also result in negative perception of the Company and its products which could have a material adverse effect
on the Company’s business, financial condition and results of operations.



Unexpected product safety or efficacy
concerns may arise.



Unexpected safety or
efficacy concerns can arise with respect to our marketed and commercialized products, whether or not scientifically justified,
leading to product recalls, withdrawals, withdrawal of regulatory approvals for the affected products, issuance of safety alerts,
Dear Healthcare Provider letters, or other safety notices, required labeling changes, or declining sales, as well as product liability,
consumer fraud and/or other claims. If product safety issues present a public health risk, products in the field may be subject
to seizure or injunctive action preventing their distribution. This could have a material adverse effect on our business, financial
condition and results of operations.



We generate revenue from a limited
number of distribution and supply agreements.



The Company currently
generates revenues from a limited number of distribution and supply agreements. A significant proportion of our revenue is derived
from AbsoricaTM. The loss of that source of revenue for any reason could have a material adverse effect on our business,
financial condition and results of operations.



The pharmaceutical industry is highly
competitive and may be impacted by rapid technological change.



The Company competes
to obtain licenses for products and competes to secure distribution channels. Moreover, our products compete with other products.



The pharmaceutical
industry is subject to rapid and substantial technological change. The patents protecting the active ingredients for the products
currently in our product pipeline have expired. In order to obtain commercial benefits from our products, we rely on proprietary
drug delivery systems. Our products will face intense competition from conventional forms of drug delivery systems and from delivery
systems which are similar to thatin-licensed by the Company. We will compete with companies in North America and abroad,
including major pharmaceutical and chemical companies, research and development firms, universities and other research institutions.





Cipher Pharmaceuticals Inc.2014 Annual Information Form-16-







Many of the Company’s
competitors have greater financial resources and market capabilities, have greater experience in the area of drug development and
have greater experience in obtaining FDA and other regulatory approvals. The Company’s competitors may succeed in developing
technologies and products that are more effective or cheaper to use than any products that we may develop or license. These developments
could render the Company’s technologies and products obsolete or uncompetitive, which could have a material adverse effect
on our business, financial condition and results of operations. These competitors could also be viewed as more favourable partners
to licensors and/or distributors.



We may require additional capital to
fund future operations.



We may have a need
for capital resources to fund possible future operational needs, product development expenditures and future strategic initiatives.
We may expend amounts to fund research and development activities in order to develop new products and, to a lesser degree, to
complete existing products under development. These expenditures may cause us to incur operating losses and cash flow deficiencies
for the near future and until such time as sales of our products by commercial partners generate sufficient additional revenues.
We mitigate the risk associated with drug development costs through the terms of our in-licensing agreements, where the risk of
additional research and development costs is borne by our development partners and Cipher pays milestone amounts only when development
milestones are achieved.



As at December 31,
2014, the Company had cash of $52.6 million. The Company is now generating commercial revenue which provides a source of cash flow
funding. During 2013 the Company generated total revenue of $32.3 million and during the year the cash position increased by $28.5
million.



We expect the cash
on handwill be sufficient to fund current product development and operating costs as well as a potential product acquisitions.
Additional funding may be required for the development of new products in-licensed from our current technology partner or other
technology partners and/or for additional acquisitions. Although we believe that we could obtain additional capital through future
equity or debt financing, there can be no assurance that we will be able to do so on terms acceptable to us or at all. If we were
unable to obtain sufficient additional capital the development of our existing principal products and/or additional products could
be disrupted, which could have a material adverse effect on our business, financial condition and operating results.



We depend on key managerial personnel
and external collaborators for our continued success.



Our product development
capacity will depend, to a great extent, on our ability to attract and retain highly qualified staff. The competition in the industry
in which the Company operates is intense. Our success will be highly dependent upon our Chief Executive Officer and a small team
of senior officers, our scientific personnel as well as our consultants and collaborators. The loss of key employees or collaborators,
if any, could compromise the pace and success of our product development.



Although we obtained regulatory approval
in the U.S. and Canada for our commercialized products, there is no assurance that we will receive regulatory approvals in the
U.S., Canada or any other jurisdictions for the other products in development or for our future products.



The cost of obtaining
and complying with government regulation can be substantial. Government authorities in the U.S., Canada and comparable authorities
in foreign countries regulate the research and development, manufacture, testing and safety of pharmaceutical products as well
as the approval and commercialization of such products. The regulations applicable to the our existing and future products may
change. There can be long delays in obtaining required clearances from regulatory authorities in any country after applications
are filed. Government agencies in the U.S., Canada and other countries in which we intend to carry on business regulate pharmaceutical
products intended for human use. Regulations require extensive clinical trials and other testing and government review and final
approval before we can market our products.



Requirements for approval
vary widely from country to country outside of the U.S. and Canada. Whether or not approved in the U.S. or Canada, regulatory authorities
in other countries must approve a product prior to the commencement of marketing the product in those countries. The time required
to obtain any such approval may be longer or shorter than in the U.S. and Canada.





Cipher Pharmaceuticals Inc.2014 Annual Information Form-17-







Any failure or delay
in obtaining regulatory approvals could adversely affect the market for any products we develop and commercialize and therefore
our business, financial condition and results of operations.



Even if we obtain regulatory
approval of our products, any such approval might significantly limit the approved indications for use, to include a more limited
patient population, require that certain precautions, contraindications or warnings be included on the product labeling, require
time-consuming post-approval clinical studies, or require that risk evaluation and mitigation strategies (“REMS”) be
followed.



Furthermore, the manufacturing,
packaging, labeling, handling, distribution, importation, exportation, licensing, sale and storage of our products are affected
by extensive laws, governmental regulations, administrative determinations, court decisions and similar constraints. There can
be no assurance that the Company’s third party distributors and manufacturers are in compliance with all of these laws, regulations
and other constraints. Failure to comply with these laws, regulations or other constraints or new laws, regulations or constraints
could lead to the imposition of significant penalties or claims or withdrawal of marketing approvals, as a result of which our
business and financial results could be materially adversely affected. In addition, the adoption of new laws, regulations or other
constraints or changes in the interpretation of such requirements may result in significant compliance costs that could be passed
on to the Company by its distributors or manufacturers or lead the Company to discontinue product sales and may have an adverse
effect on the marketing of our products, resulting in significant loss of sales.



We expect the healthcare industry to
face increased limitations on reimbursement, rebates and other payments as a result of healthcare reform, which could adversely
affect third-party coverage of our products and how much or under what circumstances healthcare providers will prescribe or administer
our products, if approved.



In the U.S., Canada
and other countries, sales of our products, if approved for marketing, will depend in part upon the availability of reimbursement
from third-party payors, which include governmental authorities, managed care organizations and other private health insurers.
Third-party payors are increasingly challenging the price and examining the cost effectiveness of medical products and services.



Increasing expenditures
for healthcare have been the subject of considerable public attention in the U.S. Both private and government entities are seeking
ways to reduce or contain healthcare costs. Numerous proposals that would effect changes in the U.S. healthcare system have been
introduced or proposed in Congress and in some state legislatures, including reducing reimbursement for prescription products and
reducing the levels at which consumers and healthcare providers are reimbursed for purchases of pharmaceutical products.



Cost reduction initiatives
and changes in coverage implemented through legislation or regulation could decrease utilization of and reimbursement for any approved
products, which in turn would affect the price we can receive for those products. Any reduction in reimbursement that results from
federal legislation or regulation may also result in a similar reduction in payments from private payors, as private payors often
follow Medicare coverage policy and payment limitations in setting their own reimbursement rates.



In March 2010, President
Obama signed into law the Patient Protection and Affordable Care Act and the Health Care and Education Affordability
Reconciliation Act of 2010 (the “Affordable Care Act”), a law intended, among other things, to broaden access to
health insurance and reduce or constrain the growth of healthcare spending. The Affordable Care Act increased the minimum rebate
due for innovator drugs from 15.1% of average manufacturer price (“AMP”), to 23.1% of AMP and capped the total rebate
amount for innovator drugs at 100.0% of AMP. The Affordable Care Act and subsequent legislation also narrowed the definition of
AMP.



Furthermore, the Affordable
Care Act imposes a significant annual, nondeductible fee on companies that manufacture or import certain branded prescription drug
products. Substantial new provisions affecting compliance have also been enacted, which may affect our business practices with
healthcare practitioners, and a significant number of provisions are not yet, or have only recently become, effective. Although
it is too early to determine the full effects of the Affordable Care Act, it appears likely to continue to put pressure on pharmaceutical
pricing, especially under the Medicare program, and may also increase our regulatory burdens and operating costs.





Cipher Pharmaceuticals Inc.2014 Annual Information Form-18-







In addition, other
legislative changes have been proposed and adopted since the Affordable Care Act was enacted. More recently, in August 2011, President
Obama signed into law the Budget Control Act of 2011, which, among other things, creates the Joint Select Committee on Deficit
Reduction to recommend to Congress proposals in spending reductions. The Joint Select Committee did not achieve a targeted deficit
reduction of an amount greater than $1.2 trillion for the years 2013 through 2021, triggering the legislation’s automatic
reduction to several government programs. This includes aggregate reductions to Medicare payments to healthcare providers of up
to 2.0% per fiscal year, which started in 2013.



These new laws may
result in additional reductions in healthcare funding, which could have a material adverse effect on our customers, which may affect
our financial operations. Legislative and regulatory proposals have been made to expand post-approval requirements and restrict
sales and promotional activities for pharmaceutical products. We cannot be sure whether additional legislative changes will be
enacted, or whether the FDA regulations, guidance or interpretations will be changed, or what the impact of such changes on the
marketing approvals of our products or our other product candidates may be.



Although we cannot
predict the full effect on our business of the implementation of existing legislation or the enactment of additional legislation
pursuant to healthcare and other legislative reform, we believe that legislation or regulations that would reduce reimbursement
for, or restrict coverage of, our products could adversely affect how much or under what circumstances healthcare providers will
prescribe or administer our products. This could materially and adversely affect our business by reducing our ability to generate
revenues, raise capital, obtain additional licensees and market our products. In addition, we believe the increasing emphasis on
managed care in the U.S. has and will continue to put pressure on the price and usage of pharmaceutical products, which may adversely
impact product sales.



