Document:

The Registrant's material Change Report dated October 1, 2010

  
 Exhibit 4.8

 TEKMIRA PHARMACEUTICALS CORPORATION 
 MATERIAL CHANGE REPORT 
 FORM 51-102F3 

 

	1.	Name and Address of Company: 

   Tekmira Pharmaceuticals Corporation (the “Company”) 

  200 - 8900 Glenlyon Parkway 
   Glenlyon Business Park 
   Burnaby, B.C. 

  V5J 5J8 
  

	2.	Date of Material Change: 

September 21, 2010 
  

	3.	News Release: 

 A news
release announcing the material change disclosed in this material change report is attached as Schedule “A” and was issued by the Company on September 21, 2010. The news release was distributed via Marketwire. 

 

	4.	Summary of Material Change: 

 On September 21, 2010, the Company announced that it had amended its license agreement with Hana Biosciences, Inc. (“Hana”). Under the terms of the amendment, Hana will make a US$5.75
million payment to the Company in consideration for reducing certain future payments associated with product candidates. The Company will transfer the US$5.75 million to former debt holders of the Company which will eliminate all future payments to
the former debt holders. 
  

	5.	Full description of Material Change: 

 Background 
 In 2006, the Company licensed three legacy chemotherapy product
candidates (Marqibo, Alocrest and Brakiva) to Hana. Hana is responsible for all expenses associated with the development of the product candidates and the Company is eligible to receive milestones and royalties. After completion of the Hana license
agreement, in 2006, the Company entered into a settlement agreement with former debt holders of the Company. As part of the settlement agreement, the former debt holders received an upfront payment and were to receive up to US$22.8 million in future
payments based on the Company receiving payments from Hana. 

  
 Tekmira has the
opportunity to receive additional milestones and royalties on product sales from Hana based on the successful development of Marqibo, Alocrest and Brakiva. 
 Material Change 
 On September 21, 2010, the Company announced that it
had amended its license agreement with Hana. Under the terms of the amendment, Hana will make a US$5.75 million payment to the Company in consideration for: 
  

	 	•	 	 The reduction of Hana’s maximum aggregate obligation for milestone payments to the Company for all three product candidates from $37.0 million to
$19.0 million. All of the affected milestone payment obligations relate to amounts triggered by the achievement of regulatory milestones for Hana’s Marqibo drug candidate; and 

 

	 	•	 	 The modification of royalty rates payable by Hana for net sales of Marqibo by eliminating a tiered royalty rate structure based upon the amount of net
sales and instead providing for a single royalty rate without regard to the amount of net sales. 

 Concurrent
with the amendment to the Hana license agreement, Tekmira entered into an agreement with its former debt holders. The Company will transfer the US$5.75 million received from Hana to former debt holders of the Company which will eliminate all future
payments to the former debt holders. 
 The foregoing description of the amendment to the license agreement with Hana and the
agreement with the former debt holders does not purport to be a complete description of the rights and obligations of the parties thereunder and is qualified in its entirety by reference to the full text of the agreements that have been filed on
SEDAR along with this material change report. 
  

	6.	Reliance on subsection 7.1(2) or (3) of National Instrument 51-102: 

 Not applicable. 
  

	7.	Omitted Information: 

 No significant facts otherwise required to be disclosed in this report have been omitted. 
  

	8.	Executive Officer: 

 The
following executive officer of the Company is knowledgeable about the material change and may be contacted respecting the change: 
 Ian Mortimer 
 Executive Vice-President and Chief Financial Officer 

200-8900 Glenlyon Parkway 
 Glenlyon Business Park 
 Burnaby, B.C. V5J 5J8 

Telephone: (604) 419-3200 

  
 - 2 -

  

	9.	Date of Report: 

October 1, 2010 

  
 - 3 -

  
 Schedule
“A” 

 

 

 Tekmira Pharmaceuticals Amends Agreement with 

Legacy Partner Hana Biosciences 
  

			
	For immediate release:	  	September 21, 2010

  

VANCOUVER, BC — Tekmira Pharmaceuticals Corporation (TSX: TKM), a leader in RNA interference (RNAi) therapeutics, announced
today that is has amended its license agreement with Hana Biosciences, Inc. Tekmira licensed three legacy chemotherapy product candidates to Hana in 2006. Hana is responsible for all expenses associated with the development of the product candidates
and Tekmira is eligible to receive milestones and royalties. Tekmira is focused on advancing novel RNAi product candidates and providing its leading lipid nanoparticle (LNP) delivery technology to pharmaceutical partners. 

Under the terms of the amendment, Hana will make a US$5.75 million payment to Tekmira in consideration for reducing certain future
payments associated with the product candidates. Tekmira will transfer the US$5.75 million to former debt holders of Tekmira which will eliminate all future payments to the former debt holders. 

Dr. Mark J. Murray, Tekmira’s President and CEO, said, “We are pleased to amend our agreement with Hana, and in the
process, eliminate any future obligations to our former debt holders. We remain focused on the advancement of our internal RNAi product candidates and providing our leading lipid nanoparticle delivery technology to our global pharmaceutical
partners.” 
 Background to Hana License Agreement and Debt Settlement 

In 2006, Tekmira licensed three legacy chemotherapy product candidates, Marqibo, Alocrest and Brakiva to Hana. After completion of the
Hana license agreement, in 2006, Tekmira entered into a settlement agreement with former debt holders of the Company. As part of the settlement agreement, the former debt holders received an upfront payment and were to receive up to US$22.8 million
in future payments based on Tekmira receiving payments from Hana. 
 Concurrent with the amendment to the Hana license agreement,
Tekmira has entered into an agreement with its former debt holders. The payment of US$5.75 million will eliminate all future payments to the former debt holders. 
 Tekmira has the opportunity to receive additional milestones and royalties on product sales from Hana based on the successful development of Marqibo, Alocrest and Brakiva. 

About RNAi and Tekmira’s LNP Technology 
 RNAi therapeutics have the potential to treat a broad number of human diseases by “silencing” disease causing genes. The discoverers of RNAi, a gene silencing mechanism used by all cells,
were awarded the 2006 Nobel Prize for Physiology or Medicine. RNAi therapeutics, such as “siRNAs,” require delivery technology to be effective systemically. LNP technology is one of the most widely used siRNA delivery

  
 - 4 -

 
approaches for systemic administration. Tekmira’s LNP technology (formerly referred to as stable nucleic acid-lipid particles or SNALP) encapsulates siRNAs with high efficiency in uniform
lipid nanoparticles which are effective in delivering RNAi therapeutics to disease sites in numerous preclinical models. Tekmira’s LNP formulations are manufactured by a proprietary method which is robust, scalable and highly reproducible and
LNP-based products have been reviewed by multiple FDA divisions for use in clinical trials. LNP formulations comprise several lipid components that can be adjusted to suit the specific application. 

About Tekmira 
 Tekmira Pharmaceuticals Corporation is a biopharmaceutical company focused on advancing novel RNAi therapeutics and providing its leading lipid nanoparticle delivery technology to pharmaceutical partners.
Tekmira has been working in the field of nucleic acid delivery for over a decade and has broad intellectual property covering SNALP and LNPs. Further information about Tekmira can be found at www.tekmirapharm.com. Tekmira is based in Vancouver, B.C.

 Forward-looking Statements and Information 
 This press release contains “forward-looking statements” or “forward-looking information” within the meaning of applicable securities laws (collectively, “forward-looking
statements”). Forward-looking statements are generally identifiable by use of the words “believes,” “may,” “plans,” “will,” “anticipates,” “intends,” “budgets”,
“could”, “estimates”, “expects”, “forecasts”, “projects” and similar expressions, and the negative of such expressions. Forward-looking statements in this news release include statements about
Tekmira’s strategy, future operations, clinical trials, prospects and the plans of management; RNAi (ribonucleic acid interference) product development programs; and Tekmira’s expectations with respect to existing agreements with Hana.

 With respect to the forward-looking statements contained in this news release, Tekmira has made numerous assumptions
regarding, among other things: LNP’s status as a leading RNAi delivery technology; Tekmira’s research and development capabilities and resources; the timing and obtaining of regulatory approvals for Tekmira’s products; and the time
required to complete research and product development activities. While Tekmira considers these assumptions to be reasonable, these assumptions are inherently subject to significant business, economic, competitive, market and social uncertainties
and contingencies. 
 Additionally, there are known and unknown risk factors which could cause Tekmira’s actual results,
performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements contained herein. Known risk factors include, among others: the possibility that other
organizations have made advancements in RNAi delivery technology that Tekmira is not aware of; the FDA will not approve the commencement of Tekmira’s planned clinical trials or approve the use of Tekmira’s products and generally,
difficulties or delays in the progress, timing and results of clinical trials and studies; anticipated payments under contracts with Tekmira’s collaborative partners, including Hana, will not be received by Tekmira on a timely basis, or at all,
or in the quantum expected by Tekmira; pre-clinical trials may not be completed, or clinical trials started, when anticipated or at all; pre-clinical and clinical trials may be more costly or take longer to complete than anticipated; pre-clinical or
clinical trials may not generate results that warrant future development of the tested drug candidate. 
 A more complete
discussion of the risks and uncertainties facing Tekmira appears in Tekmira’s Annual Information Form dated March 31, 2010 available at www.sedar.com. All forward-looking statements herein are qualified in their entirety by
this cautionary statement, and Tekmira disclaims any obligation to revise or update any such forward-looking statements or to publicly announce the result of any revisions to any of the forward-looking statements contained herein to reflect future
results, events or developments, except as required by law. 

  
 - 5 -

  
 Contact Information

 Investors 
 Adam Peeler 
 The Equicom Group 

Phone: 416-815-0700 x 225 
 Email: apeeler@equicomgroup.com 
 Ian Mortimer 

Executive Vice President and Chief Financial Officer 
 Phone: 604-419-3200
 Media 

David Ryan 

Longview Communications Inc.
 Phone: 604-694-6031 
 Email: dryan@longviewcomms.ca 

  
 - 6 -2009 Consolidated Financial Statements

  
 Exhibit 4.9

  

					
		 	 TEKMIRA PHARMACEUTICALS

CORPORATION
	 	
			
		 	2009 Consolidated Financial Statements	 	

  
 MANAGEMENT’S RESPONSIBILITY
FOR FINANCIAL REPORTING 
 The consolidated financial statements contained in this annual report have been prepared by management in
accordance with generally accepted accounting principles and have been approved by the Board of Directors. The integrity and objectivity of these consolidated financial statements are the responsibility of management. In addition, management is
responsible for all other information in the annual report and for ensuring that this information is consistent, where appropriate, with the information contained in the consolidated financial statements. 

