UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM10-K

(Mark One)

For the fiscal year ended December 31, 20122013

OR

For the transition period from                                             to                                             

Commission file number: 001-12465

CELL THERAPEUTICS, INC.

(Exact name of registrant as specified in its charter)

Registrant’s telephone number, including area code:(206) 282-7100

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

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

Preferred Stock Purchase Rights

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

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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

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

As of June 29, 2012,28, 2013, the aggregate market value of the registrant’s common equity held by non-affiliates was $121,317,591.$106,673,063. Shares of common stock held by each executive officer and director and by each person known to the registrant who beneficially owns more than 5% of the outstanding shares of the registrant’s common stock have been excluded in that such persons may under certain circumstances be deemed to be affiliates. This determination of executive officer or affiliate status is not necessarily a conclusive determination for other purposes. The registrant has no non-voting common stock outstanding.

The number of outstanding shares of the registrant’s common stock as of February 22, 201324, 2014 was 109,810,743.149,637,666.

DOCUMENTS INCORPORATED BY REFERENCE

None.Portions of the registrant’s definitive proxy statement relating to its 2014 annual meeting of shareholders, or the 2014 Proxy Statement, are incorporated by reference into Part III of this Annual Report on Form 10-K where indicated. The 2014 Proxy Statement will be filed with the U.S. Securities and Exchange Commission within 120 days after the end of the fiscal year to which this report relates.

CELL THERAPEUTICS, INC.

TABLE OF CONTENTS

Forward Looking Statements

This Annual Report on Form 10-K and the documents incorporated by reference may contain, in addition to historical information, “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. These statements relate to our future plans, objectives, expectations, intentions and financial performance, and assumptions that underlie these statements. All statements other than statements of historical fact are “forward-looking statements” for the purposes of these provisions, including:

When used in this Annual Report on Form 10-K, terms such as “anticipates,” “believes,” “continue,” “could,” “estimates,” “expects,” “intends,” “may,” “plans,” “potential,” “predicts,” “should,” or “will” or the negative of those terms or other comparable terms are intended to identify such forward-looking statements. These statements involve known and unknown risks, uncertainties and other factors that may cause industry trends or actual results, level of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these statements. Our actual results may differ significantly from the results discussed in such forward-looking statements. These factors include, but are not limited to, those listed under Part I, Item I1, “Business,” Part I, Item 1A, “Risk Factors,” Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and elsewhere in this Annual Report on Form 10-K.

We do not intend to update any of the forward-looking statements after the date of this Annual Report on Form 10-K to conform these statements to actual results or changes in our expectations. Readers are cautioned not to place undue reliance on these forward-looking statements, which apply only as of the date of this Annual Report on Form 10-K.

You may review a copy of this Annual Report on Form 10-K, including exhibits and any schedule filed therewith, and obtain copies of such materials at prescribed rates, at the U.S. Securities and Exchange Commission’s, or the SEC, Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains a website (http://www.sec.gov) that contains reports, proxy and information statements and other information regarding registrants, such as Cell Therapeutics, Inc., that file electronically with the SEC.

PART I

Overview

We are a biopharmaceutical company focused on the acquisition, development and commercialization of less toxic and more effective ways to treat cancer. Our goal is to build a profitable company by generating income from products we develop and commercialize, either alone or with one or more potential strategic partners. We are currently concentrating our efforts on treatments that target blood-related cancers where there is an unmet medical need. We are primarily focused on commercializing PIXUVRI^® (pixantrone) in the European Union, or the E.U., for multiply relapsed or refractory aggressive non-Hodgkin lymphoma, or NHL, and conducting a Phase 3 clinical trial program of pacritinib for the treatment of myelofibrosis.myelofibrosis that will support regulatory submission for approval in the United States, or the U.S., and Europe.

Our most clinically advanced compound is PIXUVRI. PIXUVRI

PIXUVRI is a novel aza-anthracenedione derivative that is structurally related to anthracyclines and anthracenediones, but does not appear to be associated with the same level of cardiotoxic effects. PIXUVRI was structurally designed so that it cannot bind iron and perpetuate oxygen radical production or form a long-lived hydroxyl metabolite—both of which are the putative mechanisms for anthracycline-induced acute and chronic cardiotoxicity.

In May 2012, the European Commission or the EC, granted conditional marketing authorization in the E.U., of PIXUVRI as a monotherapy for the treatment of adult patients with multiply relapsed or refractory aggressive NHL, a cancer caused by the abnormal proliferation of lymphocytes, which are cells that are key to the functioning of the immune system. NHL usually originates in lymph nodes and spreads through the lymphatic system. PIXUVRI is the first approved treatment in the E.U. for patients with multiply relapsed or refractory aggressive B-cell NHL.NHL who have failed two or three prior lines of therapy. This approval was based on the results from our pivotal Phase 3 clinical trial known as EXTEND or PIX301. In connection with the conditional marketing authorization, we are conducting a required to conduct a post-approval study that is intended to confirm PIXUVRI’s clinical benefit. We are currently accruing patients into a Phase 3 clinicalcommitment trial, comparingwhich compares pixantrone and rituximab with gemcitabine and rituximab in the setting of aggressive B-cell NHL.

In SeptemberDuring the fourth quarter of 2012, we began making PIXUVRI available forto healthcare providers in certain countries in the E.U. and initiated our commercial sale in partsoperations on a country-by-country basis. As of the E.U.date of this filing, PIXUVRI is currentlywas available in eight countries: Austria, Denmark, Finland, Germany, Italy, France, Netherlands, Norway, Sweden and the United Kingdom. We plan to extendKingdom, or the availability of PIXUVRI to France, Italy and Spain, as well as other European countries, in 2013.U.K. We have established a commercial operations organization, including sales, marketing and supply chain management, and reimbursement capabilities, to commercialize PIXUVRI in the E.U. PIXUVRI is not approved in the U.S. We are pursuing potential partners for commercializing PIXUVRI in additional markets within the E.U. and other markets outside the E.U. and the United States (U.S.).U.S.

In almost all European markets, pricing and availability of prescription pharmaceuticals are subject to governmental control. Decisions by governmental authorities will impact the price and market acceptance of PIXUVRI. Accordingly, any future revenues are dependent on market acceptance of PIXUVRI, the reimbursement decisions made by the governmental authorities in each country where PIXUVRI is not approvedavailable for sale and other factors. In the third quarter of 2013, PIXUVRI was granted market access in Italy and France. In December 2013, we reached agreement for funding and reimbursement with the U.S.National Association of Statutory Health Insurance Funds, or the GKV-Spitzenverband, in Germany. In February 2014, the National Institute for Health and Care Excellence, or NICE, issued final guidance recommending the prescription of PIXUVRI for as long as we make the Patient Access Scheme, or PAS, available. The PAS is a confidential pricing and access agreement with the U.K.’s Department of Health. As a result of these decisions, PIXUVRI is reimbursed under varying conditions in Italy, France, Germany and England/Wales.