It will be difficult for us to profitably
market and sell our products or product candidates if reimbursement for products is limited by government authorities and third-party
payor policies.



In addition to any
healthcare reform measures which may affect reimbursement, market acceptance and sales of the Company’s products and product
candidates, if approved, will depend on the reimbursement policies of government authorities and third-party payors. Government
authorities and third-party payors, such as private health insurers and health maintenance organizations, decide which medications
they will pay for and establish reimbursement levels.



Our ability to successfully
market our products and product candidates, once regulatory approval is obtained, depends, in part, on whether appropriate reimbursement
levels for the cost of the products and related treatments are obtained from government authorities and private health insurers
and other organizations, such as Health Maintenance Organizations (“HMOs”) and Managed Care Organizations (“MCOs”).



In Canada, patented
pharmaceutical products are subject to price control by the Patented Medicine Prices Review Board. Third-party payers increasingly
challenge the pricing of pharmaceutical products. In addition, the trend toward managed healthcare in the U.S., the growth of organizations
such as HMOs and MCOs and legislative proposals to reform healthcare and government insurance programs could significantly influence
the purchase of pharmaceutical products, resulting in lower prices and reduction in product demand. Such cost containment measures
and healthcare reform could affect our partners’ ability to sell our products and may have a material adverse effect on our
business, financial condition and results of operations.



Uncertainty exists
about the reimbursement status of newly approved pharmaceutical products. Reimbursement in the U.S., Canada or other foreign countries
may not be available for some of the Company’s products. Any reimbursement granted may not be maintained or limits on reimbursement
available from third-party payers may reduce demand for, or negatively affect the price of, those products. These issues could
have a material adverse effect on the Company’s business, financial condition and results of operations. The Company is unable
to predict if additional legislation or regulation impacting the healthcare industry or third-party coverage and reimbursement
may be enacted in the future, or what effect such legislation or regulation would have on the Company’s business. Outside
of Canada, the Company intends to rely solely on its distributors to work with the payors to obtain reimbursement codes and to
obtain pricing approvals in the relevant jurisdictions.





Cipher Pharmaceuticals Inc.2014 Annual Information Form-19-







The Company or its distributors may
be subject to various laws pertaining to health care fraud and abuse, including anti-kickback, self-referral, false claims and
fraud laws, and any violations by us of such laws could result in fines or other penalties.



The U.S. federal anti-kickback
statute prohibits the offer, receipt, or payment of remuneration in exchange for or to induce the referral of patients or the use
of products or services that would be paid for in whole or part by Medicare or other federal health care programs. Remuneration
has been broadly defined to include anything of value, including cash, improper discounts, and free or reduced price items and
services. Many states have similar laws that apply to their state health care programs as well as private payors. Violations of
the anti-kickback laws can result in exclusion from federal health care programs and substantial civil and criminal penalties.



The U.S.federal
False Claims Act (“FCA”), imposes liability on persons who, among other things, present or cause to be presented
false or fraudulent claims for payment by a federal health care program. The FCA has been used to prosecute persons submitting,
or causing the submission of, claims for payment that are inaccurate or fraudulent, that are for services not provided as claimed,
or for services that are not medically necessary. The FCA includes a whistleblower provision that allows individuals to bring actions
on behalf of the federal government and share a portion of the recovery of successful claims. If our marketing or other arrangements
were determined to violate anti-kickback or related laws, including the FCA, then our revenues could be adversely affected, which
would likely harm our business, financial condition, and results of operations.



State and federal authorities
have aggressively targeted medical technology companies for alleged violations of these anti-fraud statutes, based on improper
research or consulting contracts with doctors, certain marketing arrangements that rely on volume-based pricing, off-label marketing
schemes, and other improper promotional practices. Companies targeted in such prosecutions have paid substantial fines in the hundreds
of millions of dollars or more, have been forced to implement extensive corrective action plans, and have often become subject
to consent decrees severely restricting the manner in which they conduct their business. If we become the target of such an investigation
or prosecution based on our contractual relationships with providers or institutions, or our marketing and promotional practices,
we could face similar sanctions, which would materially harm our business.



Also, the U.S. Foreign
Corrupt Practices Act, theCanadian Corruption of Foreign Officials Act and similar worldwide anti-bribery laws
generally prohibit companies and their intermediaries from making improper payments to non-U.S. officials for the purpose of obtaining
or retaining business. Our internal control policies and procedures may not protect us from reckless or negligent acts committed
by our employees, future distributors, licensees or agents. Violations of these laws, or allegations of such violations, could
result in fines, penalties or prosecution and have a negative impact on our business, results of operations and reputation.



We rely on the success of strategic
investments and partnerships.



Economic, governmental,
industry and internal company factors outside our control affect each of the companies in which we may invest or partner with.
If these companies do not succeed, the value of our assets and the market price of the Common Shares could decline. Some of the
material risks relating to the companies in which we may invest in, or partner with, include:



| | · | the ability of these companies to successfully develop and manufacture the products which serve
as the basis of our investment;
| | - | -------------------------------------------------------------------------------------------------------------------------------



| | · | the ability of competitors to develop similar or more effective products, making the drugs developed
by the companies in which we invest difficult or impossible to market;
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------





Cipher Pharmaceuticals Inc.2014 Annual Information Form-20-







| | · | the ability of these companies to adequately secure patents for their products that do not infringe
existing patents and protect their proprietary information;
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | the ability of the companies to remain technologically competitive, and the dependence of these
companies upon key scientific and managerial personnel; and
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | the ability of these companies to remain financially viable.
| | - | ------------------------------------------------------------



We will have limited
or no control over the resources that any company in which we invest may devote to developing products in collaboration with us.
Any company in which we invest may not perform as expected. These companies may breach or terminate their agreements with us or
otherwise fail to conduct product discovery and development activities successfully or in a timely manner. If any of these events
occur, it could have a material adverse effect on our business, financial condition and results of operations.



The publication of negative results
of clinical trials may adversely impact our products.



From time to time,
studies or clinical trials on various aspects of pharmaceutical products, including a product’s active ingredient, are conducted
by academic researchers or others, including government agencies. The results of these studies or trials, when published or posted
on government websites such as clinicaltrials.gov, may have a significant effect on the market for the pharmaceutical product
that is the subject of the study. The publication of negative results of studies or clinical trials related to our products, an
active ingredient in our products, or the therapeutic areas in which our products compete could adversely affect our sales, the
prescription trends for our products and the reputation of our products. In the event of the publication of negative results of
studies or clinical trials related to our products, an active ingredient in our products, or the therapeutic areas in which our
products compete, this could have a materially adverse effect on our business, financial condition and results of operations.



Development goals and projected time
frames are unpredictable and may not be achieved.



We set goals for and
makes public statements regarding timing of the accomplishment of objectives material to our success, such as the commencement
and completion of clinical trials, anticipated regulatory approval dates, and the timing of product launches. The actual timing
of these events can vary dramatically due to factors such as delays or failures in our clinical trials, the uncertainties inherent
in the regulatory approval process, and delays in achieving product development, manufacturing or marketing milestones necessary
to commercialize our products. There can be no assurance that our clinical trials will be completed, that we will make regulatory
submissions or receive regulatory approvals as planned, or that we will be able to adhere to our current schedule for the scale-up
of manufacturing and launch of any of our products. If we fail to achieve one or more of these milestones as planned, it could
have a material adverse effect on our business, financial condition and results of operations.



Rising insurance costs could negatively
impact our profitability.



The cost of insurance,
including director and officer, product liability and general liability insurance, has risen significantly in recent years and
is expected to continue to increase. In response, we may increase deductibles and/or decrease certain coverage to mitigate these
costs. These increases, and our increased risk due to increased deductibles and reduced coverage, could have a material adverse
effect on our business, financial condition and results of operations.



Under applicable employment laws, we
may not be able to enforce covenants not to compete.



We generally enter
into non-competition agreements as part of our employment agreements with our employees. These agreements generally prohibit our
employees, if they cease working for us, from competing directly with us or working for our competitors or clients for a limited
period. We may be unable to enforce these agreements under the laws of the jurisdictions in which our employees work and it may
be difficult for us to restrict our competitors from benefitting from the expertise our former employees or consultants developed
while working for us.





Cipher Pharmaceuticals Inc.2014 Annual Information Form-21-







The Company is subject to risks associated
with the industry in which it operates.



Currently, the Company
primarily operates in the North American healthcare industry. Accordingly, the Company is subject to risks associated with operating
in a single industry in a concentrated geographic location. Any event affecting this industry could have a material adverse effect
on the Company’s business, financial condition and results of operations. Moreover, our projected revenues and operating
results are based on assumptions concerning certain levels of product purchases in these markets. Any failure to attain the Company’s
projected revenues and operating results as a result of adverse economic or market conditions could have a material adverse effect
on the Company’s business and financial condition.



We are subject to foreign currency
risk.



A significant portion
of our revenue is derived in U.S. dollars and therefore any currency exchange rate fluctuations may affect our results of operations.
Consequently, we may experience currency gains and losses on the conversion of our revenue into Canadian dollars required for business
operations.



Risks Related to Our Intellectual Property



If we infringe or are alleged to infringe
or otherwise violate intellectual property rights of third parties, our business could be harmed.



Our research, development
and commercialization activities may infringe or otherwise violate or be claimed to infringe or otherwise violate patents or patent
applications owned or controlled by other parties. Competitors in the field of therapies for acne, pain andhyperlipidemiaand other indications have developed
large portfolios of patents and patent applications relating to our business. There may be granted patents that could be asserted
against us in relation to such product candidates. There may also be granted patents held by third parties that may be infringed
or otherwise violated by our other product candidates and activities, and we do not know whether or to what extent we are infringing
or otherwise violating third party patents. There may also be third party patent applications that if approved and granted as
patents may be asserted against us in relation to our products or any of our product candidates or activities. These third parties
could bring claims against us that would cause us to incur substantial expenses and, if successful against us, could cause us
to pay substantial damages and legal fees. Further, if a patent infringement suit were brought against us, we could be temporarily
or permanently enjoined or otherwise forced to stop or delay research, development, manufacturing, marketing or sales of the product
candidate or method that is the subject of the suit.