In support of this responsibility, management maintains a system of internal controls to provide reasonable assurance as to the reliability of financial
information and the safe-guarding of assets. The consolidated financial statements include amounts which are based on the best estimates and judgments of management. 
 The Board of Directors is responsible for ensuring that management fulfills its responsibility for financial reporting and internal control and exercises this responsibility principally through the Audit
Committee. The Audit Committee consists of three directors not involved in the daily operations of the Company. The Audit Committee meets with management and meets independently with the external auditors to satisfy itself that management’s
responsibilities are properly discharged and to review the consolidated financial statements prior to their presentation to the Board of Directors for approval. 
 The external auditors, KPMG LLP, conduct an independent examination, in accordance with generally accepted auditing standards, and express their opinion on the consolidated financial statements. Their
examination includes a review of the Company’s system of internal controls and appropriate tests and procedures to provide reasonable assurance that the consolidated financial statements are, in all material respects, presented fairly and in
accordance with accounting principles generally accepted in Canada. The external auditors have free and full access to the Audit Committee with respect to their findings concerning the fairness of financial reporting and the adequacy of internal
controls. 
  

					
	(signed)	 		 	(signed)
			
	Dr. Mark J. Murray	 		 	Ian C. Mortimer
	President and
Chief Executive Officer	 		 	Executive Vice President, Finance and
Chief Financial Officer
			
	March 17, 2010	 		 	

  

 

 

  

							
		 	KPMG LLP	 	Telephone	  	(604) 691-3000
		 	Chartered Accountants	 	Fax	  	(604) 691-3031
		 	PO Box 10426 777 Dunsmuir Street	 	Internet	  	www.kpmg.ca
		 	Vancouver BC V7Y 1K3	 		  	
		 	Canada	 		  	

 AUDITORS’ REPORT TO THE SHAREHOLDERS 

We have audited the consolidated balance sheets of Tekmira Pharmaceuticals Corporation as at December 31, 2009 and 2008 and the consolidated
statements of operations and comprehensive loss, shareholders’ equity and cash flows for the years then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on
these financial statements based on our audit. 
 We conducted our audit in accordance with Canadian generally accepted auditing standards.
Those standards require that we plan and perform an audit to obtain reasonable assurance whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. 

In our opinion, these consolidated financial statements present fairly, in all material respects, the financial position of the Company as at
December 31, 2009 and 2008 and the results of its operations and its cash flows for the years then ended in accordance with Canadian generally accepted accounting principles. 

 

 

  

	
	Chartered Accountants
	
	 Vancouver, Canada

March 15, 2010

  

					
		 	 KPMG LLP, a Canadian limited liability partnership is the Canadian
 member firm of KPMG International, a Swiss cooperative.
	 	

  
 TEKMIRA PHARMACEUTICALS CORPORATION

 Consolidated Balance Sheets 
 (Expressed in Canadian Dollars) 
  

									
	 	  	December 31
2009	 	 	December 31
2008	 
			
	 Assets
	  				 			
	 Current assets:
	  				 			
	 Cash and cash equivalents
	  	$	24,397,740	  	 	$	26,218,342	  
	 Short-term investments
	  	 	—  	  	 	 	5,730,507	  
	 Accounts receivable
	  	 	1,052,895	  	 	 	632,439	  
	 Investment tax credits receivable (note 9)
	  	 	280,132	  	 	 	404,453	  
	 Inventory
	  	 	—  	  	 	 	174,524	  
	 Prepaid expenses and other assets
	  	 	226,981	  	 	 	100,360	  
		  	 	 	 	 	 	 	 
		  	 	25,957,748	  	 	 	33,260,625	  
			
	 Intangible assets (notes 4 and 6)
	  	 	15,152,430	  	 	 	16,306,980	  
	 Property and equipment (note 7)
	  	 	2,812,340	  	 	 	1,962,691	  
		  	 	 	 	 	 	 	 
		  	$	43,922,518	  	 	$	51,530,296	  
		  	 	 	 	 	 	 	 
			
	 Liabilities and shareholders’ equity
	  				 			
	 Current liabilities:
	  				 			
	 Accounts payable and accrued liabilities (note 17)
	  	$	5,653,827	  	 	$	4,473,612	  
	 Deferred revenue (note 5)
	  	 	1,162,437	  	 	 	459,094	  
		  	 	 	 	 	 	 	 
		  	 	6,816,264	  	 	 	4,932,706	  
	 Shareholders’ equity:
	  				 			
	 Share capital (note 8)
	  	 	229,426,757	  	 	 	229,412,230	  
	 Contributed surplus (note 4)
	  	 	29,531,049	  	 	 	29,272,005	  
	 Deficit
	  	 	(221,851,552	) 	 	 	(212,086,645	) 
		  	 	 	 	 	 	 	 
		  	 	37,106,254	  	 	 	46,597,590	  
		  	 	 	 	 	 	 	 
		  	$	43,922,518	  	 	$	51,530,296	  
		  	 	 	 	 	 	 	 

 Future operations (note 1) 
 Business acquisition (note 4) 
 Commitments and contingencies (notes 5(d) and 12) 

See accompanying notes to the consolidated financial statements. 
 Approved on behalf of the Board: 
  

			
	(signed)	  	(signed)
		
	Daniel Kisner - Chairman	  	James Hudson - Director

  
 Page 4 of 31

  
 TEKMIRA PHARMACEUTICALS CORPORATION

 Consolidated Statements of Operations and Comprehensive Loss 
 (Expressed in Canadian Dollars) 
  

									
	 	  	Year ended	 
	 	  	December 31
2009	 	 	December 31
2008	 
			
	 Revenue (note 5)
	  				 			
	 Research and development collaborations
	  	$	13,831,916	  	 	$	6,649,273	  
	 Licensing fees and milestone payments
	  	 	596,500	  	 	 	5,082,303	  
		  	 	 	 	 	 	 	 
		  	 	14,428,416	  	 	 	11,731,576	  
		  	 	 	 	 	 	 	 
			
	 Expenses
	  				 			
	 Research, development and collaborations (note 9)
	  	 	17,764,379	  	 	 	16,123,203	  
	 General and administrative
	  	 	4,152,540	  	 	 	4,404,028	  
	 Termination and restructuring expenses (note 10)
	  	 	—  	  	 	 	3,172,544	  
	 Amortization of intangible assets (notes 4 and 7)
	  	 	1,275,515	  	 	 	768,887	  
	 Depreciation of property and equipment
	  	 	728,894	  	 	 	587,881	  
		  	 	 	 	 	 	 	 
		  	 	23,921,328	  	 	 	25,056,543	  
		  	 	 	 	 	 	 	 
			
	 (Loss) Income from operations
	  	 	(9,492,912	) 	 	 	(13,324,967	) 
			
	 Other income and (losses)
	  				 			
	 Interest income
	  	 	163,696	  	 	 	898,600	  
	 Impairment loss on goodwill (note 4)
	  	 	—  	  	 	 	(3,890,749	) 
	 Foreign exchange gains (losses)
	  	 	(435,691	) 	 	 	2,056,192	  
		  	 	 	 	 	 	 	 
	 Net loss and comprehensive loss
	  	$	(9,764,907	) 	 	$	(14,260,924	) 
		  	 	 	 	 	 	 	 
			
	 Weighted average number of common shares
	  				 			
	 Basic and diluted
	  	 	51,629,038	  	 	 	40,581,748	  
			
	 Loss per common share
	  				 			
	 Basic and diluted
	  	$	(0.19	) 	 	$	(0.35	) 

 See accompanying notes to the consolidated
financial statements. 

  
 Page 5 of 31

  
 TEKMIRA PHARMACEUTICALS CORPORATION

 Consolidated Statements of Shareholders’ Equity 
 (Expressed in Canadian Dollars) 
 Years ended December 31, 2009 and 2008 

 

																					
	 	  	Number
of shares	 	  	Share
capital	 	  	Contributed
surplus	 	 	Deficit	 	 	Total
shareholders’
equity	 
						
	 Balance, December 31, 2007
	  	 	24,565,681	  	  	$	195,317,270	  	  	$	20,700,522	  	 	$	(197,825,721	) 	 	 	18,192,071	  
						
	 Net loss
	  	 	—  	  	  	 	—  	  	  	 	—  	  	 	 	(14,260,924	) 	 	 	(14,260,924	) 
						
	 Stock-based compensation (note 8)
	  	 	—  	  	  	 	—  	  	  	 	1,772,351	  	 	 	—  	  	 	 	1,772,351	  
						
	 Issuance of common shares pursuant to exercise of options (note 8)
	  	 	42,742	  	  	 	55,740	  	  	 	(25,623	) 	 	 	—  	  	 	 	30,117	  
						
	 Issuance of common shares pursuant to acquisition of Protiva Biotherapeutics Inc. (note 4)
	  	 	22,848,588	  	  	 	28,789,221	  	  	 	—  	  	 	 	—  	  	 	 	28,789,221	  
						
	 Reservation of common shares for issue on the exercise of Protiva Biotherapeutics Inc. options (note 4)
	  	 	—  	  	  	 	—  	  	  	 	2,109,754	  	 	 	—  	  	 	 	2,109,754	  
						
	 Issuance of common shares pursuant to private placement (note 4)
	  	 	4,166,666	  	  	 	5,249,999	  	  	 	4,715,001	  	 	 	—  	  	 	 	9,965,000	  
		  	 	 	 	  	 	 	 	  	 	 	 	 	 	 	 	 	 	 	 
	 Balance, December 31, 2008
	  	 	51,623,677	  	  	$	229,412,230	  	  	$	29,272,005	  	 	$	(212,086,645	) 	 	$	46,597,590	  
						
	 Net loss
	  	 	—  	  	  	 	—  	  	  	 	—  	  	 	 	(9,764,907	) 	 	 	(9,764,907	) 
						