Pacritinib

In May 2012, we expanded our late-stage pipeline of product candidates with the acquisition of pacritinib, an oral once-dailyinhibitor of both Janus Kinase 2, or JAK2, inhibitor thatand FMS-like tyrosine kinase, or FLT3, which demonstrated meaningful clinical benefits and good tolerability in myelofibrosis patients in Phase 2 clinical trials. Myelofibrosis is a blood-related cancer caused by the accumulation of malignant bone marrow cells that triggers

an inflammatory response, scarring the bone marrow and limiting its ability to produce red blood cells prompting the spleen and liver to take over this function. Symptoms that arise from this disease include enlargement of the spleen, anemia, extreme fatigue, itching and pain. We believe pacritinib may offer an advantage over other JAK inhibitors through effective relief of symptoms with less treatment-emergent thrombocytopenia and anemia. We initiated

In November 2013, we entered into a worldwide license agreement, or the firstBaxter Agreement, with Baxter International, Inc., or Baxter, to develop and commercialize pacritinib. Pursuant to the Baxter Agreement, we have joint commercialization rights with Baxter for pacritinib in the U.S., while Baxter has exclusive commercialization rights for all indications outside the U.S. Under the terms of the Baxter Agreement, we received a $60 million upfront payment, which included an equity investment of $30 million, and we have the potential to receive $302 million in clinical, regulatory, commercial launch and sales milestones. Additionally, if pacritinib is approved and launched, we will share U.S. profits equally and will receive royalties on net sales of pacritinib in non-U.S. markets. For additional information relating to the Baxter Agreement, see Part I, Item 1, “Business—License Agreements and Additional Milestones—Baxter”.

As part of our collaboration with Baxter, we are pursuing a broad approach to advancing pacritinib for patients with myelofibrosis by conducting two Phase 3 clinical trials: one in a broad set of patients without limitations on blood platelet counts, the PERSIST-1 trial, in myelofibrosiswhich was initiated in January 2013; and the other in patients with low platelet counts, the PERSIST-2 trial, which opened for enrollment in March 2014. In October 2013, we reached an agreement with the U.S. Food and planDrug Administration, or FDA, on a Special Protocol Assessment, or SPA, for PERSIST-2. This trial, together with PERSIST-1, is intended to initiate a second Phase 3 trialsupport registration in the second half of 2013.U.S. and the E.U.

TosedostatOther Pipeline Candidates

Our earlier stage product candidate, tosedostat, is an oral aminopeptidase inhibitor that has demonstrated significant responses in patients with acute myeloid leukemia, or AML, andAML. It is currently being evaluated in twoseveral Phase 2 trials, which are being conducted as cooperative group sponsored and investigator-sponsored trials, examining the activity of combiningor ISTs. These trials are evaluating tosedostat in combination with hypomethylating agents, (HMAs)or HMAs, in AML and myelodysplastic syndrome, or MDS, which are cancers of the blood and bone marrow. We expectanticipate that data from these signal-finding trials may be used to determine the appropriate design for a Phase 3 trial.

WeAlthough our efforts are focused on developing and commercializing treatments that target blood-related cancers, we continue to work withevaluate our other pipeline candidates targeting solid tumors includingcandidate Opaxio™ (paclitaxel poliglumex), or Opaxio, and brostallicinwhich targets solid tumors. We are evaluating this candidate through a cooperative group sponsored trials and investigator-sponsored studies.ISTs, such as the ongoing maintenance therapy trial in patients with ovarian cancer. In addition, we continue to evaluate our other drug candidate, brostallicin.

Our Strategy

Our strategy is to become a leader in the acquisition, development and commercialization of novel therapeutics for the treatment of blood-related cancers. The key elements of our strategy are to:

PIXUVRIProduct and Product Development CandidatesCandidate Portfolio

The following table summarizes our development pipeline for PIXUVRI, pacritinib and our other late-stage product candidates:candidates as to which we have ongoing trials:

Oncology Market Overview and Opportunity

Overview.    According to the American Cancer Society, or ACS, cancer is the second leading cause of death in the United States,U.S., resulting in close to 580,350 deaths annually, or more than 1,600 people per day and approximatelyday. Approximately 1.7 million new cases of cancer were expected to be diagnosed in 2013 in the United States.U.S. The most commonly used methods for treating patients with cancer are surgery, radiation and chemotherapy. Patients usually receive a combination of these treatments depending upon the type and extent of their disease.

We believe developing agents whichthat improve on the cornerstone chemotherapy classes, in addition to novel drugs designed to target biological pathways to treat specific types of cancer and cancer patients, fills a significant unmet medical need for cancer patients.

ApprovedCommercialized Product

PixuvriPIXUVRI

Overview.    

Anthracyclines are one of the most potent classes of anti-cancer agents used infirst-line treatment of aggressive NHL, leukemia and breast cancer. For these diseases, anthracycline-containing regimens can often produce long-term cancer remissions and cures. However, the currently-marketed anthracyclines can cause severe, permanent and life-threatening cardiac toxicity when administered beyond widely-recognized cumulative lifetime doses. This toxicity often prevents repeat use of anthracyclines in patients who relapse after first-line anthracycline treatment. In addition, the cardiac toxicity of anthracyclines prevents their use in combination with other drugs that can also cause cardiac toxicity. As a result, chemotherapy regimens that do not include anthracyclines are often are used for the second-line treatment of aggressive NHL, leukemia and breast cancer.

PIXUVRI is being developed in an effort to improve the activity and safety in treating cancers usually initiallyoften treated with the anthracycline family of anti-cancer agents. We believePIXUVRI is not an anthracycline and is instead a next-generation anthracyclinenovel aza-anthracenedione with unique structural and physiochemical properties. Based on its ease of administration, greater anti-tumor activity and less cardiac toxicityreduced risk of cardiotoxicity, we believe PIXUVRI could gain a significant share of the anthracycline market. We also believe that such a drug could allow repeat therapy in relapsed patients and could allow combination therapy with a broader range of chemotherapies. PIXUVRI is a novel DNA major groove binder with an aza-anthracenedione molecular structure, differentiating it from anthracycline chemotherapy agents. Similar toUnlike the anthracyclines, PIXUVRI inhibitsdoes not inhibit topo-isomerase II, but,II. Also unlike anthracyclines, rather than interacalation with DNA, PIXUVRI hydrogen bonds to and alkylates DNA, thus forming stable DNA adducts with particular specificity for CpG rich, hypermethylated sites. This results in progressive disruption of mitosis and therefore killing of rapidly dividing cells like those found in many tumors. In addition, the structural motifs on anthracycline-like agents are responsible for the generation of oxygen free radicals and the formation of toxic drug-metal complexes have also been modified in PIXUVRI to prevent iron binding and perpetuation of superoxide production, both of which are the putative mechanism of anthracycline induced acute cardiotoxicity. These novel pharmacologic differences may allow re-introduction of a single-agent chemotherapy drug with anthracycline-like potency in the treatment of patients who are otherwise at their lifetime recommended doxorubicin exposure.