As a result of patent
infringement claims, or to avoid potential claims, we may choose or be required to seek licenses from third parties. These licenses
may not be available on acceptable terms, or at all. Even if we are able to obtain a license, the license would likely obligate
us to pay license fees or royalties or both, and the rights granted to us might be nonexclusive, which could result in our competitors
gaining access to the same intellectual property, or such rights might be restrictive and limit our present and future activities.
Ultimately, we or a licensee could be prevented from commercializing a product, or be forced to cease some aspect of our business
operations, if, as a result of actual or threatened patent infringement claims, we are unable to enter into or maintain licenses
on acceptable terms.



If our efforts to obtain, protect or
enforce our patents and other intellectual property rights related to our products or any of our product candidates are not adequate,
we may not be able to compete effectively and we otherwise may be harmed.



Our commercial success
depends in part on our ability to obtain and maintain patent protection and utilize trade secret protection for our intellectual
property and proprietary technologies, our products and their uses, as well as our ability to operate without infringing upon the
proprietary rights of others. We rely upon a combination of patents, trade secret protection and confidentiality agreements, assignment
of invention agreements and other contractual arrangements to protect the intellectual property related to our products and our
other development programs. Limitations on the scope of our intellectual property rights may limit our ability to prevent third
parties from designing around such rights and competing against us. For example, our patents typically do not claim a new compound.
Rather, the active pharmaceutical ingredients of our products are existing compounds and our granted patents and pending patent
applications are directed to, among other things, novel formulations of these existing compounds. Accordingly, other parties may
compete with us, for example, by independently developing or obtaining competing formulations that design around our patent claims,
but which may contain the same active ingredients, or by seeking to invalidate our patents. Moreover any disclosure to or misappropriation
by third parties of our confidential proprietary information, unless we have sufficient patent and/or trade secret protection and
we are able to enforce such rights successfully, could enable competitors to quickly duplicate or surpass our technological achievements,
eroding our competitive position in our market.





Cipher Pharmaceuticals Inc.2014 Annual Information Form-22-







However, the patents
and patent applications that we own or license may fail to result in granted patents in the U.S. or foreign jurisdictions, or if
granted may fail to prevent a potential infringer from marketing its product or be deemed invalid and unenforceable by a court.
Our ability to obtain and maintain valid and enforceable patents depends on various factors, including interpretation of our technology
and the prior art and whether the differences between them allow our technology to be patentable. Patent applications and patents
granted from them are complex, lengthy and highly technical documents that are often prepared under very limited time constraints
and may not be free from errors that make their interpretation uncertain. The existence of errors in a patent may have a materially
adverse effect on the patent, its scope and its enforceability. Our pending patent applications may not issue, and the scope of
the claims of patent applications that do issue may be too narrow to adequately protect our competitive advantage. Also, our granted
patents and applications may be subject to challenges, including ownership challenges, or narrowly construed and may not provide
adequate protection.



Even if these patents
do successfully issue, third parties may challenge the validity, enforceability or scope of such granted patents or any other granted
patents we own or license, which may result in such patents being narrowed, invalidated or held unenforceable. For example, patents
granted by the European Patent Office may be opposed by any person within 9 months from the publication of their grant. Also, patents
granted by the U.S. Patent and Trademark Office (the “USPTO”), may be subject to reexamination and other challenges.
In addition, recent changes to the patent laws of the U.S. provide additional procedures for third parties to challenge the validity
of patents issuing from patent applications filed after March 15, 2013. Furthermore, efforts to enforce our patents could give
rise to challenges to their validity or unenforceability in court proceedings. If the patents and patent applications we hold or
pursue with respect to our products or any of our other product candidates are challenged, it could threaten our competitive advantage
for our products or any of our other product candidates. Furthermore, even if they are not challenged, our patents and patent applications
may not adequately protect our intellectual property or prevent others from designing around our claims. To meet such challenges,
which are part of the risks and uncertainties of developing and marketing product candidates, we may need to evaluate third party
intellectual property rights and, if appropriate, to seek licenses for such third party intellectual property or to challenge such
third party intellectual property, which may be costly and may or may not be successful, which could also have a material adverse
effect on the commercial potential for our products and any of our other product candidates.



Furthermore, for applications
filed before March 16, 2013, or patents issuing from such applications, an interference proceeding can be invoked by a third party,
or instituted by USPTO, to determine who was the first to invent any of the subject matter covered by the patent claims of our
applications and patents. As of March 16, 2013, the U.S. transitioned to a “first-to-file” system for deciding which
party should be granted a patent when two or more patent applications are filed by different parties claiming the same invention.
A third party that files a patent application in the USPTO under the new first-to-file system before us could therefore be awarded
a patent covering an invention of ours even if we had made the invention before it was made by the third party.



The change to “first-to-file”
from “first-to-invent” is one of the changes to the patent laws of the U.S. resulting from the Leahy-Smith America
Invents Act signed into law on September 16, 2011. Among some of the other changes to the patent laws are changes that limit
where a patentee may file a patent infringement suit and providing opportunities for third parties to challenge any issued patent
in the USPTO. Because of a lower evidentiary standard in certain USPTO proceedings compared to the evidentiary standard in U.S.
federal court necessary to invalidate a patent claim, a third party could potentially provide evidence in a USPTO proceeding sufficient
for the USPTO to hold a claim invalid even though the same evidence would be insufficient to invalidate the claim if first presented
in a district court action. Accordingly, a third party may attempt to use the USPTO procedures to invalidate our patent claims
that would not have been invalidated if first challenged by the third party as a defendant in a district court action.





Cipher Pharmaceuticals Inc.2014 Annual Information Form-23-







Even where patent,
trade secret and other intellectual property laws provide protection, costly and time-consuming litigation could be necessary to
enforce and determine the scope of our proprietary rights, and the outcome of such litigation would be uncertain. Moreover, any
actions we may bring to enforce our intellectual property against our competitors could provoke them to bring counterclaims against
us, and our competitors have intellectual property portfolios of their own, some of which are substantial. An unfavorable outcome
could have a material adverse effect on our business and could result in the challenged patent being interpreted narrowly or invalidated,
or one or more of our patent applications may be not be granted.



We also rely on trade
secret protection and confidentiality agreements to protect our know how, data and information prior to filing patent applications
and during the period before they are published. We further rely on trade secret protection and confidentiality agreements to protect
proprietary know-how that may not be patentable, processes for which patents may be difficult to obtain or enforce and other elements
of our product development processes that involve proprietary know-how, information or technology that is not covered by patents.



In an effort to protect
our trade secrets and other confidential information, we incorporate confidentiality provisions in all our employees’ agreements
and require our consultants, contractors and licensees to which we disclose such information to execute confidentiality agreements
upon the commencement of their relationships with us. These agreements require that confidential information, as defined in the
agreement and disclosed to the individual by us during the course of the individual’s relationship with us, be kept confidential
and not disclosed to third parties for an agreed term. These agreements, however, may not provide us with adequate protection against
improper use or disclosure of confidential information, and these agreements may be breached. Adequate remedies may not exist in
the event of unauthorized use or disclosure of our confidential information. A breach of confidentiality could significantly affect
our competitive position and we could lose our trade secrets or they could become otherwise known or be independently discovered
by our competitors. Also, to the extent that our employees, consultants or contractors use any intellectual property owned by others
in their work for us, disputes may arise as to the rights in any related or resulting know-how and inventions. Additionally, others
may independently develop the same or substantially equivalent proprietary information and techniques or otherwise gain access
to our trade secrets and other confidential information. Any of the foregoing could deteriorate our competitive advantages, undermine
the trade secret and contractual protections afforded to our confidential information and have material adverse effects on our
business.



Changes in U.S., Canadian or foreign
patent law could diminish the value of patents in general, thereby impairing our ability to protect our products.



The strength of patents
in the pharmaceutical field involves complex legal and scientific questions and in the U.S., Canadian and many foreign jurisdictions
patent policy also continues to evolve and the issuance, scope, validity, enforceability and commercial value of our patent rights
are highly uncertain. This uncertainty includes changes to the patent laws through either legislative action to change statutory
patent law or court action that may reinterpret existing law in ways affecting the scope or validity of granted patents, or both.
Particularly in recent years in the U.S., there have been several major legislative developments and court decisions that have
affected patent laws in significant ways and there may be more developments in the future that may weaken or undermine our ability
to obtain new patents or to enforce existing and future patents owned or licensed.



There has been substantial litigation
in the pharmaceutical industry concerning the manufacture and supply of novel versions of existing drugs that are the subject of
conflicting patent rights. Regardless of FDA or Health Canada approval, should anyone commence a lawsuit with respect to any alleged
patent infringement by the Company, the uncertainties inherent in patent litigation make the outcome of such litigation difficult
to predict and the cost involved in defending every lawsuit can be substantial.





Cipher Pharmaceuticals Inc.2014 Annual Information Form-24-







When a drug developer
files an NDA, it is required to certify to the FDA that any patent which has been listed with the FDA as covering the branded product
has expired, the date any such patent will expire, or that any such patent is invalid or will not be infringed by the manufacture,
sale or use of the new drug for which the NDA is submitted. Approval of an NDA is not effective until each listed patent expires,
unless the applicant certifies that the patents are not infringed or invalid or so notifies the patent holder and the holder of
the branded product NDA. A patent holder may challenge a notice of non-infringement or invalidity by suing for patent infringement
within 45 days of receiving notice. If the applicant is challenged, the FDA is precluded by statute from granting approval to the
applicant until the earlier of 30 months after the filing of the legal suit, a final court decision of non-infringement or patent
invalidity or a court decision which abbreviates the 30-month stay period. Challenges of this type are not uncommon. Similar procedures
exist in Canada under the Patented Medicines (Notice of Compliance Regulations).