	 Stock-based compensation (note 8)
	  	 	—  	  	  	 	—  	  	  	 	265,685	  	 	 	—  	  	 	 	265,685	  
						
	 Issuance of common shares pursuant to exercise of options (note 8)
	  	 	19,261	  	  	 	14,527	  	  	 	(6,641	) 	 	 	—  	  	 	 	7,886	  
		  	 	 	 	  	 	 	 	  	 	 	 	 	 	 	 	 	 	 	 
						
	 Balance, December 31, 2009
	  	 	51,642,938	  	  	$	229,426,757	  	  	$	29,531,049	  	 	$	(221,851,552	) 	 	$	37,106,254	  
		  	 	 	 	  	 	 	 	  	 	 	 	 	 	 	 	 	 	 	 

  
 Page 6 of 31

  
 TEKMIRA PHARMACEUTICALS CORPORATION

 Consolidated Statements of Cash Flow 
 (Expressed in Canadian Dollars) 
  

									
	 	  	Year ended	 
	 	  	December 31
2009	 	 	December 31
2008	 
			
	 OPERATIONS
	  				 			
	 (Loss) for the period
	  	$	(9,764,907	) 	 	$	(14,260,924	) 
	 Items not involving cash:
	  				 			
	 Amortization of intangible assets
	  	 	1,275,515	  	 	 	768,887	  
	 Depreciation of property and equipment
	  	 	728,894	  	 	 	587,881	  
	 Stock-based compensation expense (note 8(d))
	  	 	265,685	  	 	 	1,772,351	  
	 Impairment loss on goodwill (note 4)
	  	 	—  	  	 	 	3,890,749	  
	 Foreign exchange (gains) losses arising on foreign currency cash balances
	  	 	373,726	  	 	 	(1,749,237	) 
	 Net change in non-cash working capital (note 16)
	  	 	1,635,326	  	 	 	(1,335,134	) 
		  	 	 	 	 	 	 	 
		  	 	(5,485,761	) 	 	 	(10,325,427	) 
		  	 	 	 	 	 	 	 
			
	 INVESTMENTS
	  				 			
	 Proceeds from (Acquisition of) short-term investments, net
	  	 	5,730,507	  	 	 	2,606,652	  
	 Acquisition of intangible assets
	  	 	(120,964	) 	 	 	(97,609	) 
	 Acquisition of property and equipment
	  	 	(1,578,544	) 	 	 	(1,078,551	) 
	 Cash acquired through acquisition of Protiva
	  				 			
	 Biotherapeutics Inc., net of acquisition costs (note 4)
	  	 	—  	  	 	 	2,519,095	  
		  	 	 	 	 	 	 	 
		  	 	4,030,999	  	 	 	3,949,587	  
		  	 	 	 	 	 	 	 
			
	 FINANCING
	  				 			
	 Issuance of common share pursuant to:
	  				 			
	 Private placements (note 4)
	  	 	—  	  	 	 	9,965,000	  
	 Exercise of options
	  	 	7,886	  	 	 	30,117	  
	 Repayment of obligations under capital leases
	  	 	—  	  	 	 	(75,688	) 
		  	 	 	 	 	 	 	 
		  	 	7,886	  	 	 	9,919,429	  
		  	 	 	 	 	 	 	 
			
	 Foreign exchange gains (losses) arising on foreign currency cash balances
	  	 	(373,726	) 	 	 	1,749,237	  
		  	 	 	 	 	 	 	 
			
	 Increase in cash and cash equivalents
	  	 	(1,820,602	) 	 	 	5,292,826	  
	 Cash and cash equivalents, beginning of year
	  	 	26,218,342	  	 	 	20,925,516	  
		  	 	 	 	 	 	 	 
	 Cash and cash equivalents, end of year
	  	$	24,397,740	  	 	$	26,218,342	  
		  	 	 	 	 	 	 	 
			
	 Supplemental cash flow information
	  				 			
			
	 Interest paid
	  	$	—  	  	 	$	3,668	  
	 Fair value of shares issued to Protiva Biotherapeutics Inc. shareholders pursuant to business acquisition (note
4)
	  	 	—  	  	 	 	28,789,221	  
	 Fair value of shares reserved for the exercise of Protiva Biotherapeutics Inc. stock options (note 4)
	  	 	—  	  	 	 	2,109,754	  

 See accompanying notes to the
consolidated financial statements. 

  
 Page 7 of 31

  
 TEKMIRA PHARMACEUTICALS CORPORATION

 Notes to Consolidated financial statements 
 (Expressed in Canadian dollars) 
 Years ended December 31, 2009 and 2008 

 
  
  

	1.	Basis of presentation and future operations 

 Tekmira Pharmaceuticals Corporation (the “Company”) was incorporated on October 6, 2005 as an inactive wholly owned subsidiary of Inex Pharmaceuticals Corporation (“Inex”).
Pursuant to a “Plan of Arrangement” effective April 30, 2007 the business and substantially all of the assets and liabilities of Inex were transferred to the Company. As a non-recurring related party transaction between the Company
and Inex, companies under common control at the time of the Plan of Arrangement, the assets and liabilities were transferred at their carrying values using the continuity-of-interests method of accounting. For accounting purposes, the Company is
considered to have continued Inex’s biopharmaceutical business; accordingly, these consolidated financial statements include the historical operations and changes in financial position of Inex to April 30, 2007 and those of the Company
thereafter. Reference in these consolidated financial statements to “the Company” means “Inex” for the time prior to May 1, 2007. 
 The Company is a Canadian biopharmaceutical business focused on advancing novel RNA interference therapeutics and providing its leading lipid nanoparticle delivery technology to pharmaceutical partners.

 These consolidated financial statements include the accounts of the Company and its two wholly-owned subsidiaries, Protiva
Biotherapeutics Inc. and Protiva Biotherapeutics (USA), Inc., which were acquired on May 30, 2008 (note 4). All intercompany transactions and balances have been eliminated on consolidation. 

Future operations 
 The success of the Company and its ability to realize the value of its non-monetary assets is dependent on obtaining the necessary regulatory approval to bring its products to market and to achieve
profitable operations. The continuation of the research and development activities and the commercialization of its products are dependent on the Company’s ability to successfully complete these activities and to obtain adequate financing
through a combination of financing activities and collaborative partner funding. It is not possible to predict either the outcome of future research and development programs or the Company’s ability to fund these programs going forward.

  
 Page 8 of 31

 TEKMIRA PHARMACEUTICALS CORPORATION 
 Notes to Consolidated financial statements 
 (Expressed in Canadian dollars) 

Years ended December 31, 2009 and 2008 
  

 
  

  

	2.	Significant accounting policies 

 These consolidated financial statements are presented in Canadian dollars, have been prepared in accordance with Canadian generally accepted accounting principles and reflect the following significant
accounting policies: 
  

	(a)	Use of estimates 

 The
preparation of the consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions about future events that affect the reported amounts of assets, liabilities,
revenue, expenses, contingent assets and contingent liabilities as at the end or during the reporting period. Management believes that the estimates used are reasonable and prudent, however, actual results could significantly differ from those
estimates. Significant areas requiring the use of management estimates relate to the valuation of goodwill and intangible assets, the useful lives of property and equipment and intangible assets for the purpose of amortization, recognition of
revenue, stock-based compensation, and the amounts recorded as accrued liabilities. 
  

	(b)	Cash and cash equivalents 

 Cash
and cash equivalents are all highly liquid instruments with an original maturity of three months or less when purchased. Cash and cash equivalents are recorded at fair value. 

 

	(c)	Financial instrument measurement bases 

 The following table shows the measurement basis adopted by the Company for its financial instrument categories: 
  

			
	 Financial instrument category
	  	 Measurement basis

		
	Cash and cash equivalents	  	Held for trading
	Short-term investments	  	Held for trading
	Accounts receivable	  	Loans and receivables
	Investment tax credits receivable	  	Loans and receivables
	Accounts payable	  	Other financial liabilities

  

	(d)	Inventory 

 Inventory includes
materials assigned for the manufacture of products for our collaborative partners and manufacturing costs for products awaiting acceptance by our collaborative partners. Inventory is carried at the lower of cost and net realizable value. The cost of
inventories includes all costs of purchase, costs of manufacturing and other costs incurred in bringing the inventories to their present location and condition. 

  
 Page 9 of 31

 TEKMIRA PHARMACEUTICALS CORPORATION 
 Notes to Consolidated financial statements 
 (Expressed in Canadian dollars) 

Years ended December 31, 2009 and 2008 
  

 
  

	2.	Significant accounting policies (continued) 

  

	(e)	Property and equipment 

 Property
and equipment is recorded at cost less impairment losses, accumulated amortization, related government grants and investment tax credits. The Company records amortization using the straight-line method over the estimated useful lives of the capital
assets as follows: 
  

					
	 	  	Rate	 
		
	 Laboratory equipment
	  	 	5 years	  
	 Computer networks
	  	 	5 years	  
	 Office equipment
	  	 	2 years	  
	 Furniture and fixtures
	  	 	5 years	  

 Leasehold
improvements are amortized over the lesser of their estimated useful lives or the lease term. Assets held under capital leases that do not allow for ownership to pass to the Company are amortized using the straight-line method over the lease term.

  

	(f)	Intangible assets 

 Intangible
assets consist of medical technology and computer software. 
 The costs of acquiring or licensing medical technology from
arm’s length third parties are capitalized. Costs are amortized on a straight-line basis over the estimated useful life of the technology. 
 The costs incurred in establishing and maintaining patents for intellectual property developed internally are expensed in the period incurred. 

Costs incurred in purchasing or developing computer software are recorded as intangible assets and are amortized over 2 to 5 years.

  

	(g)	Impairment of long-lived assets 

If management determines that the carrying value of property and equipment or medical technology exceeds the recoverable value based on
undiscounted future cash flows, such assets are written down to their fair values. 

  
 Page 10 of 31

 TEKMIRA PHARMACEUTICALS CORPORATION 
 Notes to Consolidated financial statements 
 (Expressed in Canadian dollars) 

Years ended December 31, 2009 and 2008 
  

 
  

	2.	Significant accounting policies (continued) 

  

	(h)	Leases and lease inducements 

Leases entered into are classified as either capital or operating leases. Leases which substantially transfer all benefits and risks of
ownership of property to the Company are accounted for as capital leases. At the time a capital lease is entered into, an asset is recorded together with its related long-term obligation to reflect the purchase and financing. 