PIXUVRI for the Treatment of NHL

We are specifically developing and commercializing PIXUVRI a novel aza-anthracenedione derivative, for the treatment of NHL. NHL is caused by the abnormal proliferation of lymphocytes, which are cells key to the functioning of the immune system. NHL usually originates in lymph nodes and spreads through the lymphatic system. The ACS estimated that there would be 70,13069,740 people diagnosed with NHL in the U.S. and approximately 18,94019,020 people would die from this disease in 2012.2013. In Europe, the World Health Organization’s International Agency for Research on Cancer’s 2008 GLOBOCAN database estimates that in the European UnionE.U. approximately 74,16279,312 people will be diagnosed with NHL and 31,37130,691 are estimated to die from NHL annually. NHL is the seventh most common type of cancer. NHL can be broadly classified into two main forms, each with many subtypes—aggressive NHL is a rapidly growing form of the disease that moves into advanced stages much faster than indolent NHL, which progresses more slowly.

Aggressive

There are many types and subtypes of NHL, although aggressive B-cell NHL is one of the moremost common types of NHL and accounts for about 60%50 percent of all NHL cases. After initial therapy for aggressive NHL with anthracycline-based combination therapy, one-third of patients typically develop progressive disease.diseases. Approximately half of these patients are likely to be eligible for intensive second-line treatment and stem cell transplantation, although 50%50 percent are expected not to respond. For those patients who fail to respond or relapse following second-line treatment, treatment options are limited and usually palliative only.palliative. PIXUVRI is the first treatment approved in the E.U. for treatment of patients with multiply relapsed or refractory aggressive B-cell NHL. There are no drugs approved for this indication in the United States.U.S.

Clinical Trials and Conditional Marketing Approval of PIXUVRI in the E.U.

The pivotal Phase 3 EXTEND, or PIX301, trial evaluated PIXUVRI for patients with relapsed or refractory aggressive NHL. The trial enrolled 140 patients randomized to receive either PIXUVRI or another single-agent drug currently used for the treatment of this patient population and selected by the physician. Twenty percent (20%) of patients in the trial who received pixantrone achieved a complete or unconfirmed complete response at end of treatment compared with 5.7%5.7 percent in the comparator group (p=0.021). Median progression-free survival, or PFS, in the intent-to-treat population was also greater with pixantrone than with comparators: 5.3 versus 2.6 months (p=0.005). PIXUVRI had predictable and manageable toxicities when administered at the proposed dose and schedule in heavily pre-treated patients. The most common (incidence greater than or equal to 10%)10 percent) grade 3/4 adverse events reported for PIXUVRI-treated subjects across trials were neutropenia and leukopenia. Other common adverse events (any grade) included infection, anemia, thrombocytopenia, asthenia, pyrexia and cough. Overall, the incidence of grade 3 or greater cardiac adverse events was 7%7 percent (five patients) on the PIXUVRI arm and 2%2 percent (one patient) on the comparator arm. There were an equal number of deaths due to an adverse event in both the PIXUVRI and comparator arm. The EXTEND study was published inLancet Oncology in May 2012.

In May 2012, PIXUVRI was granted conditional marketing authorization by the European Commission, or the E.C., as a monotherapy for the treatment of adult patients with multiply relapsed or refractory aggressive NHL. The E.C. granted conditional approvalmarketing authorization based on the results from the EXTEND pivotal trial. The decision authorized us to market PIXUVRI in the 27 Member States of the E.U. as well as in Iceland, Liechtenstein and Norway.

Similar to accelerated approval regulations in the U.S., conditional marketing authorizations are granted in the E.U. to medicinal products with a positive benefit/risk assessment that address unmet medical needs and whose availability would result in a significant public health benefit. A conditional marketing authorization is renewable annually. Under the provisions of the conditional marketing authorization for PIXUVRI, we are required to complete a post-marketing study by June 2015 aimed at confirming the clinical benefit previously observed.

An In this regard, our post-marketing study is an ongoing randomized, controlled Phase 3 clinical trial, known as PIX-R^® or PIX306, which compares PIXUVRI-rituximab to gemcitabine-rituximab in patients who have relapsed after one to three prior regimens for aggressiveB-cell NHL and who are not eligible for autologous stem cell transplant. The PIX-R trial utilizes overall survival, or OS, as the primary endpoint of the study, with a secondary endpoint of progression free survival, or PFS. The PIX306 trial was initiated in March 2011. Planned enrollment in this study is approximately 350 patients. As a condition of approval,In December 2013, we have agreed to submit the results of the Phase 3 PIX-R study to the E.C. by June 2015. We plan to meet withgained agreement from the European regulatory authorities in 2013 in regardsMedicines Agency, or the EMA, to change the primary endpoint of the ongoing trial.PIX306 trial from overall survival to PFS. The trial is now expected to enroll approximately 220 patients versus the 350 patients previously planned. This trial is expected to complete enrollment in 2015 and is intended to support the conversion of the conditional approval for PIXUVRI in Europe to full approval and potentially support a registration application in the U.S.

Commercialization of PIXUVRI in the E.U.

In September 2012, we initiated E.U. commercialization of PIXUVRI and by the end of 2012 made PIXUVRI available to healthcare providers in eight E.U. countries, including Austria, Denmark, Finland, Germany, Netherlands, Norway, Sweden and the United Kingdom. We plan to extend the availabilityU.K. Future revenues are dependent on market acceptance of PIXUVRI, to France,the reimbursement decisions made by the governmental authorities in each country where PIXUVRI is available for sale and other factors.

In the third quarter of 2013, PIXUVRI was granted market access in Italy and SpainFrance. In December 2013, we reached agreement for funding and reimbursement with the GKV-Spitzenverband in Germany. In February 2014, NICE issued final guidance recommending the prescription of PIXUVRI for as welllong as other European countrieswe make the Patient Access Scheme, or PAS, available. The PAS is a confidential pricing and access agreement with the U.K.’s Department of Health. We have established distributors in 2013.Israel and Turkey for PIXUVRI is currently available elsewhere in the E.U. and Turkey through a named patient program in certain countries where itthe drug is not otherwise commercially available. A named patient program is a mechanism through which physicians can prescribe investigational drugs under individual country-specific guidelines for patients prior to marketing approval.