Third parties own patents
relating to product formulations. Claims by these companies that Cipher infringes their proprietary technology may result in liability
for damages or may delay the development and commercialization of Cipher’s products. In the pharmaceutical industry, it is
not uncommon for competitors to advance such claims for strategic purposes. There can be no assurance that additional patent or
other litigation will not arise in connection with any of our current or future products or product candidates. Patent litigation,
with or without merit, is time-consuming and costly and may significantly impact our financial condition and results of operations,
even if we prevail. If we do infringe the intellectual property rights of others, we could lose our right to develop, manufacture
or sell products or could be required to pay monetary damages or royalties to license proprietary rights from third parties. The
outcomes of infringement actions are uncertain and infringement actions are costly and divert technical and management personnel
from their normal responsibilities.



To the extent our products
are patented and the patents are suitable for listing in the FDA’s Approved Drug Products List (the “Orange Book”),
and are listed in the Orange Book, the patents can be challenged and generic products can be approved under an ANDA. In the United
States, under the “Hatch-Waxman Act”, the FDA can approve an ANDA, for a generic version of a branded drug.
In place of clinical studies, an ANDA applicant usually needs only to submit pharmacokinetic data demonstrating that its product
has the same active ingredient(s) and is bioequivalent to the branded product. This is referred to as the ANDA process. The “Hatch-Waxman
Act” requires an applicant for a drug that relies, at least in part, on the patent of a branded drug, to notify the sponsor
of the branded drug of their application and potential infringement of a patent. Upon receipt of this notice, the sponsor of the
branded drug has 45 days to bring a patent infringement suit in federal district court against the applicant seeking approval of
a product covered by the patent. If such a suit is commenced and the ANDA was filed after the patent had been listed in the Orange
Book, then the FDA is generally prohibited from granting approval of the ANDA until the earliest of 30 months from the date the
FDA accepted the application for filing, or the conclusion of litigation in the generic's favour, or expiration of the patent.



On September 17, 2013,
Ranbaxy, received a Paragraph IV Certification Notice of filing from Watson of an ANDA for a generic version of AbsoricaTM
(isotretinoin capsules). Ranbaxy and Cipher are vigorously defending Absorica's intellectual property rights and pursuing all available
legal and regulatory pathways in defense of the product. AbsoricaTM is currently protected by three issued patents listed
in the FDA Orange Book, which expire in September 2021. A patent infringement lawsuit against Watson was filed by Ranbaxy, Cipher
and Galephar on October 29, 2013 and as a result the ANDA is subject to a 30-month stay of FDA approval, beginning on the date
the notification letter was received. The stay of FDA approval lasts until there is a final court ruling, or a settlement, or the
30-month stay expires. A Markman hearing is currently scheduled for early April 2015 in the U.S. Federal Court located in New Jersey.



Any litigation could
have a material adverse effect on our business, financial condition and operating results.



If we are unable to protect our trademarks
from infringement, our business prospects may be harmed.



We own trademarks that
identify our products and have registered these trademarks in the U.S. and Canada. Although we take steps to monitor the possible
infringement or misuse of our trademarks, it is possible that third parties may infringe, dilute or otherwise violate our trademark
rights. Any unauthorized use of our trademarks could harm our reputation or commercial interests. In addition, our enforcement
against third-party infringers or violators may be unduly expensive and time-consuming, and the outcome may be an inadequate remedy.





Cipher Pharmaceuticals Inc.2014 Annual Information Form-25-







Risks Related to Our Common Shares



Shareholders of the Company may be
further diluted.



The Company has financed
its operations to date through the sale of securities, specifically, Common Shares. We may need to continue our reliance on the
sale of such securities for future financing, resulting in dilution to our existing shareholders. Our long-term capital requirements
will depend on many factors, including continued scientific progress in our product discovery and development programs, progress
in its pre-clinical and clinical evaluation of products and product candidates, time and expense associated with filing, prosecuting
and enforcing its patent claims and costs associated with obtaining regulatory approvals. In order to meet such capital requirements,
we will consider contract fees, collaborative research and development arrangements, public financing or additional private financing
(including the issuance of additional equity securities) to fund all or part of our particular programs.



Our business, financial
condition and results of operations may depend on our ability to obtain additional financing which may not be available under favourable
terms, if at all. Our ability to arrange such financing in the future will depend in part upon the prevailing capital market conditions
as well as our business performance. If our capital resources are exhausted and adequate funds are not available, we may have to
reduce substantially or eliminate expenditures for research and development, testing, production and marketing of our proposed
products, or obtain funds through arrangements with corporate partners that require us to relinquish rights to certain of our technologies
or products.



Our share price has been volatile,
and an investment in our Common Shares could suffer a decline in value.



Market prices for the
securities of pharmaceutical and biotechnology companies have historically been highly volatile and the market has, from time to
time, experienced significant price and volume fluctuations that are unrelated to the operating performance of particular companies.
In addition to the risk factors described herein, factors such as fluctuations in our operating results, the aftermath of any public
announcements made by us, concern as to the safety of any drugs developed by us, and general market conditions, can and have had
an adverse effect on the market price of the Common Shares.



In the past, when the
market price of a stock has been volatile, shareholders have often instituted securities class action litigation against that company.
If any of our shareholders brought a lawsuit against us, we could incur substantial costs defending the lawsuit. The lawsuit could
also divert the time and attention of our management.



We have a significant shareholder.



A director of the Company,
Dr. John D. Mull,owns 9,622,299 Common Shares, representing 37.2% of the total outstanding Common Shares as at the date
hereof. If Dr. Mull was to sell his interest in the Company into the public market, or even if the market was to perceive that
such a sale may occur, such event might lower the market price of the Common Shares. Dr. Mull’s interests as a shareholder
may not be aligned at all times with the interests of all of the other shareholders of the Company.



We do not currently intend to pay dividends
on our Common Shares.



We have never declared
or paid any cash dividend on our Common Shares and do not currently intend to do so for the foreseeable future. We currently anticipate
that we will retain future earnings for the development, operation and expansion of our business and do not anticipate declaring
or paying any cash dividends for the foreseeable future. Therefore, the success of an investment in our Common Shares will depend
upon any future appreciation in their value. There is no guarantee that our Common Shares will appreciate in value or even maintain
the price at which our shareholders have purchased their shares. See “Dividend Policy”.





Cipher Pharmaceuticals Inc.2014 Annual Information Form-26-







Our operating results may fluctuate
significantly and any failure to meet financial expectations may disappoint securities analysts or investors and result in a decline
in the price of our Common Shares.



Our operating results
have fluctuated in the past and are likely to do so in the future. These fluctuations could cause the price of the Common Shares
to decline. Some of the factors that could cause operating results to fluctuate include the following:



| | · | the inability to complete product development in a timely manner that results in a failure or delay
in receiving the required regulatory approvals or allowances to commercialize product candidates;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | the timing of regulatory submissions and approvals;
| | - | ---------------------------------------------------



| | · | the timing and willingness of any current or future collaborators to invest the resources necessary
to commercialize our product candidates, and the timing of payments we may make or receive under these arrangements;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | any intellectual property infringement or other lawsuits in which we may become involved;
| | - | -----------------------------------------------------------------------------------------



| | · | foreign currency fluctuations;
| | - | ------------------------------



| | · | the timing of achievement and the receipt of milestone payments from current or future third parties;
| | - | -----------------------------------------------------------------------------------------------------



| | · | failure to enter into new or the expiration or termination of current agreements with third parties;
and
| | - | --------------------------------------------------------------------------------------------------------



| | · | failure to introduce the product candidates to the market in a manner that generates anticipated
revenues.
| | - | ----------------------------------------------------------------------------------------------------------



DIVIDENDS



The Company has not
declared or paid any dividends since incorporation and has no present intention to declare or pay any dividends in the foreseeable
future. Any decision to declare or pay dividends will be made by the board of directors based upon the Company’s earnings,
financial requirements and other conditions existing at such future time.



DESCRIPTION
OF CAPITAL STRUCTURE



The Company’s
authorized capital consists of an unlimited number of Common Shares and an unlimited number of Preference Shares, issuable in series,
in each case without nominal or par value.



The following is a
summary of the rights, privileges, restrictions and conditions attaching to the Common Shares and Preference Shares.



Common Shares



The Company is authorized
to issue an unlimited number of Common Shares. The Common Shares rank junior to the Preference Shares. Holders of Common Shares
are entitled to receive notice of and to attend all annual and special meetings of the shareholders of the Company, other than
separate meetings of holders of any other class or series of shares, and to one vote in respect of each common share held at such
meetings. Holders of Common Shares are entitled to receive dividends if, as and when declared by the board of directors of the
Company and to receive pro-rata the remaining assets of the Company upon its liquidation, dissolution or winding-up, subject to
the rights of holders of Preference Shares and any other class or series of shares of the Company having priority over the Common
Shares. As at March 31, 2015, there were 25,893,110 Common Shares issued and outstanding.





Cipher Pharmaceuticals Inc.2014 Annual Information Form-27-







Preference Shares



The Preference Shares
are issuable in series and have such rights, restrictions, conditions and limitations as the board of directors of the Company
may from time to time determine. The Preference Shares rank senior to the Common Shares with respect to the payment of dividends
or on any distribution of assets of the Company on the liquidation, dissolution or winding-up of the Company. Holders of Preference
Shares are not entitled to receive notice of or to attend or vote at any meeting of the shareholders of the Company, except as
required by law. As at March 31, 2015, no Preference Shares were issued and outstanding.