All other leases are accounted for as operating leases wherein rental payments are expensed as incurred. 

Lease inducements represent leasehold improvement allowances and reduced or free rent periods and are amortized on a straight-line basis
over the term of the lease and are recorded as a reduction of rent expense. 
  

	(i)	Revenue recognition 

 The Company
earns revenue from research and development collaboration services, licensing fees and milestone payments. Revenues associated with multiple element arrangements are attributed to the various elements based on their relative fair values or are
recognized as a single unit of accounting when relative fair values are not determinable. Non-refundable payments received under collaborative research and development agreements are recorded as revenue as services are performed and related
expenditures are incurred. Non-refundable upfront license fees from collaborative licensing and development arrangements are recognized as the Company fulfills its obligations related to the various elements within the agreements, in accordance with
the contractual arrangements with third parties and the term over which the underlying benefit is being conferred. Revenue earned under contractual arrangements upon the occurrence of specified milestones is recognized as the milestones are achieved
and collection is reasonably assured. Revenue earned under research and development manufacturing collaborations where the Company bears some or all of the risk of a product manufacturing failure is recognized when the purchaser accepts the product
and there are no remaining rights of return. Revenue earned under research and development collaborations where the Company does not bear any risk of product manufacturing failure is recognized in the period the work is performed. 

Cash or other compensation received in advance of meeting the revenue recognition criteria is recorded on the balance sheet as deferred
revenue. Revenue meeting recognition criteria but not yet received or receivable is recorded on the balance sheet as accrued revenue and classified in accounts receivable. 

 

	(j)	Research and development expenditures 

 Research costs are charged as an expense in the period in which they are incurred. Development costs are charged as an expense in the period incurred unless the Company believes a development project
meets specified criteria for deferral and amortization. No development costs have been deferred to date. 

  
 Page 11 of 31

 TEKMIRA PHARMACEUTICALS CORPORATION 
 Notes to Consolidated financial statements 
 (Expressed in Canadian dollars) 

Years ended December 31, 2009 and 2008 
  

 
  

	2.	Significant accounting policies (continued) 

  

	(k)	Income or loss per share 

 Income
or loss per share is calculated based on the weighted average number of common shares outstanding. Diluted loss per share does not differ from basic loss per share since the effect of the Company’s stock options are antidilutive. Diluted income
per share is based on the diluted weighted average number of common shares outstanding resulting from in-the-money stock options based on the average trading price of the Company’s shares in that period. 

 

	(l)	Government assistance 

Government assistance provided for current expenses is included in the determination of income for the year, as a reduction of the
expenses to which it relates. Government assistance towards the acquisition of property and equipment is deducted from the cost of the related property and equipment. 
  

	(m)	Foreign currency translation 

Monetary assets and liabilities are translated into Canadian dollars at the rate of exchange prevailing at the balance sheet date.
Non-monetary assets and liabilities are translated at historical exchange rates. The previous month’s closing rate of exchange is used to translate revenue and expense transactions. Exchange gains and losses are included in income or loss for
the year. 
  

	(n)	Future income taxes 

 Income
taxes are accounted for using the asset and liability method of accounting. Future income taxes are recognized for the future income tax consequences attributable to differences between the carrying values of assets and liabilities and their
respective income tax bases and for loss carry-forwards. Future income tax assets and liabilities are measured using substantively enacted or enacted income tax rates expected to apply to taxable income in the years in which temporary differences
are expected to be recovered or settled. The effect on future income tax assets and liabilities of a change in tax laws or rates is included in earnings in the period that includes the substantive enactment date. When realization of future income
tax assets does not meet the more-likely-than-not criterion for recognition, a valuation allowance is provided. 
  

	(o)	Economic dependence 

 The Company
is dependent on collaborative partners for both funding and access to intellectual property. Funding from collaborative partners and credit risk associated with accounts receivable from these partners is described in notes 5 and 15 respectively.

  
 Page 12 of 31

 TEKMIRA PHARMACEUTICALS CORPORATION 
 Notes to Consolidated financial statements 
 (Expressed in Canadian dollars) 

Years ended December 31, 2009 and 2008 
  

 
  

	2.	Significant accounting policies (continued) 

  

	(p)	Stock-based compensation 

 The
Company grants stock options to employees and directors pursuant to a share incentive plan described in note 8. Compensation expense is recorded for issued stock options using the fair value method with a corresponding increase in contributed
surplus. Forfeitures of unvested options are recorded in the period in which the forfeitures occur. Any consideration received on the exercise of stock options is credited to share capital. 

The fair value of stock options is typically measured at the grant date and amortized on a straight-line basis over the vesting period.

  

	3.	Recent accounting pronouncements 

  

	(a)	Goodwill and intangible assets and financial statement concepts 

 Effective January 1, 2009, the Company adopted the Canadian Institute of Chartered Accountants (“CICA”) accounting standards updates for goodwill and intangible assets (CICA 3064) and for
financial statement concepts (CICA 1000). CICA 3064, Goodwill and Intangible Assets replaced CICA 3062, Goodwill and Other Intangible Assets, and CICA 3450, Research and Development Costs. CICA 1000, Financial Statement
Concepts was also amended to provide consistency with this new standard. The new section establishes standards for the recognition, measurement, and disclosure of goodwill and intangible assets. 

The adoption of this standard did not have any impact on the Company’s net loss but did result in a reclassification of computer
software costs from property and equipment to intangible assets in the amount of $1,511,232 as at December 31, 2008. 
  

	(b)	International financial reporting standards 

 On February 13, 2008, the Accounting Standards Board confirmed that the use of International Financial Reporting Standards (“IFRS”) will be required, for fiscal years beginning on or after
January 1, 2011, for publicly accountable profit-oriented enterprises. After that date, IFRS will replace Canadian GAAP for those enterprises. The Company has conducted a preliminary assessment of the impact of these new accounting standards on
its consolidated financial statements. A detailed assessment will be conducted in 2010. Changes in accounting policies are likely and may materially impact the Company’s consolidated financial statements. 

  
 Page 13 of 31

 TEKMIRA PHARMACEUTICALS CORPORATION 
 Notes to Consolidated financial statements 
 (Expressed in Canadian dollars) 

Years ended December 31, 2009 and 2008 
  

 
  

  

	4.	Business acquisition 

 On
May 30, 2008, the Company completed the acquisition of 100% of the outstanding shares of Protiva Biotherapeutics, Inc. (“Protiva”), a privately owned Canadian company developing lipid nanoparticle delivery technology for small
interfering RNA (“siRNA”), for $31,761,255. Concurrent with the acquisition, the Company entered into initial research agreements with F. Hoffman-La Roche Ltd and Hoffman La-Roche Inc. (collectively “Roche”). Also concurrent with
the acquisition, the Company completed a private placement investment of 2,083,333 newly issued common shares for $4,965,000 (US$5,000,000, US$2.40 per share) with Alnylam Pharmaceuticals, Inc. (“Alnylam”) and a private placement
investment of 2,083,333 newly issued common shares for $5,000,000 (CAD$2.40 per share) with a Roche affiliate for an aggregate investment of $9,965,000. The fair value of the Company’s shares issued to Alnylam and the Roche affiliate of
$5,249,999 was determined based on the weighted average closing price of the shares traded on the Toronto Stock Exchange from March 27, 2008 to April 2, 2008, being $1.26 per share and has been recorded as share capital. Based on this fair
value, the share premium paid by Alnylam and the Roche affiliate was an aggregate of $4,715,001 and has been recorded as contributed surplus. 
 The acquisition of Protiva and related financing and other transactions were first announced by the Company on March 30, 2008 and the acquisition closed on May 30, 2008. 

The primary purpose of the Protiva acquisition is to give the Company broader technology and intellectual property in the field of lipid
nanoparticle delivery, including the delivery of siRNA as well as RNAi product candidates. 

  
 Page 14 of 31

 TEKMIRA PHARMACEUTICALS CORPORATION 
 Notes to Consolidated financial statements 
 (Expressed in Canadian dollars) 

Years ended December 31, 2009 and 2008 
  

 
  

	4.	Business acquisition (continued) 

  

 The acquisition was accounted for under the purchase method of accounting. Accordingly,
the assets, liabilities, revenues and expenses of Protiva are consolidated with those of the Company from May 30, 2008. Total fair value of the consideration given was allocated to the assets acquired and liabilities assumed based upon their
estimated fair values, as follows: 
  

					
	 Cost of acquisition:
	  			
	 Common shares issued
	  	$	28,789,221	  
	 Common shares issuable upon exercise of Protiva stock options
	  	 	2,109,754	  
	 Direct acquisition costs
	  	 	862,280	  
		  	 	 	 
		  	$	31,761,255	  
		  	 	 	 
		
	 Allocated at estimated fair values:
	  			
	 Cash
	  	$	3,381,375	  
	 Short-term investments
	  	 	8,337,159	  
	 Accounts receivable
	  	 	1,148,928	  
	 Prepaid expenses and other assets
	  	 	82,573	  
	 Investment tax credit receivable
	  	 	275,695	  
	 Property and equipment
	  	 	635,911	  
	 Medical technology
	  	 	16,252,000	  
	 Goodwill
	  	 	3,890,749	  
	 Accounts payable and accrued liabilities
	  	 	(1,794,500	) 
	 Deferred revenue
	  	 	(448,635	) 
		  	 	 	 
		  	$	31,761,255	  
		  	 	 	 

 Cost of acquisition 
 The Company issued 22,848,588 common shares to acquire 100% of the outstanding shares of Protiva. The fair value of the Company’s shares has been determined based on the weighted average closing
price of the shares traded on the Toronto Stock Exchange from March 27, 2008 to April 2, 2008, being $1.26 per share. The Company used the Black-Scholes option pricing model to estimate the fair value of the 1,752,294 shares reserved at
the acquisition date for the exercise of assumed Protiva stock options using the following weighted average assumptions: dividend yield of 0%; risk free interest rate of 3.03%; volatility factor of the expected market price of the Company’s
common stock of 131%; and a weighted average expected life of the options of six years. 
 Allocation of fair values

 A valuation of Protiva’s property and equipment and medical technology has been completed. 