WeIn July 2012, we entered into an agreement with Quintiles Commercial Europe Limited, or Quintiles, in July 2012 under which we will interview, approve for hire, train and manage a sales force and medical science liaisons for PIXUVRI in the E.U. While the sales force would be dedicated to PIXUVRI, they are not our employees, but Quintiles employees. We believe this is a cost effective way to commercialize PIXUVRI in the E.U. We currently have also entered into a third-party logistics agreement with Movianto Nederland BVapproximately 20 sales and medical science liaisons in September 2012 to provide us with warehousing, transportation,the countries where PIXUVRI is reimbursed.

As discussed in Part I, Item 1, “Business—Manufacturing, Distribution and Associated Matters,” we utilize third parties for the manufacture, storage and distribution order processing and cash collection services forof PIXUVRI, as well as an agreement with LogixX Pharma Solutions, Ltdfor other associated supply chain requirements. Our strategy of utilizing third parties in such manner allows us to act asdirect our interim wholesaler dealers license holder while we apply for our own license.

We signed aresources to the development and commercialization of products rather than to the establishment of manufacturing supply agreement with NerPharMa, S.r.l. in July 2010 for PIXUVRI drug product manufacture for both the commercial and clinical supply of PIXUVRI drug product. In July 2010, the Italian Medicines Agency, or AIFA, the national authority responsible for drug regulation in Italy, approved the facility at NerPharMa DS, S.r.l. for the production of PIXUVRI drug substance.facilities.

Clinical Development of PIXUVRI in the United StatesU.S.

WeAlthough we are not currently pursuing regulatory approval of PIXUVRI in the U.S., butwe may evaluatereevaluate a possible resubmission strategy in the U.S. based on the data generated from the ongoing PIX306 clinical trial. In the U.S.Previously, in 2009, we began a rolling NDA submissionhad submitted to the FDA in April 2009a completed New Drug Application, or NDA, submission for PIXUVRI, and, completed the submission in June 2009. In March 2010, the FDA’s ODAC panel voted unanimously that the clinical trial data was not adequate to support approval of PIXUVRI for this patient population. In early April 2010, we receivedFDA issued a complete response letter

from the FDA regarding our NDA for PIXUVRI recommending that we design and conduct an additional trial to demonstrate the safety and efficacy of PIXUVRI and other items. We filed an appeal in December 2010 with the FDA’s Center for Drug Evaluation and Research regarding the FDA’s decision in April 2010 to not approve PIXUVRI for relapsed/refractory aggressive NHL and to ask the Office of New Drugs, or the OND, to conclude that PIX301 demonstrated efficacy.

In April 2011, the OND responded to our December 2010 appeal of the FDA’s April 2010 decision to not approve PIXUVRI for relapsed or refractory aggressive NHL. In its response, the OND indicated that after considering the data available in the appeal, it did not believe that accelerated approval of our NDA is necessarily out of reach based on a single controlled clinical trial, provided that two key matters can be resolved satisfactorily. First, the circumstances of stopping the PIX301 trial early must be resolved to assure that ongoing results assessment were not dictating the decision to stop. Second, ascertainment of the primary endpoint in the PIX301 study must be determined to have been sound and not subject to bias.

The OND also indicated that our request that the OND find that the data in our NDA demonstrate efficacy and return the NDA to the Office of Oncology Drug Products for consideration of safety and other issues was denied because the OND was not able to conclude that efficacy had been demonstrated. However, the OND also did not find that it could be concluded that PIX301 was a failed study, which warranted application of interim analysis statistical thresholds.

In June 2011, we met with the FDA’s Division of Oncology Drug Products, or DODP, in a meeting that focused on the documents we proposed to provide regarding the circumstances of stopping the enrollment of PIX301 prior to achieving the original planned patient accrual and the make-up of the new radiology expert panel, as well as our plan to address the items noted in the FDA’s complete response letter. Subsequently, a second independent radiology assessment of response and progression endpoint data from our PIX301 clinical trial of PIXUVRI was achieved with statistical significance. We believe this assessment confirmed the statistical robustness of the PIX301 efficacy data that was previously submitted by us to the FDA in our NDA for PIXUVRI.

In October 2011, we resubmitted the NDA to the FDA’s Division of Oncology Products 1, or DOP1, for accelerated approval to treat relapsed or refractory aggressive NHL in patients who failed two or more lines of prior therapy. In December 2011, the DOP1 notified us that our resubmitted NDA iswas considered a complete, Class 2 response to the FDA’s April 2010 complete response letter. The FDA set a PDUFAPrescription Drug User Fee Act goal date of April 24, 2012 for a decision on our resubmitted NDA. ODAC was scheduled to review our resubmitted NDA for PIXUVRI inIn February 2012, but we voluntarily withdrew our resubmitted NDA for PIXUVRI because after communications with the FDA, we needed additional time was required to prepare for the review of the NDA by ODAC at its February 2012 meeting. Prior to withdrawing the NDA, we requested that the FDA consider rescheduling the review of the NDA to the ODAC meeting to be held in late March. The FDA was unable to accommodate our request to reschedule, and given the PDUFA goal date, the only way to have PIXUVRI possibly considered at a later ODAC meeting was to withdraw and later resubmit the NDA. We are not currently pursuing regulatory approval of PIXUVRI in the U.S., but may evaluate a possible resubmission strategy in the U.S. based on the data generated from the ongoing PIX306 clinical trial. We had discussions with the DHP relating to a Special Protocol Assessment, or SPA, and following these discussions we determined that we would not pursue a SPA. The DHP noted that we could conduct a study utilizing PFS along with OS as co-primary endpoints which would be an acceptable design outside of the formal SPA process. At the initiation of the study, co-primary endpoints of OS and PFS were used. Subsequently, an amendment was made to the study protocol in January 2012, to make OS the sole primary endpoint, and PFS a secondary endpoint. As this study is being conducted without a SPA, regulatory acceptability will depend on the magnitude of the difference between the trial study arms as well as a risk and benefit analysis.necessary information.

Novartis International Pharmaceutical Ltd., or Novartis, has an option to negotiate a license to develop and commercialize PIXUVRI as discussed under Part I, Item 1, Business “—License Agreements and Additional Milestones — Novartis.”

Development Candidates

Pacritinib

Pacritinib is an oral once-daily, tyrosine kinase inhibitor or TKI, with dual activity against JAK2 and FMS-like tyrosine kinase 3, or FLT3. The JAK family of enzymes is a central component in signal transduction pathways, which are critical to normal blood cell growth and development as well as inflammatory cytokine expression and immune responses. Mutations in these kinases have been shown to be directly related to the development of a variety of blood relatedblood-related cancers, including myeloproliferative neoplasms, leukemia and lymphoma. Pacritinib may offer an advantage over other JAK inhibitors through effective treatment of symptoms while having less treatment-emergent thrombocytopenia and anemia than has been seen in currently approved and in-development JAK inhibitors. We acquired pacritinib in May 2012 pursuant to an agreement under which we have certain royalty and milestone payment obligations. See Part I, Item 1, “Business—License Agreements and Additional Milestone Activities” for additional information.