MARKET
FOR SECURITIES



The Common Shares of
the Company trade on the TSX under the symbol “CPH” (prior to November 24, 2014 the symbol was “DND”),
and on NASDAQ under the symbol “CPHR”. The following table sets forth the reported high and low prices and the trading
volume for the periods indicated:









|Month       |  | Toronto Stock Exchange (CDN$) |       |  | NASDAQ (US$) | 
|----------- |  | ----------------------------- | ----- |  | ------------ | 
|(2014)      |  | High                          |       |  | Low          | 
|January     |  |                               | 8.15  |  |              | 
|February    |  |                               | 8.24  |  |              | 
|March       |  |                               | 8.06  |  |              | 
|April       |  |                               | 8.61  |  |              | 
|May         |  |                               | 8.50  |  |              | 
|June        |  |                               | 9.20  |  |              | 
|July        |  |                               | 9.27  |  |              | 
|August      |  |                               | 10.98 |  |              | 
|September   |  |                               | 12.25 |  |              | 
|October     |  |                               | 14.38 |  |              | 
|November(1) |  |                               | 15.99 |  |              | 
|December    |  |                               | 18.60 |  |              | 



| |  | (1) The Common Shares commenced trading on NASDAQ on November 24, 2014.
| |  | -----------------------------------------------------------------------



DIRECTORS
AND OFFICERS



Set out below is information
with respect to the directors and executive officers of the Company as at December 31, 2014:



|Name andProvince/State of Residence              | Position                              | Director Since | Principal Occupation                                                                                           
|------------------------------------------------ | ------------------------------------- | -------------- | ---------------------------------------------------------------------------------------------------------------
|GERALD P. McDOLE1Ontario, Canada                 | Chair and Director                    | Feb. 23, 2004  | Retired. Former President and Chief Executive Officer of AstraZeneca Canada Inc.’s pharmaceutical operations   
|JOHN D. MULL, M.D., 
F.R.C.P.(C)2Ontario, Canada | Director                              | Jan. 9, 2004   | Chief Executive Officer, Typhon Group Limited                                                                  
|STEPHEN R. WISEMAN, 
CPA, CA3Ontario, Canada     | Director                              | Aug. 3, 2005   | Retired.  Former Chairman of CML HealthCare Inc. and former partner of Taylor Leibow LLP, Chartered Accountants
|STEFAN AIGNER, M.D.4Pennsylvania, U.S.A.         | Director                              | Dec. 6, 2007   | Chief Executive Officer, Inspirion Delivery Technologies, LLC                                                  
|WILLIAM D. CLAYPOOL, M.D.5Pennsylvania, U.S.A.   | Director                              | Nov. 3, 2009   | President and COO of Hsiri Therapeutics, LLC                                                                   
|THOMAS G. WELLNEROntario, Canada                 | Director                              | Mar. 25, 2014  | President and Chief Executive Officer of Revera Inc.                                                           
|SHAWN PATRICK O’BRIENPennsylvania, U.S.A.        | President and Chief Executive Officer |                | President and Chief Executive Officer of Cipher                                                                
|NORMAN EVANS, CPA, CAOntario, Canada             | Chief Financial Officer and Secretary |                | Chief Financial Officer and  Secretary of Cipher                                                               
|JOAN CHYPYHAOntario, Canada                      | Vice President, Marketing and Sales   |                | Vice President, Marketing and Sales of Cipher                                                                  



| | (1) | Mr. McDole is Chair of the Board of Directors, Chair of the Compensation Committee, Chair of the
Nominating and Governance Committee and a member of the Audit Committee.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (2) | Dr. Mull is a member of the Audit, Nominating and Governance, and Compensation Committees.
| | --- | ------------------------------------------------------------------------------------------

| | (3) | Mr. Wiseman is the Chair of the Audit Committee and a member of the Nominating and Governance,
and Compensation Committees.
| | --- | ---------------------------------------------------------------------------------------------------------------------------

| | (4) | Dr. Aigner is a member of the Audit, Nominating and Governance, and Compensation Committees.
| | --- | --------------------------------------------------------------------------------------------

| | (5) | Dr. Claypool is a member of the Audit, Nominating and Governance, and Compensation Committees.
| | --- | ----------------------------------------------------------------------------------------------





Cipher Pharmaceuticals Inc.2014 Annual Information Form-28-







All of the directors
and executive officers of the Company have been engaged for more than five years in their present principal occupations or in other
capacities with the companies with which they currently hold positions with the exception of William Claypool who was a Senior
Partner at Pennmark Associates, LLC from October 2008 to  January 2012;  Thomas Wellner, who was Co-CEO LifeLabs LP from
October 2013 to February 2014, President & CEO CML Healthcare Inc., from Feb 2012 to October 2013, and President & CEO
of Therapure Biopharma Inc. from April 2008-May 2011; Shawn O’Brien, who was Co-founder, President & CEO of AltheRx Pharmaceuticals
from January 2010 to December 2013, and President & CEO of Profectus BioSciences Inc. from January 2008 to January 2010; and
Joan Chypyha who was CEO of Alto Pharmaceuticals Ltd. from July 2009 to February 2013, Chief Development Officer of Rhei Pharmaceuticals
Ltd. from April 2009 to October 2010 and Vice-President, Corporate Development of Barrier Therapeutics Inc. from July 2007 to December
2009.



As at March 31, 2015,
the current directors and executive officers as a group (nine persons) beneficially own or control, directly or indirectly, 9,940,097
of the outstanding common shares of the Company (38.4%).



The term of office
of all directors of the Company will expire at the next annual meeting of the shareholders of the Company to be held on May 13,
2015.



LEGAL
PROCEEDINGS



On September 17, 2013, Ranbaxy, received
a Paragraph IV Certification Notice of filing from Watson of an ANDA to the FDA for a generic version of AbsoricaTM (isotretinoin
capsules). A Paragraph IV Certification Notice is when the sponsor company of the ANDA believes that it is not infringing the patent
and/or the patent is not valid. Ranbaxy and Cipher announced that they intend to vigorously defend Absorica’s intellectual
property rights and pursue all available legal and regulatory pathways in defense of the product. AbsoricaTM is currently
protected by three issued patents listed in the FDA’s Approved Drug Products List (Orange Book), which expire in September
2021. A patent infringement lawsuit against Watson was filed by Ranbaxy, Cipher and Galephar on October 29, 2013 in the United
States District Court for the District of New Jersey and as a result the ANDA is subject to a 30-month stay of FDA approval, beginning
on the date the notification letter was received. The stay of FDA approval lasts until there is a final court ruling, or a settlement,
or the 30-month stay expires. Watson has filed a statement of defense and the litigation is proceeding. A Markman hearing is currently
scheduled for early April 2015 in the U.S. Federal Court located in New Jersey. A Markman hearing is a pretrial hearing in a U.S.
District Court during which a judge examines evidence from the parties on the appropriate meanings of relevant key words used in
a patent infringement claim.





Cipher Pharmaceuticals Inc.2014 Annual Information Form-29-







TRANSFER
AGENT AND REGISTRAR



The Company’s
registrar and transfer agent is Computershare Investor Services Inc. at its principal office in Toronto, Ontario.



MATERIAL
CONTRACTS



The following are the
material contracts, other than contracts in the ordinary course of business, and material contracts in the ordinary course of business
required to be listed, that were entered into by the Company in 2014 or prior to 2014 and are still in effect:



Master Licensing and Clinical Supply
Agreement



In February 2002, the
Company entered into a master licensing and clinical supply agreement with Galephar (the “Master Licensing and Clinical Supply
Agreement”). Pursuant to the Master Licensing and Clinical Supply Agreement, Galephar granted the Company a license to package,
test, obtain regulatory approval and/or market certain pharmaceutical products in certain geographical areas more particularly
described in the agreement. The license gives the Company the right to conduct all studies and tests required by the FDA and other
regulatory authorities in the geographic area where the pharmaceutical product is being packaged, tested, approved and/or marketed,
as well as the right to prepare, file and prosecute any regulatory submissions for approval in such geographic area. The license
granted for each pharmaceutical product is of perpetual duration and is an exclusive license in the relevant geographic area and
a non-exclusive license in other geographic areas more particularly specified in the agreement.



Lipofen® Distribution and Supply
Agreement



In July 2007, Cipher
entered into a licensing and distribution agreement with ProEthic Pharmaceuticals Inc. (“ProEthic”) under which ProEthic
was granted the exclusive right to market, sell and distribute Lipofen® in the U.S. ProEthic was subsequently acquired by Kowa
Company, Ltd. and its name was changed to Kowa. The agreement is for a period of ten years and Kowa has the right to extend the
term for two additional two year periods. Under the terms of the agreement, Cipher received certain milestone payments as well
as a royalty on a percentage of net sales, which escalates from the mid-teens to the mid-twenties based on annual sales levels
and the degree of promotional effort by Kowa.



CIP-ISOTRETINOIN Development, Distribution
and Supply Agreement



In August 2008, Cipher
entered into a development, distribution and supply agreement with Ranbaxy, under which Cipher granted Ranbaxy the exclusive right
to market, sell and distribute CIP-ISOTRETINOIN in the U.S., its territories and possessions. Under the terms of the agreement
with Ranbaxy, Cipher received an initial upfront payment of US$1 million. The agreement provides for additional pre- and post-commercialization
milestones payments of up to US$23 million, contingent upon the achievement of certain milestone targets, all of which have now
been achieved. Cipher also receives a royalty in the mid-teens on net sales. In addition, Ranbaxy has reimbursed Cipher for the
costs associated with the clinical studies required to obtain FDA approval, up to a predetermined cap. Additional development costs
associated with initial FDA approval in excess of the cap were shared equally. Cipher is responsible for all product development
activities, including management of the clinical studies required by the FDA to secure NDA approval.





Cipher Pharmaceuticals Inc.2014 Annual Information Form-30-







ConZip® Distribution and Supply Agreement



In June 2011, Cipher
entered into a distribution and supply agreement with Vertical under which Vertical was granted the exclusive right to market,
sell and distribute ConZip® in the U.S. The agreement is for a period of ten years and Vertical has the right to
extend the term for two additional five year periods. Under the terms of the agreement, Cipher received a US$0.5 million up-front
payment and a launch milestone of US$0.75 million in 2011. The agreement also provides for additional milestone payments of up
to US$3.75 million based on the achievement of certain net sales targets. Cipher also receives a royalty on a percentage of net
sales in the mid-teens.



AUDIT
COMMITTEE INFORMATION



The Audit Committee
was formed on March 2, 2004 and is currently composed of Messrs. Stephen Wiseman (Chair), Gerald McDole, Stefan Aigner, William
Claypool and John Mull. All of the committee members have been determined by the Board to be “independent” directors
within the meaning of the TSX and NASDAQ listing standards. The Board has also determined that all members of the Audit Committee
are “financially literate” as defined in the Audit Committee charter. A copy of the charter is attached hereto as Schedule
A.