  
 Page 15 of 31

 TEKMIRA PHARMACEUTICALS CORPORATION 
 Notes to Consolidated financial statements 
 (Expressed in Canadian dollars) 

Years ended December 31, 2009 and 2008 
  

 
  

	4.	Business acquisition (continued) 

  

 Allocation of fair values (continued) 

 

 The Company used the income approach and considered potential cash flows from both
internal and partnered products to determine the fair value of the medical technology. The excess purchase price over the fair value of the net identifiable assets acquired has been allocated to goodwill. 

Various factors contributed to the establishment of goodwill, including: the value of Protiva’s highly skilled and knowledgeable work
force as of the acquisition date; the expected revenue growth over time that is attributable to new and expanded collaborative partnerships; and the synergies expected to result from combining workforces and infrastructures. 

At September 30, 2008 the Company carried out a goodwill impairment test. Based on the Company’s market capitalization as at
September 30, 2008 the Company determined that the fair value of goodwill was nil and an impairment loss of $3,890,749 was recorded in the statement of operations and comprehensive income (loss). 

The medical technology acquired includes licenses and intellectual property. The medical technology is being amortized on a straight-line
basis over its useful life, estimated to be 16 years (note 6). 
 Deferred revenue of $448,635 (US$450,000) is in respect of
payments received from Bristol-Myers Squibb Company (“Bristol-Myers Squibb”) for research work not begun as at May 30, 2008. 
 The Company does not anticipate a future tax liability as a result of the differences between the tax values and allocated fair values of the assets, based on available tax deductions. At the time of the
acquisition, Protiva had approximately $19,000,000 of unused non-capital losses available to reduce taxable income of future years and expiring between 2008 and 2027 and approximately $1,000,000 of investment tax credits available to reduce income
taxes of future years expiring between 2011 and 2027. Furthermore, Protiva had Scientific Research and Experimental Development expenditures of approximately $11,500,000 available for carry-forward indefinitely against future taxable income. The
potential income tax benefits relating to these future tax assets have not been recognized in the purchase price allocation as their realization does not meet the requirements of “more likely than not” under the liability method of tax
allocation. 
 On March 25, 2008, Protiva declared dividends totaling US$12,000,000. The dividend was paid by Protiva
issuing promissory notes on May 23, 2008. Recourse against Protiva for payment of the promissory notes will be limited to Protiva’s receipt, if any, of up to US$12,000,000 in payments from a certain third party. Protiva will pay these
funds if and when it receives them, to the former Protiva shareholders in satisfaction of the promissory notes. As contingent obligations that would not need to be funded by the Company at the acquisition, the US$12,000,000 receivable and the
related promissory notes payable are not included in the purchase equation above and are not recorded in the Company’s consolidated balance sheet. 

  
 Page 16 of 31

 TEKMIRA PHARMACEUTICALS CORPORATION 
 Notes to Consolidated financial statements 
 (Expressed in Canadian dollars) 

Years ended December 31, 2009 and 2008 
  

 
  

  

	5.	Collaborative and Licensing Agreements 

 The following table sets forth revenue recognized under the licensing, collaborative and evaluation agreements: 
  

									
	 	  	2009	 	  	2008	 
			
	 Research and development collaborations
	  				  			
	 Alnylam (a)
	  	$	8,831,250	  	  	$	6,079,681	  
	 Roche (b)
	  	 	4,757,842	  	  	 	159,465	  
	 Other RNAi collaborators (c)
	  	 	242,824	  	  	 	359,112	  
	 Hana (d)
	  	 	—  	  	  	 	51,015	  
		  	 	 	 	  	 	 	 
	 Total research and development collaborations
	  	 	13,831,916	  	  	 	6,649,273	  
			
	 Alnylam licensing fees and milestone payments (a)
	  	 	596,500	  	  	 	5,082,303	  
		  	 	 	 	  	 	 	 
			
	 Total revenue
	  	$	14,428,416	  	  	$	11,731,576	  
		  	 	 	 	  	 	 	 

  

	(a)	License and collaboration with Alnylam Pharmaceuticals, Inc. (“Alnylam”) 

License and Collaboration Agreement with Alnylam through Tekmira 

On January 8, 2007, the Company entered into a licensing and collaboration agreement with Alnylam (“Alnylam License and
Collaboration”) giving them an exclusive license to certain of the Company’s historical lipid nanoparticle intellectual property for the discovery, development, and commercialization of ribonucleic acid interference (“RNAi”)
therapeutics. 
 Cross-License with Alnylam acquired through Protiva 

As a result of the acquisition of Protiva on May 30, 2008, the Company acquired a Cross-License Agreement between Protiva and Alnylam
dated August 14, 2007 (the “Alnylam Cross-License”). Alnylam was granted a non-exclusive license to the Protiva intellectual property. Under the Alnylam Cross-License, Alnylam was required to make collaborative research payments at a
minimum rate of US$2,000,000 per annum for the provision of the Company’s research staff. The research collaboration under the Alnylam Cross-License expired on August 13, 2009. 

  
 Page 17 of 31

 TEKMIRA PHARMACEUTICALS CORPORATION 
 Notes to Consolidated financial statements 
 (Expressed in Canadian dollars) 

Years ended December 31, 2009 and 2008 
  

 
  

	5.	Collaborative and Licensing Agreements (continued) 

  

 Research and development collaboration with Alnylam 

Up until December 31, 2008, Alnylam was making collaborative agreement payments to both Tekmira and Protiva. Effective
January 1, 2009, all collaborative research with Alnylam is performed under the Alnylam Cross-License and manufacturing is performed under a manufacturing agreement (the “Alnylam Manufacturing Agreement”) dated January 2, 2009.
Under the Alnylam Manufacturing Agreement the Company continues to be the exclusive manufacturer of any products required by Alnylam through to the end of phase 2 clinical trials that utilize the Company’s technology. Alnylam pays the Company
for the provision of staff and for external costs incurred. Time charged to Alnylam is at a fixed rate and under the Alnylam Manufacturing Agreement there is a contractual minimum for the provision of staff of $11,200,000 for the three years from
2009 to 2011. 
 Licensing fees and milestone payments 

Under the Alnylam License and Collaboration, the Company received 361,990 newly issued shares of Alnylam common stock which the Company
sold for the net amount of $8,938,867 (US$7,594,619) and a subsequent cash payment of $475,720 (US$405,381) to bring the total up-front payment to $9,414,587 (US$8,000,000). Under a license agreement with the University of British Columbia
(“UBC”), the Company made a milestone payment of $941,459, in respect of the up-front payment from Alnylam. In accordance with the Company’s revenue recognition policy, the up-front payment of $9,414,587 and the milestone payment to
UBC of $941,459, were deferred and were amortized on a straight-line basis to revenue and expense respectively to December 31, 2008, the period over which the Company provided research support under the Alnylam License and Collaboration.

 Alnylam has provided non-exclusive access to the Company’s lipid nanoparticle intellectual property to F. Hoffman-La
Roche Ltd (“Roche”), Regulus Therapeutics, Inc. (a joint venture between Alnylam and Isis Pharmaceuticals, Inc.) and Takeda Pharmaceutical Company Limited (“Takeda”). The Company is eligible to receive up to US$16,000,000 in
milestones for each RNAi therapeutic advanced by Alnylam or its partners. The Company is also eligible for royalties on product sales. These milestones and royalties will pass through Alnylam. Of the US$16,000,000 potential milestone payments,
US$4,500,000 relate to pre-regulatory approval milestones and US$11,500,000 relate to the milestones of regulatory approval and cumulative product sales of over US$500,000,000. 
 In the year ended December 31, 2009 the Company received a $596,500 (US$500,000) milestone payment from Alnylam in respect of the initiation of Alnylam’s ALN-VSP Phase 1 human clinical trial and
made a related milestone payment of $58,700 (US$50,000) to UBC. 

  
 Page 18 of 31

 TEKMIRA PHARMACEUTICALS CORPORATION 
 Notes to Consolidated financial statements 
 (Expressed in Canadian dollars) 

Years ended December 31, 2009 and 2008 
  

 
  

	5.	Collaborative and Licensing Agreements (continued) 

  

 Alnylam deferred revenue 

At December 31, 2009, the Company had deferred research and development collaboration revenue in respect of Alnylam of $35,987 (2008
- $309,250). 
  

	(b)	Roche 

 On May 11,
2009 the Company announced a product development agreement with Roche (the “Roche Product Development Agreement”). Under the Roche Product Development Agreement Roche will pay the Company up to US$8,800,000 to support the advancement of
each Roche RNAi product candidate using the Company’s SNALP technology through to the filing of an Investigational New Drug (“IND”) application. The Company is also eligible to receive up to US$16,000,000 in milestones plus royalties
on product sales for each product advanced through development and commercialization based on Roche’s access to the Company’s intellectual property through Alnylam. 
 The Company will develop and manufacture the drug product for use in all preclinical studies under the Roche Product Development Agreement and will collaborate with Roche to conduct the preclinical
testing. The agreement also provides that the Company will manufacture one batch of clinical product for a Phase 1 clinical trial. 
 Under the Roche Product Development Agreement Roche will pay the Company for the provision of staff and for external costs incurred. The Company is recognizing revenue in proportion to the services
provided up to the reporting date by comparing actual hours spent to estimated total hours for each product under the contract. Revenue from external costs incurred on Roche product candidates will be recorded in the period that Roche is invoiced
for those costs. The difference between service revenue recognized and cash received will be recorded in the Company’s balance sheet as accrued revenue or deferred revenue, as appropriate, and as at December 31, 2009 the deferred revenue
balance was $792,583. 
 At December 31, 2009 there was one product in development under the Roche Product Development
Agreement. Under the agreement, Roche may select a second product for development. 
 Under a separate February 11, 2009
research agreement with Roche the Company received $923,151 (US$765,000) and recognized this amount as revenue during the year ended December 31, 2009 (2008 - $nil). 

 

	(c)	Other RNAi collaborators 

The Company has active research agreements with a number of other RNAi collaborators including Bristol-Myers Squibb Company and Takeda. As
at December 31, 2009 other RNAi collaborator deferred revenue was $333,867 (2008 - $149,844). 