Pacritinib has been studied in two Phase 2 trials inwith a total of 65 myelofibrosis patients.patients, all of whom were treated with 400 mg of once-daily pacritinib. In December 2013, an integrated analysis of these two Phase 2 trials 30-74% improvement in sevenwas presented at the American Society of Hematology Annual Meeting, or ASH. During these Phase 2 trials, spleen response was assessed by physical exam and magnetic resonance imaging, or MRI, and patient-reported outcomes used the myelofibrosis symptom assessment form (MF-SAF) scores was observed relative to baseline at cycle 4, 7Myelofibrosis Symptom Assessment Form, or 10 (28 day cycles).MF-SAF. Among evaluable patients, 31%37 percent achieved 35%35 percent or greater reduction in spleen volume measured by MRI. We believe these effects appearMRI and 48 percent achieved a 50 percent or greater reduction in patient-reported symptom score up to be independenttheir last visit on treatment. Duration of patientexposure and daily dose were unaffected by baseline platelet count. Pacritinib appearscounts. This integrated safety analysis of all 65

patients showed the most common non-hematologic adverse events (occurring in 15 percent or more of patients overall) were gastrointestinal, predominantly diarrhea, and most were grade 1 or 2, regardless of baseline platelet counts. Of note, there were no thrombocytopenia-associated adverse events occurring at this frequency in either group.

In November 2013, we entered into the Baxter Agreement to be associateddevelop and commercialize pacritinib. Pursuant to the Baxter Agreement, we have joint commercialization rights with less myelosuppression thanBaxter for pacritinib in the U.S., while Baxter has exclusive commercialization rights for all indications outside the U.S. Under the terms of the Baxter Agreement, we received a $60 million upfront payment, which included an equity investment of $30 million, and we have the potential to receive $302 million in clinical, regulatory, commercial launch and sales milestones. Additionally, if pacritinib is approved and launched, we will share U.S. profits equally and receive royalties on net sales of pacritinib in markets outside of the U.S.

As part of our collaboration with Baxter, we are pursuing a broad approach to advancing pacritinib for patients with myelofibrosis by conducting two Phase 3 clinical trials: one in a broad set of patients without limitations on blood platelet counts, the PERSIST-1 trial, which was initiated in January 2013; and the other JAK2 inhibitors. in patients with low platelet counts, the PERSIST-2 trial, which opened for enrollment in March 2014.

In January 2013, we initiated the first of two plannedclinical trial sites and began enrolling patients with myelofibrosis in a Phase 3 clinical trials in patients with myelofibrosis.trial known as the PERSIST-1, or PAC325, trial. PERSIST-1 is a multicenter, open-label, randomized, controlled Phase 3 trial comparingevaluating the efficacy and safety of pacritinib with that of best available therapy in patients with primary myelofibrosis, post-polycythemia vera myelofibrosis or post-essential thrombocythemia myelofibrosis. A total of 270approximately 320 eligible patients are plannedexpected to be randomized 2:1 to receive either pacritinib 400 mg taken orally once daily or the best available therapy. The bestBest available therapy includes any physician-selected treatment other than JAK inhibitors. There will beinhibitors, and there is no exclusion by patient platelet count.

The primary endpoint will beof the PERSIST-1 trial is the percentage of patients achieving a 35%35 percent or greater reduction in spleen volume from baseline to Week 24 as measured by MRI or computed tomography, or CT, scan. The secondary endpoint is the percentage of patients achieving a 50 percent or greater reduction in Total Symptom Score, or TSS, from baseline to 24 weeks as measured by tracking specific symptoms on a form. At the time of initiation of the trial, PERSIST-1 utilized the original Myeloproliferative Neoplasm Symptom Assessment (MPN-SAF TSS) instrument, to measure TSS reduction. However, we have substantially concluded the process of amending the PERSIST-1 trial protocol to replace the original MPN-SAF TSS instrument with a new instrument, known as the MPN-SAF TSS 2.0, which is also being used for recording patient-reported outcomes for the PERSIST-2 trial detailed below. In connection with this amendment, we expect that enrollment in PERSIST-1 will be increased from 270 to approximately 320 patients. The trial is currently enrolling patients at clinical sites in Europe, Australia, New Zealand, Russia and the U.S. More details on the PERSIST-1 trial can be found at www.clinicaltrials.gov. We anticipate reporting topline data for PERSIST-1 in the second half of 2014.

In March 2014, we opened clinical trial sites for enrollment of patients with myelofibrosis in the second Phase 3 clinical trial known as the PERSIST-2, or PAC326, trial. PERSIST-2 is a multi-center, open-label randomized, controlled clinical trial evaluating pacritinib in up to 300 patients with myelofibrosis whose platelet counts are less than or equal to 100,000/µL. The trial will evaluate pacritinib as compared to best available therapy, including approved JAK2 inhibitors that are dosed according to the product label for myelofibrosis patients with thrombocytopenia. Patients will be randomized (1:1:1) to receive 200 mg pacritinib twice daily, 400 mg pacritinib once daily or best available therapy. In October 2013, CTI reached an agreement with the FDA on a SPA for the PERSIST-2 trial, regarding the planned design, endpoints and statistical analysis approach of the trial to be used in support of a potential NDA submission. Under the SPA, the agreed upon co-primary endpoints are the percentage of patients achieving a 35 percent or greater reduction in spleen volume measured by MRI or CT atscan from baseline to 24 weeks of treatment.treatment and the percentage of patients achieving a TSS reduction of 50 percent or greater using six key symptoms as measured by the modified MPN-SAF diary from baseline to 24 weeks. The trial is expected to enroll patients at clinical sites in the U.S., Canada, Europe, Australia and New Zealand. Additional trial details are available atwww.clinicaltrials.gov.

Tosedostat

Tosedostat is a selective, oral inhibitor of aminopeptidases, which are required by tumor cells to provide amino acids necessary for growth and tumor cell survival. Tosedostat has demonstrated significant anti-tumor responses in blood-related cancers and solid tumors in Phase 1 and 2 clinical trials.

In December 2011, final results from the United States.Phase 2 OPAL study of tosedostat in elderly patients with relapsed or refractory AML were presented at ASH. These results showed that once-daily, oral doses of tosedostat had predictable and manageable toxicities and demonstrated encouraging response rates, including a high response rate among patients who received prior hypomethylating agents, which are used to treat MDS, a precursor of AML.