Relevant Education and Experience of
Audit Committee Members



The following is a
brief summary of the education and experience of each member of the Audit Committee relevant to the performance of his responsibility
as a member of the Committee.



|Audit
Committee Member  |  | Relevant
Education and Experience                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|----------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|Stephen Wiseman (Chair) |  | Stephen R. Wiseman Chair of the board of CML HealthCare Inc. until March 3, 2011.  He was previously a partner of Taylor Leibow LLP, the largest independent accounting firm in the greater Hamilton and Burlington region and he continues to serve as an advisor and consultant with the firm.  Mr. Wiseman is a member of the  Chartered Professional Accountants of Canada and the Chartered Professional Accountants of Ontario.  In addition, he holds a CFE designation from the Association of Certified Fraud Examiners.  Prior to joining Taylor Leibow in 1976, Mr. Wiseman held academic positions at McMaster University, University of Regina and University of Ottawa.  He earned his MBA from McMaster University and Bachelor of Commerce and Master of Arts (Economics) degrees from the University of Ottawa.  Mr. Wiseman serves as Chair of Cipher’s Audit Committee.
|                        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|Gerald McDole           |  | Mr. McDole holds a B.Sc. and a certificate of Business Management from the University of Manitoba, an MBA from Simon Fraser University, and a business administration diploma from the University of Toronto. Mr. McDole’s experience includes acting as President and CEO of AstraZeneca Canada Inc.’s pharmaceutical operations and leading the merger of Astra Pharma Inc. and Zeneca Pharma Inc. Prior to this, Mr. McDole was President and CEO of Astra Pharma Inc. In those prior roles he actively supervised people engaged in preparing, auditing, analyzing and evaluating financial statements with a level of complexity not less than those of the Company.  Mr. McDole also has significant experience as a member of the audit committee of a number of public companies.                                                                                                 





Cipher Pharmaceuticals Inc.2014 Annual Information Form-31-







|Audit
Committee Member |  | Relevant
Education and Experience                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|---------------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Stefan Aigner          |  | Dr. Aigner holds a medical degree from the University of Erlangen (Nuremberg, Germany) and is currently CEO of Inspirion Delivery Technologies, LLC, a company formed in 2006 to pursue opportunities in specialty pharmaceuticals.  Dr. Aigner has held the designation of CFA (Certified Financial Analyst) since 2001.  Previously, Dr. Aigner was an Executive Officer at Alpharma, Inc. and prior to that he was co-founder and Executive Vice President of Reliant Pharmaceuticals, Inc. in charge of business and corporate development and was a management consultant for The Wilkerson Group.  In those prior roles he was involved in evaluating and analyzing financial structures and financial statements with a level of complexity not less than those of the Company.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|                       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|William Claypool       |  | Since January of 2012, Dr. Claypool has been the President and Chief Operating Officer of Hsiri Therapeutics, LLC, a development stage pharmaceutical company focused on antibiotic drugs. Prior to that, he was a Senior Partner at Pennmark Associates, LLC, a pharmaceutical development consulting firm, he co-founded in October 2008. He was President of Phoenix Data Systems Inc. as a wholly owned subsidiary of Bioclinica, Inc. from March 2008 until September of 2008.  Before that, Dr. Claypool served as President, Chief Executive Officer and Chairman of Phoenix Data Systems, Inc. from January 2001 until its sale in March 2008. From January 2001 until June 2001, he served as President and Chief Executive Officer of The GI Company. From 1991 to 2001 Dr. Claypool held a number of senior management positions with SmithKline Beecham Pharmaceuticals, including Senior Vice President and Director of Worldwide Clinical Development and Medical Affairs. Dr. Claypool was a director at ViroPharma prior to its sale to Shire Pharmaceuticals. He was a director at Morphotek prior to its sale to Eisai Pharmaceuticals. He was also a board member of 3 Dimensional Pharmaceuticals prior to its sale to Johnson & Johnson. Dr. Claypool received his medical degree from the University of Connecticut School of Medicine and completed his residency and fellowship at the Hospital of the University of Pennsylvania.                                                                                                                                                                                                                                                                           
|                       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|John Mull              |  | Dr. Mull is currently the Chief Executive Officer of Typhon Group Limited, a private equity capital corporation. Dr. Mull is the founder and former Chief Executive Officer of Cipher Pharmaceuticals Inc., as well as CML HealthCare Inc., Pharma Medica Research Inc., (“Pharma Medica”) and Starplex Scientific, Inc. (“Starplex”).  In those capacities, he has overseen the operations of significant enterprises and been involved in more than thirty merger and acquisition transactions. Cipher and Pharma Medica were subsidiaries of CML prior to CML’s conversion to an income trust in 2004. At the time, CML was one of the largest operators of medical diagnostic and medical imaging facilities in Canada and in the United States. Its peak market capitalization exceeded $1.4 billion. CML merged with Lifelabs Medical Laboratory Services in 2013. Pharma Medica is a contract research organization that provides services to pharmaceutical and other life science companies. Starplex develops and manufactures innovative medical devices. In these prior roles he was involved in evaluating and analyzing financial structures and financial statements with a level of complexity not less than those of the Company. Dr. Mull is a graduate of the Faculty of Medicine, University of Toronto, and completed his training in Anatomic and Clinical Pathology at the University of Michigan (Ann Arbor). He is certified in Pathology by the Royal College of Physicians and Surgeons and in Anatomic and Clinical Pathology by the American College of Physicians and Surgeons. His original investigative research work in those fields involved publication of 15 papers in various medical journals.





Cipher Pharmaceuticals Inc.2014 Annual Information Form-32-







Pre-Approval Policies and Procedures



The Audit Committee
has not adopted specific policies and procedures for the engagement of non-audit services by the external auditor. As set out in
section 9.1(d) of the Audit Committee charter, the Audit Committee approves any non-audit services provided by the external auditor
on a case-by-case basis.



External Auditor Service Fees



The fees paid or payable by the Company
to PricewaterhouseCoopers LLP, the Company’s external auditor, for the periods noted below for all services performed were
as follows:



|                       |  | Fiscal 2014 |         |  | Fiscal 2013 |  
|---------------------- |  | ----------- | ------- |  | ----------- | -
|Audit fees (1)         |  | $           | 122,600 |  |             | $
|Audit-related fees (2) |  |             | 36,700  |  |             |  
|Tax fees (3)           |  |             | 59,015  |  |             |  
|All other fees (4)     |  |             | 22,500  |  |             |  
|TOTAL                  |  | $           | 240,815 |  |             | $



| | (1) | Fees in respect of services performed in order to comply with Canadian generally accepted auditing
standards (“GAAS”). In some cases, these may include an appropriate allocation of fees for tax services or accounting
consultations, to the extent such services were necessary to comply with GAAS.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (2) | Fees in respect of reviews of the interim financial statements, the reports of which are provided
to the Audit Committee.
| | --- | -------------------------------------------------------------------------------------------------------------------------

| | (3) | Fees in respect of services performed by the auditor’s tax professionals, except those services
required in order to comply with GAAS which are included under “Audit Fees”. Tax services include assistance with tax
compliance and tax planning and advice.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (4) | Fees in respect of all services not falling under any of the foregoing three categories. In 2014
the fees were related to procedures required for the NASDAQ listing.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------



INTEREST
OF EXPERTS



The financial statements
of the Company for the fiscal year ended December 31, 2014 have been audited by PricewaterhouseCoopers LLP which is independent
with respect to the meaning of the Rules of Professional Conduct as outlined by the Institute of Chartered Accountants of Ontario
and the Public Company Accounting Oversight Board Rule 3520, Auditor Independence.



ADDITIONAL
INFORMATION



Additional information
relating to the Company may be found on SEDAR at www.sedar.com. Additional information, including directors’ and executive
officers’ remuneration and indebtedness and principal holders of the Company’s securities is contained in the Company’s
management information circular for its May 13, 2015 annual meeting of shareholders at which directors are to be elected. Additional
financial information is available in the Company’s financial statements and MD&A for its most recently completed financial
year.



Cipher Pharmaceuticals Inc.2014 Annual Information Form-33-







Schedule
A



CHARTER OF THE AUDIT COMMITTEE OF CIPHER PHARMACEUTICALS INC.



GENERAL



| | 1. | PURPOSE AND RESPONSIBILITIES OF THE COMMITTEE
| | -- | ---------------------------------------------



| | 1.1 | Purpose
| | --- | -------



The primary purpose of the Committee
is to assist Board oversight of:



| | (a) | the integrity of the Corporation’s financial statements and of the accounting and financial
reporting practices and procedures of the Corporation;
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------



| | (b) | the adequacy of the internal and accounting controls and procedures of the Corporation;
| | --- | ---------------------------------------------------------------------------------------



| | (c) | the External Auditor’s qualifications and independence;
| | --- | -------------------------------------------------------



| | (d) | the performance of the Corporation’s internal audit function, if any and the External Auditor;
and
| | --- | --------------------------------------------------------------------------------------------------



| | (e) | the Corporation’s compliance with legal and regulatory requirements, to the extent that such
requirements are relevant to the foregoing.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------



| | 2. | DEFINITIONS AND INTERPRETATION
| | -- | ------------------------------



| | 2.1 | Definitions
| | --- | -----------



In this Charter:



| | (a) | “Board” means the Board of Directors of the Corporation;
| | --- | --------------------------------------------------------



| | (b) | “Chair” means the chair of the Committee;
| | --- | -----------------------------------------



| | (c) | “Committee” means the audit committee of the Board;
| | --- | ---------------------------------------------------



| | (d) | “Corporation” means Cipher Pharmaceuticals Inc.;
| | --- | ------------------------------------------------



| | (e) | “Directors” means the directors of the Corporation;
| | --- | ---------------------------------------------------



| | (f) | “External Auditor” means the Corporation’s independent auditor; and
| | --- | -------------------------------------------------------------------



| | (g) | “GAAP” means Canadian generally accepted accounting principles.
| | --- | ---------------------------------------------------------------



Any words or terms with initial
capital letters which are not defined herein shall have the meanings ascribed thereto in the charter of the Directors.



| | 2.2 | Interpretation
| | --- | --------------



The provisions of this Charter
are subject to any Applicable Laws.