  
 Page 19 of 31

 TEKMIRA PHARMACEUTICALS CORPORATION 
 Notes to Consolidated financial statements 
 (Expressed in Canadian dollars) 

Years ended December 31, 2009 and 2008 
  

 
  

	5.	Collaborative Agreements (continued) 

  

	(d)	Agreements with Hana Biosciences, Inc. (“Hana”) and related contingent obligation 

On May 6, 2006, the Company signed a number of agreements with Hana including the grant of worldwide licenses
(the “Hana License Agreement”) for three of the Company’s chemotherapy products, Marqibo®,
AlocrestTM (formerly INX-0125, Optisomal Vinorelbine) and BrakivaTM (formerly INX-0076, Optisomal Topotecan). Under the Hana License Agreement the Company could have received up to US$29,500,000 in cash or Hana shares upon achievement of further
development and regulatory milestones and is also eligible to receive royalties on product sales. On May 27, 2009, the Hana License Agreement was amended to decrease the size of near-term milestone payments and increase the size of long-term
milestone payments. If received, these contingent payments from Hana will be transferred to contingent creditors. The contingent obligation arose through a Purchase and Settlement Agreement dated June 20, 2006 whereby the Company retired debt
in exchange for contingent consideration including certain future milestone and royalty payments from Hana. The contingent creditors have no recourse to any of the Company’s assets other than milestone and royalty payments that the Company
receives from Hana. As off-setting contingent assets and liabilities neither the potential milestones and royalties nor the contingent obligation are shown on the Company’s balance sheet. The balance of the contingent obligation related to the
Hana milestones and royalties is not effected by the May 27, 2009 amendment to the Hana License Agreement and is US$22,835,476 as at December 31, 2009 (December 31, 2008 – US$22,835,476). 

 

	(e)	License agreement with Merck & Co., Inc. (“Merck”) 

 As a result of the acquisition of Protiva the Company received a non-exclusive royalty-bearing world-wide license, of certain intellectual property acquired by Merck. Under the license Merck will pay up
to US$17,000,000 in milestones for each product it develops using the acquired intellectual property except for the first product for which Merck will pay up to US$15,000,000 in milestones. Merck will also pay royalties on product sales. The license
agreement with Merck was entered into as part of a settlement of litigation between Protiva and a Merck subsidiary. 
 Merck has
granted a license to the Company to certain of its intellectual property. 
  

	(f)	Aradigm Corporation (“Aradigm”) 

 The Company entered into a licensing agreement with Aradigm on December 8, 2004 under which Aradigm licensed certain of the Company’s technology. Under this agreement, the Company is eligible to
receive up to US$4,750,000 in milestone payments for each disease indication, to a maximum of two, pursued by Aradigm as well as royalties on product revenue resulting from products utilizing the licensed technology. The milestone payments are only
payable twice regardless of the number of disease indications pursued. 
 The Company did not receive any milestone payments from
Aradigm during the year ended December 31, 2009 (2008 – nil). 

  
 Page 20 of 31

 TEKMIRA PHARMACEUTICALS CORPORATION 
 Notes to Consolidated financial statements 
 (Expressed in Canadian dollars) 

Years ended December 31, 2009 and 2008 
  

 
  

  

	6.	Intangible assets 

  

													
	 December 31, 2009
	  	Cost	 	  	Accumulated
amortization	 	 	Net
book value	 
				
	 Medical technology (note 4)
	  	$	16,252,000	  	  	$	(1,608,271	) 	 	$	14,643,729	  
	 Computer software
	  	 	1,632,196	  	  	 	(1,123,495	) 	 	 	508,701	  
		  	 	 	 	  	 	 	 	 	 	 	 
				
		  	$	17,884,196	  	  	$	(2,731,766	) 	 	$	15,152,430	  
		  	 	 	 	  	 	 	 	 	 	 	 
				
	 December 31, 2008
	  	Cost	 	  	Accumulated
amortization	 	 	Net
book value	 
				
	 Medical technology (note 4)
	  	$	16,252,000	  	  	$	(592,521	) 	 	$	15,659,479	  
	 Computer software
	  	 	1,511,232	  	  	 	(863,731	) 	 	 	647,501	  
		  	 	 	 	  	 	 	 	 	 	 	 
				
		  	$	17,763,232	  	  	$	(1,456,252	) 	 	$	16,306,980	  
		  	 	 	 	  	 	 	 	 	 	 	 

 The medical technology acquired from Protiva (note 4) is being amortized on a straight-line basis over its
useful life, estimated to be 16 years. 
  

	7.	Property and equipment 

  

													
	 2009
	  	Cost	 	  	Accumulated
depreciation
and impairment	 	  	Net
book value	 
				
	 Laboratory equipment
	  	$	7,352,191	  	  	$	6,116,631	  	  	$	1,235,560	  
	 Leasehold improvements
	  	 	5,671,752	  	  	 	4,377,986	  	  	 	1,293,766	  
	 Computer networks
	  	 	1,055,145	  	  	 	814,435	  	  	 	240,710	  
	 Office equipment
	  	 	561,338	  	  	 	540,758	  	  	 	20,580	  
	 Furniture and fixtures
	  	 	662,242	  	  	 	640,518	  	  	 	21,724	  
		  	 	 	 	  	 	 	 	  	 	 	 
				
		  	$	15,302,668	  	  	$	12,490,328	  	  	$	2,812,340	  
		  	 	 	 	  	 	 	 	  	 	 	 
				
	 2008
	  	Cost	 	  	Accumulated
depreciation
and impairment	 	  	Net
book value	 
				
	 Laboratory equipment
	  	$	6,966,852	  	  	$	5,703,814	  	  	$	1,263,038	  
	 Leasehold improvements
	  	 	5,699,816	  	  	 	5,473,402	  	  	 	226,414	  
	 Computer networks
	  	 	1,301,727	  	  	 	939,516	  	  	 	362,211	  
	 Office equipment
	  	 	558,274	  	  	 	479,156	  	  	 	79,118	  
	 Furniture and fixtures
	  	 	662,242	  	  	 	630,332	  	  	 	31,910	  
		  	 	 	 	  	 	 	 	  	 	 	 
				
		  	$	15,188,911	  	  	$	13,226,220	  	  	$	1,962,691	  
		  	 	 	 	  	 	 	 	  	 	 	 

  
 Page 21 of 31

 TEKMIRA PHARMACEUTICALS CORPORATION 
 Notes to Consolidated financial statements 
 (Expressed in Canadian dollars) 

Years ended December 31, 2009 and 2008 
  

 
  

  

	8.	Share capital 

  

	(a)	Authorized 

 The
Company’s authorized share capital consists of an unlimited number of common and preferred shares without par value. 
  

	(b)	Stock-based compensation 

Under the Company’s stock option plan the Board of Directors may grant options to employees and directors. The exercise price of the
options is determined by the Company’s Board of Directors but will be at least equal to the closing market price of the common shares on the day preceding the date of grant and the term may not exceed 10 years. Options granted generally vest
over three years for employees and immediately for directors. 
 Concurrent with the announcement of the acquisition of Protiva
on March 28, 2008, the Company’s Board approved the accelerated vesting of all options outstanding under the Company’s 1996 Share Option Plan such that all options outstanding at that date became fully vested and exercisable. Any
stock based compensation expense not yet recognized with respect to the options with accelerated vesting was recognized on May 30, 2008, the date that Protiva was acquired. 

On May 28, 2008 and on May 12, 2009, the shareholders of the Company approved increases to the number of shares reserved for
issuance under the Company’s 1996 Stock Option Plan of 1,487,000 and 1,331,000, respectively, thereby increasing the maximum common shares available under the plan to 5,846,276 of which 2,104,604 common shares remain available for future
allocation as at December 31, 2009. 
 On May 30, 2008, as a condition of the acquisition of Protiva (note 4), the
Company reserved 1,752,294 common shares for the exercise of 519,073 Protiva share options (“Protiva Options”). The Protiva Options have an exercise price of $0.30, are fully vested, expire at various dates from November 19, 2010 to
March 1, 2018 and upon exercise each option will be converted into approximately 3.3758 shares of the Company (the same ratio at which Protiva common shares were exchanged for Company common shares at completion of the acquisition of Protiva).
To December 31, 2009, none of the Protiva Options had been exercised, forfeited or cancelled. The Protiva Options are not part of the Company’s 1996 Stock Option Plan and the Company is not permitted to grant any further Protiva Options.

  
 Page 22 of 31

 TEKMIRA PHARMACEUTICALS CORPORATION 
 Notes to Consolidated financial statements 
 (Expressed in Canadian dollars) 

Years ended December 31, 2009 and 2008 
  

 
  

	8.	Share capital (continued) 

  

	(b)	Stock-based compensation (continued) 

  

 The following table sets forth outstanding options under the Company’s 1996 Stock
Option Plan: 
  

									
	 	  	Number of optioned
common
shares	 	 	Weighted average
exercise price	 
			
	 Balance, December 31, 2007
	  	 	2,613,495	  	 	$	3.48	  
			
	 Options granted
	  	 	2,634,950	  	 	 	0.85	  
	 Options exercised
	  	 	(42,742	) 	 	 	0.70	  
	 Options forfeited, cancelled or expired
	  	 	(617,277	) 	 	 	1.59	  
		  	 	 	 	 	 	 	 
			
	 Balance, December 31, 2008
	  	 	4,588,426	  	 	 	2.25	  
			
	 Options granted
	  	 	13,200	  	 	 	0.97	  
	 Options exercised
	  	 	(19,261	) 	 	 	0.41	  
	 Options forfeited, cancelled or expired
	  	 	(254,225	) 	 	 	6.18	  
		  	 	 	 	 	 	 	 
			
	 Balance, December 31, 2009
	  	 	4,328,140	  	 	$	2.02	  
		  	 	 	 	 	 	 	 

 Options under the 1996 Stock Option Plan expire at various dates from May 28, 2010 to August 30,
2019. 
 The following table summarizes information pertaining to stock options outstanding at December 31, 2009 under the
Company’s 1996 Stock Option Plan: 
  

																					
	 	  	 	 	  	 Options outstanding
December 31, 2009
	 	  	 Options exercisable

December 31, 2009
	 
	 Range of
 Exercise prices
	  	Number
of options
outstanding	 	  	Weighted
average
remaining
contractual
life (years)	 	  	Weighted
average
exercise
price	 	  	Number
of options
exercisable	 	  	Weighted
average
exercise
price	 
						