The secondIn December 2013, interim results from an investigator-initiated Phase 32 clinical trial PERSIST-2, is currently being plannedof tosedostat in combination with cytarabine or decitabine in newly diagnosed older patients with AML or high-risk MDS were presented at ASH. The Phase 2 trial was designed to evaluate pacritinib compared to best availabletest the efficacy of tosedostat in combination with low intensity therapy including JAK inhibitors,for older patients with previously untreated AML or high-risk MDS not considered candidates for standard intensive therapy. This presentation reported on the results of 26 patients (median age was 69) enrolled in the first dose cohort. Patients were randomized for treatment with tosedostat in combination with either cytarabine or decitabine. Fourteen out of 26 (54 percent) patients in this cohort had either a complete response (CR; n=10, 39 percent) or complete response with incomplete blood count recovery (CRi; n=4, 15 percent). The percentage of complete responses was comparable between arms. Seven (50 percent) of the 14 CR/CRi were achieved in patients with myelofibrosis whose platelet countspoor-risk cytogenetic features. Importantly, 10 of the 26 patients subsequently went on to receive hematopoietic stem cell transplant. The study achieved its primary objective with 21 (82 percent) patients alive at four months. Median overall survival was encouraging at approximately 12 months for both study arms. Tosedostat combination therapy was well tolerated and predominantly administered as an outpatient therapy. The primary side effects of the combination therapy, the majority of which were associated with the cytarabine arm, included febrile neutropenia (50 percent), pulmonary infections (31 percent) and sepsis (19 percent). Clinically significant non-hematological toxicities were uncommon and predominantly low grade.

There are <100,000 / µL. This trial is expected to initiateseveral ongoing Phase 2 cooperative group sponsored trials and ISTs evaluating the activity of tosedostat in combination with standard agents in patients with AML or MDS. We anticipate that data from these signal-finding trials may inform the second half of 2013, and we expect it will have the same primary endpoint as PERSIST-1.appropriate design for a Phase 3 trial.

We acquired all right, titlehave an exclusive marketing and interest of S*BIOco-development agreement for tosedostat in North, Central and assumed certain liabilities relating to, certain intellectual propertySouth America, which is discussed in more detail in Part I, Item 1, “Business—License Agreements and other assets related to compounds SB1518 (also referred to as “pacritinib”) and SB1578, which inhibit Janus kinase 2, commonly referred to as JAK2. Under the S*BIO Agreement, we are solely responsible for development and commercialization activities of pacritinib worldwide and agreed to make regulatory success and sales-based milestone payments, as well as single-digit royalties on net sales.Additional Milestone Activities.”

Opaxio (paclitaxel(paclitaxel poliglumex)

Opaxio is our novel biologically-enhanced chemotherapeutic agent that links paclitaxel to a biodegradable polyglutamate polymer, resulting in a new chemical entity. Taxanes, including paclitaxel (Taxol^®) and docetaxel (Taxotere^®), are widely used for the treatment of various solid tumors, including non-small cell lung, ovarian, breast and prostate cancers. We are currently focusing our development of Opaxio through investigator-sponsored studiescooperative group trials and ISTs in the following indications: ovarian, glioblastoma multiforme, and head and neck cancers.

Opaxio was designed to deliver paclitaxel preferentially to tumor tissue. By linking paclitaxel to a biodegradable amino acid carrier, the conjugated chemotherapeutic agent is inactive in the bloodstream, sparing normal tissues the toxic side effects of chemotherapy. Once inside tumor tissue, the conjugated chemotherapeutic agent is activated and released by the action of an enzyme called cathepsin B. Opaxio remains stable in the bloodstream for several days after administration; this prolonged circulation allows the passive accumulation of Opaxio in tumor tissue.

Opaxio for ovarian cancer

We are currently focusing our development of Opaxio as a potential maintenance therapy for women with advanced stage ovarian cancer who achieve a complete remission following first-line therapy with paclitaxel and carboplatin. In March 2004, we entered into a clinical trial agreement with the Gynecologic Oncology Group, or

the GOG, to perform a Phase 3 trial, known as the GOG-0212 trial. As such, the GOG-0212 trial is conducted and managed by the GOG. We expectThe GOG-0212 study is a randomized, multicenter, open label Phase 3 trial of either monthly Opaxio or paclitaxel for up to 12 consecutive months compared to surveillance among women with advanced ovarian cancer who have no evidence of disease following first-line therapy with paclitaxel and carboplatin. For purposes of registration, the trialprimary endpoint of the study is overall survival of Opaxio compared to enroll 1,100 patients. surveillance. Secondary endpoints are PFS, safety and quality of life.

In February 2012, we were informed that the Data Monitoring Committee for GOG-0212 adopted an amendment to the study’s statistical analysis plan or SAP, to perform four interim analyses instead of thepreviously-planned single interim analysis allowing for an earlier analysis of survival results than previously noted. There are early stopping criteria for either success or futility. In January 2013, we reported that the GOGwere informed us that the Data Safety Monitoring Board (DSMB) recommended continuation of the GOG-0212 Phase 3 clinical trial of Opaxio for maintenance therapy in ovarian cancer with no changes following a planned interim survival analysis. EnrollmentIn January 2014, we were informed by the GOG that enrollment in the trial is expected to behad been completed in 2013.with 1,150 patients enrolled.

Opaxio for glioblastoma multiforme (malignant brain cancer)

In November 2010, results were presented by the Brown University Oncology Group from a Phase 2 trial of Opaxio combined with temozolomide, or TMZ, and radiotherapy in patients with newly-diagnosed, high-grade gliomas, a type of brain cancer.cancer, were presented by the Brown University Oncology Group. The trial demonstrated a high rate of complete and partial responses and an encouragingly high rate of six month PFS. Based on these results, the Brown University Oncology Group has initiated a randomized, multicenter Phase 2 studytrial of Opaxio and standard radiotherapy versus TMZ and radiotherapy for newly diagnosed patients with glioblastoma with an active gene termed MGMT that reduces responsiveness to TMZ. The primary endpoints of the trial goals are to estimate disease free and overall survival for the two study arms. Preliminary results are expected to be available in the second halfquarter of 2013.2014. In September 2012, Opaxio was granted orphan-drug designation by the FDA for the treatment of a type of brain cancer called glioblastoma multiforme.

Opaxio for head and neck cancer

AIn April 2008, SUNY Upstate Medical University initiated a Phase 1-2 studytrial of Opaxio combined with radiotherapy and cisplatin was initiated by SUNY Upstate Medical University, infor patients with locally advanced head and neck cancer. PreliminaryIn June 2013, results are expected to be presented mid-2013. from the Phase 1-2 trial showed promising clinical activity and the combination of the two agents was tolerable. An expansion cohort of HPV negative advanced head and neck cancer patients on this protocol is in progress.