Cipher Pharmaceuticals Inc.2014 Annual Information Form







CONSTITUTION AND FUNCTIONING OF THE COMMITTEE



| | 3. | ESTABLISHMENT AND COMPOSITION OF THE COMMITTEE
| | -- | ----------------------------------------------



| | 3.1 | Establishment of the Audit Committee
| | --- | ------------------------------------



The Committee is hereby continued
with the constitution, function and responsibilities herein set forth.



| | 3.2 | Appointment and Removal of Members of the Committee
| | --- | ---------------------------------------------------



| | (a) | Board Appoints Members. The members of the Committee shall be appointed by the Board.
| | --- | -------------------------------------------------------------------------------------



| | (b) | Annual Appointments. The appointment of members of the Committee shall take place annually
at the first meeting of the Board after a meeting of the shareholders at which Directors are elected, provided that if the appointment
of members of the Committee is not so made, the Directors who are then serving as members of the Committee shall continue as members
of the Committee until their successors are appointed.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (c) | Vacancies. The Board may appoint a member to fill a vacancy which occurs in the Committee
between annual elections of Directors.
| | --- | --------------------------------------------------------------------------------------------------------------------------------



| | (d) | Removal of Member. Any member of the Committee may be removed from the Committee by a resolution
of the Board.
| | --- | --------------------------------------------------------------------------------------------------------------



| | 3.3 | Number of Members
| | --- | -----------------



The Committee shall consist of
three or more Directors.



| | 3.4 | Independence of Members
| | --- | -----------------------



Each member of the Committee
shall be independent as defined under Applicable Laws.



| | 3.5 | Financial Literacy
| | --- | ------------------



| | (a) | Financial Literacy Requirement. Each member of the Committee shall be financially literate
or must become financially literate within a reasonable period of time after his or her appointment to the Committee.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (b) | Definition of Financial Literacy. “Financially literate” means the ability to
read and understand a set of financial statements that present a breadth and level of complexity of accounting issues that are
generally comparable to the breadth and complexity of the issues that can reasonably be expected to be raised by the Corporation’s
financial statements.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 3.6 | Audit Committee Financial Expert
| | --- | --------------------------------



| | (a) | Attributes of an Audit Committee Financial Expert. To the extent possible, the Board shall
appoint to the Committee at least one Director who has the following attributes:
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | (i) | an understanding of generally accepted accounting principles
and financial statements;
| |  | --- | --------------------------------------------------------------------------------------



| |  | (ii) | ability to assess the general application of such principles
in connection with the accounting for estimates, accruals and reserves;
| |  | ---- | ------------------------------------------------------------------------------------------------------------------------------------



| |  | (iii) | experience preparing, auditing, analyzing or evaluating
financial statements that present a breadth and level of complexity of accounting issues that are generally comparable to the
breadth and complexity of issues that can reasonably be expected to be raised by the Corporation’s financial statements,
or experience actively supervising one or more persons engaged in such activities;
| |  | ----- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





Cipher Pharmaceuticals Inc.2014 Annual Information FormA-2







| |  | (iv) | an understanding of internal controls and procedures
for financial reporting; and
| |  | ---- | ---------------------------------------------------------------------------------



| |  | (v) | an understanding of audit committee functions.
| |  | --- | ----------------------------------------------



| | (b) | Experience of the Audit Committee Financial Expert. To the extent possible, the Board shall
appoint to the Committee at least one Director who acquired the attributes in (a) above through:
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | (i) | education and experience as a principal financial officer,
principal accounting officer, controller, public accountant or auditor or experience in one or more positions that involve the
performance of similar functions (or such other qualification as the Board interprets such qualification in its business judgment);
| |  | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | (ii) | experience actively supervising a principal financial
officer, principal accounting officer, controller, public accountant, auditor or person performing similar functions;
| |  | ---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | (iii) | experience overseeing or assessing the performance of
companies or public accountants with respect to the preparation, auditing or evaluation of financial statements; or
| |  | ----- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | (iv) | other relevant experience.
| |  | ---- | --------------------------



| | 4. | COMMITTEE CHAIR
| | -- | ---------------



| | 4.1 | Board to Appoint Chair
| | --- | ----------------------



The Board shall appoint the Chair
from the members of the Committee (or, if it fails to do so, the members of the Committee shall appoint the Chair from among its
members).



| | 4.2 | Chair to be Appointed Annually
| | --- | ------------------------------



The appointment of the Committee’s
Chair shall take place annually at the first meeting of the Board after a meeting of the members at which Directors are elected,
provided that if the designation of Chair is not so made, the Director who is then serving as Chair shall continue as Chair until
his or her successor is appointed.



| | 5. | COMMITTEE MEETINGS
| | -- | ------------------



| | 5.1 | Quorum
| | --- | ------



A quorum of the Committee shall
be a majority of its members.



| | 5.2 | Secretary
| | --- | ---------



The Chair shall designate from
time to time a person who may, but need not, be a member of the Committee, to be Secretary of the Committee.



| | 5.3 | Time and Place of Meetings
| | --- | --------------------------



The time and place of the meetings
of the Committee, the calling of meetings and the procedure in all things at such meetings shall be determined by the Committee
in accordance with the by-laws of the Corporation; provided, however, the Committee shall meet at least quarterly.





Cipher Pharmaceuticals Inc.2014 Annual Information FormA-3







| | 5.4 | In Camera Meetings
| | --- | ------------------



As part of each meeting of the
Committee at which the Committee recommends that the Board approve the annual audited financial statements or at which the Committee
approves the quarterly financial statements, the Committee shall meet separately with each of:



| | (a) | management;
| | --- | -----------



| | (b) | the External Auditor; and
| | --- | -------------------------



| | (c) | the internal auditor, if any.
| | --- | -----------------------------



| | 5.5 | Right to Vote
| | --- | -------------



Each member of the Committee
shall have the right to vote on matters that come before the Committee.



| | 5.6 | Invitees
| | --- | --------



The Committee may invite Directors,
officers and employees of the Corporation or any other person to attend meetings of the Committee to assist in the discussion and
examination of the matters under consideration by the Committee. The External Auditor shall receive notice of each meeting of the
Committee and shall be entitled to attend any such meeting at the Corporation’s expense.



| | 5.7 | Regular Reporting
| | --- | -----------------



The Committee shall report to
the Board at the Board’s next meeting the proceedings at the meetings of the Committee and all recommendations made by the
Committee at such meetings.



| | 6. | AUTHORITY OF COMMITTEE
| | -- | ----------------------



| | 6.1 | Retaining and Compensating Advisors
| | --- | -----------------------------------



The Committee shall have the
authority to engage independent counsel and other advisors as the Committee may deem appropriate in its sole discretion and to
set and pay the compensation for any advisors employed by the Committee. The Committee shall not be required to obtain the approval
of the Board in order to retain or compensate such consultants or advisors.



| | 6.2 | Subcommittees
| | --- | -------------



The Committee may form and delegate
authority to subcommittees if deemed appropriate by the Committee.



| | 6.3 | Recommendations to the Board
| | --- | ----------------------------



The Committee shall have the
authority to make recommendations to the Board, but shall have no decision-making authority other than as specifically contemplated
in this Charter.



| | 7. | REMUNERATION OF COMMITTEE MEMBERS
| | -- | ---------------------------------



| | 7.1 | Remuneration of Committee Members
| | --- | ---------------------------------



Members of the Committee and
the Chair shall receive such remuneration for their service on the Committee as the Board may determine from time to time.





Cipher Pharmaceuticals Inc.2014 Annual Information FormA-4







| | 7.2 | Directors’ Fees
| | --- | ---------------



No member of the Committee may
earn fees from the Corporation or any of its subsidiaries other than Directors’ fees (which fees may include cash and/or
securities or options or other in-kind consideration ordinarily available to Directors, as well as all of the regular benefits
that other Directors receive). For greater certainty, no member of the Committee shall accept, directly or indirectly, any consulting,
advisory or other compensatory fee from the Corporation or any of its subsidiaries.



SPECIFIC DUTIES AND RESPONSIBILITIES



| | 8. | INTEGRITY OF FINANCIAL STATEMENTS
| | -- | ---------------------------------



| | 8.1 | Review and Approval of Financial Information
| | --- | --------------------------------------------



| | (a) | Annual Financial Statements. The Committee shall review and discuss with management and
the External Auditor, the Corporation’s audited annual financial statements and related MD&A together with the report
of the External Auditor thereon and, when appropriate, shall recommend to the Board that the Board approve the audited annual financial
statements and related MD&A.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (b) | Interim Financial Statements. The Committee shall review and discuss with management and
the External Auditor and, when appropriate, shall recommend to the Board that the Board approve the Corporation’s interim
unaudited financial statements and related MD&A.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (c) | Material Public Financial Disclosure. The Committee shall discuss with management and the
External Auditor:
| | --- | -----------------------------------------------------------------------------------------------------------



| |  | (i) | the types of information to be disclosed and the type
of presentation to be made in connection with earnings press releases,
| |  | --- | ----------------------------------------------------------------------------------------------------------------------------



| |  | (ii) | financial information and earnings guidance (if any)
to be provided to analysts, investors and rating agencies, and
| |  | ---- | -------------------------------------------------------------------------------------------------------------------



| |  | (iii) | press releases containing financial information (paying
particular attention to any use of “pro forma” or “adjusted” non-GAAP information),
| |  | ----- | -------------------------------------------------------------------------------------------------------------------------------------------



and, when appropriate, shall recommend
to the Board that the Board approve any such material financial disclosure prior to its release to the public.



| | (d) | Procedures for Review. The Committee shall be satisfied that adequate procedures are in
place for the review of the Corporation’s disclosure of financial information extracted or derived from the Corporation’s
financial statements (other than financial statements, MD&A and earnings press releases, which are dealt with elsewhere in
this Charter) and shall periodically assess the adequacy of those procedures.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (e) | Accounting Treatment. The Committee shall review and discuss with management and the External
Auditor:
| | --- | ------------------------------------------------------------------------------------------------------



| |  | (i) | major issues regarding accounting principles and financial
statement presentations including any significant changes in the Corporation’s selection or application of accounting principles
and major issues as to the adequacy of the Corporation’s internal controls and any special audit steps adopted in light
of material control deficiencies;
| |  | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | (ii) | analyses prepared by management and/or the External Auditor
setting forth significant financial reporting issues and judgments made in connection with the preparation of the financial statements,
including analyses of the effects of alternative GAAP methods on the financial statements;
| |  | ---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