	 $0.30 to $0.56
	  	 	797,900	  	  	 	8.9	  	  	$	0.34	  	  	 	451,678	  	  	$	0.35	  
	 $0.60 to $0.95
	  	 	1,101,077	  	  	 	7.1	  	  	 	0.71	  	  	 	897,890	  	  	 	0.67	  
	 $1.07 to $1.12
	  	 	1,446,496	  	  	 	7.9	  	  	 	1.11	  	  	 	1,438,143	  	  	 	1.11	  
	 $1.18 to $1.78
	  	 	474,679	  	  	 	6.5	  	  	 	1.34	  	  	 	474,679	  	  	 	1.34	  
	 $2.08 to $4.00
	  	 	26,650	  	  	 	7.2	  	  	 	2.28	  	  	 	26,650	  	  	 	2.28	  
	 $7.60 to $14.10
	  	 	481,338	  	  	 	2.3	  	  	 	11.18	  	  	 	481,338	  	  	 	11.18	  
		  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 
						
	 $0.30 to $14.10
	  	 	4,328,140	  	  	 	7.1	  	  	$	2.02	  	  	 	3,770,378	  	  	$	2.24	  
		  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 

  
 Page 23 of 31

 TEKMIRA PHARMACEUTICALS CORPORATION 
 Notes to Consolidated financial statements 
 (Expressed in Canadian dollars) 

Years ended December 31, 2009 and 2008 
  

 
  

	8.	Share capital (continued) 

  

	(b)	Stock-based compensation (continued) 

  

 The fair value of each option is estimated as at the date of grant using the
Black-Scholes option pricing model. The weighted average option pricing assumptions and the resultant fair values are as follows: 
  

									
	 	  	2009	 	 	2008	 
			
	 Dividend yield
	  	 	0.0	% 	 	 	0.0	% 
	 Expected volatility
	  	 	144.0	% 	 	 	123.2	% 
	 Risk-free interest rate
	  	 	2.5	% 	 	 	2.8	% 
	 Expected average option term
	  	 	5.0 years	  	 	 	7.2 years	  
	 Fair value of options granted
	  	$	0.87	  	 	$	0.77	  

 The Company has
recorded compensation expense for stock-based compensation awarded to employees and calculated in accordance with the fair value method of $265,685 (2008 - $1,772,351). 

 

	9.	Government grants and refundable investment tax credits 

 Government grants and refundable investment tax credits have been netted against research and development expenses. 
 Government grants for the year ended December 31, 2009 include $775,292 in funding from the US Army Medical Research Institute for Infectious Diseases (2008 - $239,031). 

The Company’s estimated claim for refundable Scientific Research and Experimental Development investment tax credits for the year
ended December 31, 2009 is $139,502 (claim for year ended December 31, 2008 - $128,758). Investment tax credits receivable as at December 31, 2008 of $404,453 include $275,695 earned by Protiva prior to being acquired by the Company
and losing its Canadian Controlled Private Corporation tax status. 
  

	10.	Termination and restructuring expenses 

 In May 2008, as a condition of closing the business combination with Protiva (note 4) the employment contract of the Company’s previous Chief Executive Officer was terminated and an expense of
$1,984,266 was recorded. The termination sum is being paid out as salary continuance and $608,550 remained unpaid as at December 31, 2009 (December 31, 2008 - $1,484,757). 
 In October 2008, as part of the integration of the operations of Tekmira and Protiva, the Company completed a restructuring that resulted in a reduction in workforce of 15 employees. The Company recorded
an expense of $1,188,278 in respect of these 15 employees in accordance with EIC 134 – Accounting for Severance and Termination Benefits. As at December 31, 2009 a balance of $5,284 remained unpaid (December 31, 2008 - $235,393).

  
 Page 24 of 31

 TEKMIRA PHARMACEUTICALS CORPORATION 
 Notes to Consolidated financial statements 
 (Expressed in Canadian dollars) 

Years ended December 31, 2009 and 2008 
  

 
  

  

	11.	Income taxes 

 Income tax
(recovery) expense varies from the amounts that would be computed by applying the combined Canadian federal and provincial income tax rate of 30.0% (2008 – 31.0%) to loss before income taxes as shown in the following table: 

 

									
	 	  	2009	 	 	2008	 
			
	 Computed taxes (recoveries) at Canadian federal and provincial tax rates
	  	$	(2,929,472	) 	 	$	(4,420,886	) 
	 Difference due to change in enacted tax rates
	  	 	635,462	  	 	 	237,731	  
	 Permanent and other differences
	  	 	927,938	  	 	 	(200,276	) 
	 Change in valuation allowance
	  	 	1,366,072	  	 	 	4,383,431	  
		  	 	 	 	 	 	 	 
			
	 Income tax (recovery) expense
	  	$	—  	  	 	$	—  	  
		  	 	 	 	 	 	 	 

 As at December 31, 2009, the Company has investment tax credits available to reduce Canadian federal
income taxes of $5,304,810 (2008 - $3,193,999) and provincial income taxes of $2,781,784 (2008 - $1,425,686) and expiring between 2011 and 2029. At December 31, 2009, the Company has scientific research and experimental development
expenditures of $27,483,678 (2008 - $20,301,032) available for indefinite carry-forward and $23,758,157 (23,868,051) of net operating losses due to expire between 2015 and 2029 and which can be used to offset future taxable income in
Canada. 
 Significant components of the Company’s future tax assets as of December 31 are shown below: 

 

									
	 	  	2009	 	 	2008	 
			
	 Future tax assets:
	  				 			
	 Non-capital loss carry-forwards
	  	$	5,940,000	  	 	$	6,206,000	  
	 Research and development deductions
	  	 	6,871,000	  	 	 	5,278,000	  
	 Book amortization in excess of tax
	  	 	3,436,000	  	 	 	4,217,000	  
	 Share issue costs
	  	 	213,000	  	 	 	292,000	  
	 Tax value in excess of accounting value in investment
	  	 	—  	  	 	 	24,000	  
	 Revenue recognized for tax purposes in excess of revenue recognized for accounting purposes
	  	 	291,000	  	 	 	113,000	  
	 Tax value in excess of accounting value in lease inducements 
	  	 	124,000	  	 	 	—  	  
	 Provincial investment tax credits
	  	 	629,000	  	 	 	301,000	  
		  	 	 	 	 	 	 	 
			
	 Total future tax assets
	  	 	17,504,000	  	 	 	16,431,000	  
			
	 Future tax liability:
	  				 			
	 Accounting value in excess of tax value in intangible assets
	  	 	(3,580,000	) 	 	 	(3,981,000	) 
		  	 	 	 	 	 	 	 
			
		  	 	13,924,000	  	 	 	12,450,000	  
	 Valuation allowance
	  	 	(13,924,000	) 	 	 	(12,450,000	) 
		  	 	 	 	 	 	 	 
			
	 Net future tax assets
	  	$	—  	  	 	$	—  	  
		  	 	 	 	 	 	 	 

  
 Page 25 of 31

 TEKMIRA PHARMACEUTICALS CORPORATION 
 Notes to Consolidated financial statements 
 (Expressed in Canadian dollars) 

Years ended December 31, 2009 and 2008 
  

 
  

	11.	Income taxes (continued) 

  

 Under a Plan of Arrangement (Note 1) completed on April 30, 2007, Inex’s
non-capital losses and scientific research and experimental development pool of undeducted expenditures as well as the federal non-refundable investment tax credits generated from the business through April 30, 2007 are not available to the
Company. The balances at December 31, 2009 represent the balances available to the Company. 
 The potential income tax
benefits relating to the future tax assets shown in the table have not been recognized in the accounts as their realization does not meet the requirements of “more likely than not” under the liability method of tax allocation. Accordingly,
no future tax assets have been recognized as at December 31, 2009 and 2008. 
  

	12.	Commitments and contingencies 

  

	(a)	Effective July 29, 2009 the Company signed an amendment to the operating lease for its laboratory and office premises. The amended lease expires in July 2014 but
the Company has the option to extend the lease to 2017 and then to 2022 and then to 2027. The amended lease includes a signing incentive payment. In accordance with the Company’s accounting policy the signing incentive payment will be amortized
on a straight-line basis over the term of the amended lease. 

 Following the lease amendment the minimum
commitment, contracted sub-lease income and net commitment for rent and estimated operating costs, are as follows: 
  

													
	 	  	Lease
commitment	 	  	Sub-lease
income	 	 	Net
commitment	 
				
	 Year ended December 31, 2010
	  	$	1,410,000	  	  	$	(244,000	) 	 	$	1,166,000	  
	 Year ended December 31, 2011
	  	 	1,410,000	  	  	 	(244,000	) 	 	 	1,166,000	  
	 Year ended December 31, 2012
	  	 	1,410,000	  	  	 	(234,000	) 	 	 	1,176,000	  
	 Year ended December 31, 2013
	  	 	1,410,000	  	  	 	—  	  	 	 	1,410,000	  
	 Year ended December 31, 2014
	  	 	823,000	  	  	 	—  	  	 	 	823,000	  
		  	 	 	 	  	 	 	 	 	 	 	 
		  	$	6,463,000	  	  	$	(722,000	) 	 	$	5,741,000	  
		  	 	 	 	  	 	 	 	 	 	 	 

 The Company has netted $191,376 of sub-lease income against lease expense in the year ended
December 31, 2009 (2008 - $208,518). 

  
 Page 26 of 31

 TEKMIRA PHARMACEUTICALS CORPORATION 
 Notes to Consolidated financial statements 
 (Expressed in Canadian dollars) 

Years ended December 31, 2009 and 2008 
  

 
  

	12.	Commitments and contingencies (continued) 

  

	(b)	The Company entered into a Technology Partnerships Canada (“TPC”) agreement with the Canadian Federal Government on November 12, 1999. Under this
agreement, TPC agreed to fund 27% of the costs incurred by the Company, prior to March 31, 2004, in the development of certain oligonucleotide product candidates up to a maximum contribution from TPC of $9,329,912. As at December 31, 2009,
a cumulative contribution of $3,701,571 (2008 - $3,701,571) has been received under this agreement. The Company does not expect any further funding under this agreement. In return for the funding provided by TPC, the Company agreed to pay
royalties on the share of future licensing and product revenue, if any, that is received by the Company on certain non siRNA oligonucleotide product candidates covered by the funding under the agreement. These royalties are payable until a certain
cumulative payment amount is achieved or until a pre-specified date. In addition, until a cumulative amount equal to the funding actually received under the agreement has been paid to TPC, the Company agreed to pay royalties on the share of future
product revenue, if any, for Marqibo that is received by the Company. To December 31, 2009, the Company has not made any royalty payments to TPC. 