We acquired an exclusive worldwide license for rights to Opaxio and certain polymer technology from PG-TXL Company, L.P., or PG-TXL, in November 1998 as discussed below in “—Part I, Item 1, “Business—License Agreements and Additional Milestone Activities—PG-TXL.”

WeBrostallicin

Brostallicin, a novel, synthetic, second-generation DNA minor groove binder, binds covalently to DNA within the DNA minor groove, interfering with DNA division and leading to tumor cell death. More than 200 patients have entered into an exclusive worldwide licensing agreement for Opaxiobeen treated with Novartis as discussed belowbrostallicin in “—License Agreementssingle-agent and Additional Milestone Activities—Novartis.”

Tosedostat

Tosedostat is an oral, aminopeptidase inhibitor that has demonstrated significant anti-tumor responses in blood related cancers and solid tumors in Phase 1-2 clinical trials.combination studies. In December 2011,June 2013, we reported on final results from thea cooperative group sponsored trial and National Cancer Institute-sponsored Phase 2 OPALclinical trial of brostallicin in combination with cisplatin for the treatment of women with metastatic triple-negative breast cancer, or mTNBC. Triple-negative breast cancer lacks progesterone and estrogen receptors and the HER2 biomarker that is present in most breast cancers, which makes standard therapy with hormone or targeted therapy

ineffective. The rationale for the present study in TNBC is based on data that demonstrates that silencing of the breast cancer susceptibility gene(s), or BRCA, is associated with substantially enhanced sensitivity to brostallicin. BRCA is silenced or mutated in most patients with TNBC. In this study of tosedostat in elderly48 patients with relapsed or refractory AMLheavily pretreated mTNBC, the 3-month PFS was 51 percent with 10 confirmed responses (one complete response and nine partial responses). Among the 25 patients who received a reduced brostallicin dose, the overall response rate was 28 percent, with 3-month PFS of 61.5 percent and median overall survival of 11.8 months. Adverse events were mostly hematologic (75 percent) and consistent with other treatments in this setting. The final data were presented at the 2013 American Society of Hematology Annualfor Clinical Oncology Meeting. These results showed that once-daily, oral doses of tosedostat had predictable and manageable toxicities and results demonstrated encouraging response rates including a high-response rate among patients who received prior hypomethylating agents, which are used to treat myelodysplastic syndrome, or MDS, a precursor of AML. There are three ongoing Phase 2 investigator-sponsored trials examining the activity of tosedostat in combination with standard agents in patients with AML or MDS. We expect data from these trials may be used to determine the appropriate design for a Phase 3 trial.

We have entered into an exclusiveworldwide rights to use, develop, import and export brostallicin pursuant to a license agreement, with Chroma Therapeutics, Ltd., or Chroma. Our agreement with Chromawhich is discussed in more detail in Part I, Item 1, Business, “—License Agreements and Additional Milestone Activities.”

Brostallicin

We are developing brostallicin through our worldwide rights to use, develop, import and export brostallicin. Brostallicin is a synthetic DNA minor groove binding agent that has demonstrated anti-tumor activity and a favorable safety profile in clinical trials.

An investigator-sponsored study of brostallicin with the North Central Cancer Treatment Group, or the NCCTG, opened for enrollment a Phase 2 study of brostallicin in combination with cisplatin in patients with metastatic triple-negative breast cancer, or mTNBC. mTNBC is defined by tumors lacking expression of estrogen, progesterone receptors and without over-expression of HER2. Women with mTNBC have very limited effective treatments and, based on the novel mechanism of action of brostallicin and the recognized activity of cisplatin in this disease, the combination of the two agents will be explored by the NCCTG. In addition to standard clinical efficacy measures, biological endpoints will also be evaluated to assist in understanding the specific activity of brostallicin in this disease. In December 2012, preliminary results of this study were presented at the San Antonio Breast Cancer Symposium. As of the preliminary analysis, 10 of 47 evaluable patients (21%) achieved a confirmed tumor response with nine patients having a partial response (PR) and one complete response (CR). The 3-month PFS was at 51%. Adverse events were manageable. Final results are expected to be presented in 2013. We have entered into a license agreement with Nerviano Medical Sciences, S.r.l., or Nerviano. Our agreement with Nerviano is discussed in more detail in Part I, Item 1, Business, “—“Business—License Agreements and Additional Milestone Activities.”

Research and Development CostsExpenses

Research and development is essential to our business. We spent $33.6 million, $33.2 million and $34.9 million in 2013, 2012 and $27.0 million in 2012, 2011, and 2010, respectively, on company-sponsored research and development activities. Because of the risks and uncertainties associated with theThe development of a product candidate involves inherent risks and uncertainties, including, among other things, that we cannot accurately predict when or whether we will successfully completewith any certainty the developmentpace of enrollment of our product candidates or the ultimate product development cost.

Weclinical trials. As a result, we are unable to provide the nature, timing and estimated costs of the efforts necessary to complete the development of PIXUVRI, Opaxio, pacritinib, tosedostat and brostallicin because, among other reasons, we cannot predict with any certaintyOpaxio or to complete the pacepost-approval commitment study of enrollment of our clinical trials.PIXUVRI. Further, third parties are conducting key clinical trials for Opaxiotosedostat and brostallicin.Opaxio. Even after a clinical trial is enrolled, preclinical and clinical data can be interpreted in different ways, which could delay, limit or preclude regulatory approval and advancement of this compound through the development process. For these reasons, among others, we cannot estimate the date on which clinical development of these product candidates will be completed or when we will generate material net cash inflows from PIXUVRI or be able to begin commercializing, Opaxio, pacritinib, tosedostat and brostallicinOpaxio to generate material net cash inflows. For additional information relating to our research and development expenses, see Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations—Research and development expenses.”

The risks and uncertainties associated with completing development of our product candidates on schedule and the consequences to operations, financial position and liquidity if our research and development projects are not completed timely are discussed in more detail in the following risk factors, which begin on page 20 of this Form 10-K: “Our financial condition may be harmed if third parties default in the performance of contractual obligations.Part I, Item 1A, “Risk Factors.”; “We may be delayed, limited or precluded from obtaining regulatory approval of Opaxio as a maintenance therapy for advanced-stage ovarian cancer and as a radiation sensitizer.”; “We may not obtain or maintain the regulatory approvals required to commercialize some or all of our products.”; “Even if our drug candidates are successful in clinical trials and receive regulatory approvals, we may not be able to successfully commercialize them.”; “If we do not successfully develop our product candidates into marketable products, we may be unable to generate significant revenue or become profitable.”; and “We may take longer to complete our clinical trials than we expect, or we may not be able to complete them at all.”