Cipher Pharmaceuticals Inc.2014 Annual Information FormA-5







| |  | (iii) | the effect of regulatory and accounting initiatives,
as well as off-balance sheet structures on the Corporation’s financial statements;
| |  | ----- | ---------------------------------------------------------------------------------------------------------------------------------------



| |  | (iv) | the management certifications of the financial statements
as required by applicable securities laws in Canada or otherwise; and
| |  | ---- | -------------------------------------------------------------------------------------------------------------------------------



| |  | (v) | pension plan financial statements, if any.
| |  | --- | ------------------------------------------



| | 9. | EXTERNAL AUDITOR
| | -- | ----------------



| | 9.1 | External Auditor
| | --- | ----------------



| | (a) | Authority with Respect to External Auditor. The Committee shall be directly responsible
for the nomination, compensation and oversight of the work of the External Auditor engaged for the purpose of preparing or issuing
an audit report or performing other audit, review or attest services for the Corporation. In the discharge of this responsibility,
the Committee shall:
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | (i) | have sole responsibility for recommending to the Board
the person to be proposed to the Corporation’s shareholders for appointment as External Auditor for the above-described
purposes as well as the responsibility for recommending such External Auditor’s compensation and determining at any time
whether the Board should recommend to the Corporation’s shareholders whether the incumbent External Auditor should be removed
from office;
| |  | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | (ii) | review the terms of the External Auditor’s engagement,
discuss the audit fees with the External Auditor and be solely responsible for approving such audit fees; and
| |  | ---- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | (iii) | require the External Auditor to confirm in its engagement
letter each year that the External Auditor is accountable to, and shall report directly to, the Committee as the representative
of shareholders.
| |  | ----- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (b) | Independence. The Committee shall satisfy itself as to the independence of the External
Auditor. As part of this process the Committee shall:
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------



| |  | (i) | assure the regular rotation of the lead audit partner
as required by law and consider whether, in order to ensure continuing independence of the External Auditor, the Corporation should
rotate periodically, the audit firm that serves as External Auditor;
| |  | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | (ii) | require the External Auditor to submit on a periodic
basis to the Committee, a formal written statement delineating all relationships between the External Auditor and the Corporation
and its subsidiaries and that the Committee is responsible for actively engaging in a dialogue with the External Auditor with
respect to any disclosed relationships or services that may impact the objectivity and independence of the External Auditor and
for recommending that the Board take appropriate action in response to the External Auditor’s report to satisfy itself of
the External Auditor’s independence;
| |  | ---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | (iii) | address non-audit services provided by the External Auditor
as described in clause (d) below; and
| |  | ----- | -------------------------------------------------------------------------------------------------



| |  | (iv) | review and approve the policy setting out the restrictions
on the Corporation and its subsidiaries hiring partners, employees and former partners and employees of the Corporation’s
current or former External Auditor.
| |  | ---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





Cipher Pharmaceuticals Inc.2014 Annual Information FormA-6







| | (c) | Issues Between External Auditor and Management. The Committee shall:
| | --- | --------------------------------------------------------------------



| |  | (i) | review any problems experienced by the External Auditor
in conducting the audit, including any restrictions on the scope of the External Auditor’s activities or in access to requested
information;
| |  | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | (ii) | review any disagreements with management and, to the
extent possible, resolve any disagreements between management and the External Auditor regarding financial reporting; and
| |  | ---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | (iii) | review with the External Auditor:
| |  | ----- | ---------------------------------



| | (A) | any accounting adjustments that were proposed by the External Auditor, but were not made by management;
| | --- | -------------------------------------------------------------------------------------------------------



| | (B) | any communications between the audit team and audit firm’s national office respecting significant
auditing or accounting issues presented by the engagement;
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (C) | any management or internal control letter issued, or proposed to be issued by the External Auditor
to the Corporation; and
| | --- | --------------------------------------------------------------------------------------------------------------------------



| | (D) | the performance of the Corporation’s internal audit function and internal auditors.
| | --- | -----------------------------------------------------------------------------------



| | (d) | Non-Audit Services.
| | --- | -------------------



| |  | (i) | The Committee shall either:
| |  | --- | ---------------------------



| | (A) | approve any non-audit services provided by the External Auditor or the external auditor of any
subsidiary of the Corporation to the Corporation (including its subsidiaries); or
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (B) | adopt specific policies and procedures for the engagement of non-audit services, provided that
such pre-approval policies and procedures are detailed as to the particular service, the Committee is informed of each non-audit
service and the procedures do not include delegation of the Committee’s responsibilities to management.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | (ii) | The Committee may delegate to one or more members of
the Committee the authority to pre-approve non-audit services in satisfaction of the requirement in the previous section, provided
that such member or members must present any non-audit services so approved to the full Committee at its first scheduled meeting
following such pre-approval.
| |  | ---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | (iii) | The Committee shall instruct management to promptly bring
to its attention any services performed by the External Auditor which were not recognized by the Corporation at the time of the
engagement as being non-audit services.
| |  | ----- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (e) | Evaluation of External Auditor. The Committee shall evaluate the External Auditor each year,
and present its conclusions to the Board. In connection with this evaluation, the Committee shall:
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | (i) | review and evaluate the performance of the lead partner
of the External Auditor;
| |  | --- | --------------------------------------------------------------------------------



| |  | (ii) | obtain the opinions of management and of the persons
responsible for the Corporation’s internal audit function with respect to the performance of the External Auditor; and
| |  | ---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------





Cipher Pharmaceuticals Inc.2014 Annual Information FormA-7







| |  | (iii) | obtain and review a report by the External Auditor describing:
| |  | ----- | --------------------------------------------------------------



| | (A) | the External Auditor’s internal quality-control procedures;
| | --- | -----------------------------------------------------------



| | (B) | to the extent permitted by Applicable Laws and by the Canadian Public Accountability Board, any
material issues raised by the most recent internal quality-control review, or peer review, of the External Auditor’s firm
or by any inquiry or investigation by governmental or professional authorities, within the preceding five years, respecting one
or more independent audits carried out by the External Auditor’s firm, and any steps taken to deal with any such issues;
and
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (C) | all relationships between the External Auditor and the Corporation (for the purposes of assessing
the External Auditor’s independence).
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------



| | (f) | Review of Management’s Evaluation and Response. The Committee shall:
| | --- | --------------------------------------------------------------------



| |  | (i) | review management’s evaluation of the External
Auditor’s audit performance;
| |  | --- | ---------------------------------------------------------------------------



| |  | (ii) | review the External Auditor’s recommendations,
and review management’s response to and subsequent follow-up on any identified weaknesses;
| |  | ---- | -----------------------------------------------------------------------------------------------------------------------------------------



| |  | (iii) | review management’s response to significant internal
control recommendations of the internal audit staff and the External Auditor;
| |  | ----- | ----------------------------------------------------------------------------------------------------------------------------------



| |  | (iv) | receive regular reports from management and receive comments
from the External Auditor, if any, on:
| |  | ---- | ---------------------------------------------------------------------------------------------------



| | (A) | the Corporation’s principal financial risks;
| | --- | --------------------------------------------



| | (B) | the systems implemented to monitor those risks; and
| | --- | ---------------------------------------------------



| | (C) | the strategies (including hedging strategies) in place to manage those risks; and
| | --- | ---------------------------------------------------------------------------------



| | (g) | recommend to the Board whether any new material strategies presented by management should be considered
appropriate and approved.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------



| | 10. | INTERNAL AUDIT FUNCTION
| | --- | -----------------------



| | 10.1 | Internal Auditor
| | ---- | ----------------



In connection with the Corporation’s
internal audit function, if any the Committee shall:



| | (a) | review the terms of reference of the internal auditor, if any, and meet with the internal auditor
as the Committee may consider appropriate to discuss any concerns or issues;
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (b) | in consultation with the External Auditor and the internal audit group, review the adequacy of
the Corporation’s internal control structure and procedures designed to ensure compliance with laws and regulations and any
special audit steps adopted in light of material deficiencies and controls;
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (c) | review the internal control report prepared by management, including management’s assessment
of the effectiveness of the Corporation’s internal control structure and procedures for financial reporting; and
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (d) | periodically review with the internal auditor, if any, any significant difficulties, disagreements
with management or scope restrictions encountered in the course of the work of the internal auditor.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





Cipher Pharmaceuticals Inc.2014 Annual Information FormA-8







| | 11. | COMPLIANCE WITH LEGAL AND REGULATORY REQUIREMENTS
| | --- | -------------------------------------------------



| | 11.1 | Risk Assessment and Risk Management
| | ---- | -----------------------------------



The Committee shall discuss the
Corporation’s major financial risk exposures and the steps management has taken to monitor and control such exposures and
shall report to the Board with respect thereto.



| | 11.2 | Related Party Transactions
| | ---- | --------------------------



The Committee shall review and
approve all related party transactions in which the Corporation is involved or which the Corporation proposes to enter into.



| | 11.3 | Whistleblowing Policy
| | ---- | ---------------------



The Committee shall put in place,
subject to approval by the Board, procedures for:



| | (a) | the receipt, retention and treatment of complaints received by the Corporation or its subsidiaries
regarding accounting, internal accounting controls or auditing matters; and
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (b) | the confidential, anonymous submission by employees of the Corporation or its subsidiaries of concerns
regarding questionable accounting or auditing matters.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 12. | ANNUAL PERFORMANCE REVIEW
| | --- | -------------------------



On an annual basis, the Committee
shall follow the process established by the Board and overseen by the Nominating and Governance Committee for reviewing the performance
of the Committee.



| | 13. | CHARTER REVIEW
| | --- | --------------



The Committee shall review and
assess the adequacy of this Charter annually and recommend to the Board any changes it deems appropriate.



December 28, 2005 and amended August 3,
2006 and March 30, 2015.





Cipher Pharmaceuticals Inc.2014 Annual Information FormA-9