  

	(c)	The Company has a contingent liability of US$12,000,000 in regard to certain promissory notes and has a related, equal and offsetting contingent asset receivable from a
third party as described in note 4. 

  

	13.	Related party transactions 

Research, development and collaborations expenses in the year ended December 31, 2009 include $44,415 of contract research costs,
measured at the cash amount and incurred in the normal course of operations with a vendor whose Chief Executive Officer is also a director of the Company (December 31, 2008 - $nil). There was no balance in accounts payable and accrued liabilities at
December 31, 2009 in respect of this vendor (December 31, 2008 - $nil). 
  

	14.	Capital Disclosures 

 The
Company’s board of directors’ (“Board”) policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future development of the business. Management defines capital as the
Company’s total shareholders’ equity. To maintain the capital structure, the Company may attempt to issue new shares, acquire or dispose of assets or structure collaborative and license agreements in a particular way. The Company has not
yet attained sustainable profitable operations, therefore the Board does not establish quantitative return on capital criteria for management. 

  
 Page 27 of 31

 TEKMIRA PHARMACEUTICALS CORPORATION 
 Notes to Consolidated financial statements 
 (Expressed in Canadian dollars) 

Years ended December 31, 2009 and 2008 
  

 
  

	14.	Capital Disclosures (continued) 

  

 As of December 31, 2009 and December 31, 2008, the Company’s capital
structure was as follows: 
  

													
	 	  	December 31
2009	 	  	December 31
2008	 	  	Change	 
				
	 Total equity
	  	$	37,106,254	  	  	$	46,597,590	  	  	 	(20	)% 

 In the year ended
December 31, 2009, total equity decreased 20% compared to December 31, 2008 due to an increase in deficit. There were no changes in the Company’s approach to capital management during the year. The Company is not subject to externally
imposed capital requirements. 
  

	15.	Financial Instruments and Financial Risk 

 Credit Risk 
 Credit risk is defined by the Company as an unexpected loss in
cash and earnings if a collaborative partner is unable to pay its obligations in due time. The Company’s main source of credit risk is related to its accounts receivable balance which principally represents temporary financing provided to
collaborative partners in the normal course of operations. The account receivable from Alnylam Pharmaceuticals, Inc. (“Alnylam”) as at December 31, 2009 was $398,658 and represents 38% of total accounts receivable as at that date
(December 31, 2008 - $393,830 and 62%). 
 The Company does not currently maintain a provision for bad debts as the majority of
accounts receivable are from collaborative partners or government agencies and are considered low risk. 
 The carrying amount of
financial assets represents the maximum credit exposure. The maximum exposure to credit risk at the reporting date was the accounts receivable balance of $1,052,895 (December 31, 2008 - $632,439). 

The aging of accounts receivable at the reporting date was: 

 

									
	 	  	December 31
2009	 	  	December 31
2008	 
			
	 Current
	  	$	898,859	  	  	$	632,439	  
	 Past due 0-30 days 
	  	 	154,036	  	  	 	—  	  
	 Past due more than 30 days
	  	 	—  	  	  	 	—  	  
		  	 	 	 	  	 	 	 
			
		  	$	1,052,895	  	  	$	632,439	  
		  	 	 	 	  	 	 	 

  
 Page 28 of 31

 TEKMIRA PHARMACEUTICALS CORPORATION 
 Notes to Consolidated financial statements 
 (Expressed in Canadian dollars) 

Years ended December 31, 2009 and 2008 
  

 
  

	15.	Financial Instruments and Financial Risk (continued) 

  

 Liquidity Risk 

Liquidity risk results from the Company’s potential inability to meet its financial liabilities, for example payments to suppliers.
The Company ensures sufficient liquidity through the management of net working capital and cash balances. 
 The Company’s
liquidity risk is primarily attributable to its cash and cash equivalents. The Company limits exposure to liquidity risk on its liquid assets through maintaining its cash and cash equivalent deposits with high-credit quality financial institutions.
Due to the nature of these investments, the funds are available on demand to provide optimal financial flexibility. 
 The
Company believes that its current sources of liquidity are sufficient to cover its likely applicable short term cash obligations. The Company’s financial obligations include accounts payable and accrued liabilities which generally fall due
within 45 days. 
 The net liquidity of the Company is considered to be the cash, cash equivalents and short-term investments
funds available less accounts payable and accrued liabilities. 
  

									
	 	  	December 31
2009	 	 	December 31
2008	 
			
	 Cash, cash equivalents and short term investments
	  	$	24,397,740	  	 	$	31,948,849	  
	 Less: Accounts payable and accrued liabilities
	  	 	(5,653,827	) 	 	 	(4,473,612	) 
		  	 	 	 	 	 	 	 
			
		  	$	18,743,913	  	 	$	27,475,237	  
		  	 	 	 	 	 	 	 

 Foreign currency risk 
 The Company’s revenues and operating expenses are denominated in both Canadian and US dollars so the results of the Company’s operations are subject to currency transaction risk and currency
translation risk. 
 The operating results and financial position of the Company are reported in Canadian dollars in the
Company’s financial statements. The fluctuation of the US dollar in relation to the Canadian dollar will consequently have an impact upon the Company’s income or loss and may also affect the value of the Company’s assets and the
amount of shareholders’ equity. 
 The Company manages its US dollar exchange rate risk by using cash received from US
dollar revenues to pay US dollar expenses and by limiting its holdings of US dollar cash and cash equivalent balances to working capital levels. The Company has not entered into any agreements or purchased any instruments to hedge possible currency
risks at this time. 

  
 Page 29 of 31

 TEKMIRA PHARMACEUTICALS CORPORATION 
 Notes to Consolidated financial statements 
 (Expressed in Canadian dollars) 

Years ended December 31, 2009 and 2008 
  

 
  

	15.	Financial Instruments and Financial Risk (continued) 

  

 Foreign currency risk (continued) 

 

 The Company’s exposure to US dollar currency risk expressed in Canadian dollars was
as follows: 
  

									
	 	  	December 31
2009	 	 	December 31
2008	 
			
	 Cash and cash equivalents
	  	$	293,027	  	 	$	1,649,187	  
	 Accounts receivable
	  	 	520,892	  	 	 	540,527	  
	 Accounts payable and accrued liabilities
	  	 	(1,765,874	) 	 	 	(1,006,854	) 
		  	 	 	 	 	 	 	 
			
		  	$	(951,955	) 	 	$	1,182,860	  
		  	 	 	 	 	 	 	 

 A 10% strengthening of the Canadian dollar against the US dollar at December 31, 2009 would have
decreased losses for the year ending December 31, 2009 by $121,996. A 10% weakening of the Canadian dollar against the US dollar at December 31, 2009 would have increased losses for the same period by $121,996. This analysis assumes that
all other variables, in particular interest rates, remain constant. 
 Interest rate risk 

The Company invests its cash reserves in bankers’ acceptances and high interest savings accounts issued by major Canadian banks. The
Company’s audit committee approves a list of acceptable investments on a quarterly basis. A 100 basis point decrease in the interest rate would have resulted in the Company earning no interest and an increase in net losses of $163,696 for the
year ended December 31, 2009. A 100 basis point increase in interest rates would have resulted in a decrease in net losses of $241,232. 
 At December 31, 2009, the Company’s cash equivalents held in bankers’ acceptances and high interest savings accounts bore a weighted average interest rate of 0.4% (2008 – 1.7%).

 Fair values 
 The Company’s financial instruments consist of cash and cash equivalents, short-term investments, accounts receivable, investment tax credits receivable, accounts payable and promissory notes.

 The carrying values of cash and cash equivalents and short-term investments are recorded at fair value. The carrying values of
accounts receivable, investment tax credits receivable and accounts payable approximate their fair values due to the immediate or short-term maturity of these financial instruments. 

  
 Page 30 of 31

 TEKMIRA PHARMACEUTICALS CORPORATION 
 Notes to Consolidated financial statements 
 (Expressed in Canadian dollars) 

Years ended December 31, 2009 and 2008 
  

 
  

  

	16.	Net change in non-cash working capital items 

  

									
	 	  	2009	 	 	2008	 
			
	 Accounts receivable
	  	$	(420,456	) 	 	$	2,310,444	  
	 Investment tax credits receivable
	  	 	124,321	  	 	 	(102,574	) 
	 Inventory
	  	 	174,524	  	 	 	38,495	  
	 Prepaid expenses and other assets
	  	 	(126,621	) 	 	 	91,367	  
	 Accounts payable and accrued liabilities
	  	 	1,180,215	  	 	 	923,691	  
	 Deferred revenue
	  	 	703,343	  	 	 	(4,596,557	) 
		  	 	 	 	 	 	 	 
			
		  	$	1,635,326	  	 	$	(1,335,134	) 
		  	 	 	 	 	 	 	 

  

	17.	Supplementary information 

Accounts payable and accrued liabilities is comprised of the following: 

 

									
	 	  	2009	 	  	2008	 
			
	 Trade accounts payable
	  	$	2,090,672	  	  	$	619,912	  
	 Research and development accruals
	  	 	1,246,053	  	  	 	485,145	  
	 Professional fee accruals
	  	 	548,551	  	  	 	551,972	  
	 Executive termination cost accrual
	  	 	608,550	  	  	 	1,484,757	  
	 Restructuring cost accruals
	  	 	40,283	  	  	 	235,393	  
	 Executive bonus accrual
	  	 	—  	  	  	 	80,357	  
	 Deferred lease inducements
	  	 	495,229	  	  	 	283,334	  
	 Other accrued liabilities
	  	 	624,489	  	  	 	732,742	  
		  	 	 	 	  	 	 	 
			
		  	$	5,653,827	  	  	$	4,473,612	  
		  	 	 	 	  	 	 	 

  
 Page 31 of 31

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