License Agreements and Additional Milestone Activities

NovartisBaxter

In September 2006,November 2013, we entered into an exclusive worldwide licensing agreement, or the NovartisBaxter Agreement with Novartis International Pharmaceutical Ltd., or Novartis, for the development and commercialization of Opaxio.pacritinib for use in oncology and potentially additional therapeutic areas. Under the Novartisterms of the Baxter Agreement, total productwe have granted to Baxter an exclusive, worldwide (subject to certain co-promotion rights for us in the U.S.), royalty-bearing, non-transferable, and registration milestones(under certain circumstances outside of the U.S.) sub-licensable license to our know-how and patents relating to pacritinib. Licensed products under the Baxter Agreement consist of products in which pacritinib is an ingredient.

Baxter has granted to us a non-exclusive license in order for us to perform our rights and obligations under the Baxter Agreement, including our co-promotion rights and manufacturing obligations.

Baxter paid us an upfront payment of $60 million, which included $30 million to acquire 30,000 shares of our convertible preferred stock. In November 2013, Baxter converted such preferred stock into our common stock at an initial conversion price of $1.914 per share.

We are also eligible to receive potential payments of up to $302 million upon the successful achievement of certain development and commercialization milestones, comprised of $112 million of potential clinical,

Opaxio could amountregulatory and commercial launch milestone payments, and potential additional sales milestone payments of up to approximately $270$190 million. Royalty paymentsOf such milestones, $67 million relates to us for Opaxio are basedclinical progress milestones. We and Baxter will jointly commercialize and share profits and losses on worldwide Opaxio net sales volumes and range fromof pacritinib in the low- to mid-twenties as a percentage of net sales.U.S.

Pursuant to the Novartis Agreement, we are responsible for the development costs of Opaxio and have control over development of Opaxio unless and until Novartis exercises its development rights, or the Development Rights. In the event that Novartis exercises the Development Rights, then from and after the date of such exercise, or the Novartis Development Commencement Date, Novartis will be solely responsible for the development of Opaxio. Prior to the Novartis Development Commencement Date, we are solely responsible for all costs associated with the development of Opaxio, but will be reimbursed by Novartis for certain costs after the Novartis Development Commencement Date. After the Novartis Development Commencement Date, NovartisWe will be responsible for all development costs associated withincurred prior to January 1, 2014, as well as for approximately $96 million in U.S. and E.U. development costs incurred on or after January 1, 2014. Of such $96 million in development costs, we anticipate that up to $67 million will be offset through the potential receipt from Baxter through 2015 of the aforementioned clinical progress milestones. All development of Opaxio,costs exceeding the $96 million threshold will generally be shared as follows: (i) costs generally applicable worldwide will be shared 75 percent to Baxter and 25 percent to us, (ii) costs applicable to territories exclusive to Baxter will be 100 percent borne by Baxter and (iii) costs applicable exclusively to co-promotion in the U.S. will be shared equally between the parties, subject to certain limitations; however,exceptions.

Outside the U.S., we are also responsibleeligible to receive tiered high single digit to mid-teen percentage royalty payments based on net sales for reimbursing Novartismyelofibrosis, and higher double digit royalties for certain costsother indications, subject to reduction by up to 50 percent if (i) Baxter is required to obtain additional third party licenses, on which it is obligated to pay royalties, to fulfill its obligations under the Baxter Agreement and (ii) in any jurisdiction where there is no longer either regulatory exclusivity or patent protection.

Joint commercialization, manufacturing, development and steering committees with representatives from Baxter and from us will be established pursuant to the NovartisBaxter Agreement.

The NovartisBaxter Agreement also provides Novartis with an option to develop and commercialize PIXUVRI based on agreed terms. If Novartis exercises its option on PIXUVRI under certain conditions and we are able to negotiate and sign a definitive license agreement with Novartis, Novartis would be requiredwill expire when there is no longer any obligation for Baxter to pay us a $7.5 million license fee, up to $104 million in registration and sales related milestones and a royalty on PIXUVRI worldwide net sales. Royalty paymentsroyalties to us in any jurisdiction, at which time the licenses granted to Baxter will become perpetual and royalty-free. We or Baxter may terminate the Baxter Agreement prior to its expiration in certain circumstances. Following the one year anniversary of receipt of regulatory approval in Australia, Canada, China, France, Germany, Italy, Japan, Spain, the U.K. or the U.S., we may terminate the Baxter Agreement as to one or more particular countries if Baxter has not undertaken requisite regulatory or commercialization efforts in the applicable country and certain other conditions are met. Baxter may terminate the Baxter Agreement earlier than its expiration in certain circumstances including (i) in the event development costs for PIXUVRImyelofibrosis for the period commencing January 1, 2014 are based on worldwide PIXUVRI net sales volumes and range fromreasonably projected to exceed a specified threshold, (ii) as to some or all countries in the low-double digits to the low-thirties as a percentageevent of net sales.

Royalties for Opaxio and PIXUVRI are payable from the first commercial sale of a product until the laterfailure of the expirationlicensed product or (iii) without cause following the one-year anniversary of the last to expire valid claimeffective date of the licensorBaxter Agreement, provided that such termination will have a lead-in period of six months before it becomes effective. Additionally, either party may terminate the Baxter Agreement prior to its expiration in events of force majeure, or the occurrence of other certain events,party’s uncured material breach or the Royalty Term. Unless otherwise terminated, the term of the Novartis Agreement continues on a product-by-product and country-by-country basis until the expiration of the last-to-expire Royalty Term with respect to a product in such certain country. In the event Novartis does not exercise its Development Rights until the earlier to occur of (i) the expiration of 30 days following receipt by Novartis of the product approval information package pursuant to the Novartis Agreement or (ii) Novartis’ determination, in its sole discretion, to terminate the Development Rights exercise period by written notice to us (events (i) and (ii) collectively being referred to as the “Development Rights Exercise Period”), the Novartis Agreement will automatically terminate upon expiration of the Development Rights Exercise Period.insolvency. In the event of an uncured material breach of the Novartis Agreement, the non-breaching party may terminate the Novartis Agreement. Either party may terminate the Novartis Agreement without notice upon the bankruptcy of the other party. In addition, Novartis may terminate the Novartis Agreement without cause at any time (a) in its entirety within 30 days written noticea termination prior to the exercise by Novartisexpiration date, rights in pacritinib will revert to us.

The Baxter Agreement also requires Baxter and us to negotiate and enter into a Manufacturing and Supply Agreement, which will provide for the manufacture of its Development Rights or (b) on a product-by-product or country-by-country basis onthe licensed products, with an option for Baxter to finish and package encapsulated bulk product, within 180 days written notice afterof the exercise by Novartiseffective date of its Development Rights. If we experience a change of control that involves certain major pharmaceutical companies, Novartis may terminate the Novartis Agreement by written notice within a certain period of time to us or our successor entity.

As of December 31, 2012, we have not received any milestone payments and we will not receive any milestone payments unless Novartis elects to exercise its option to participate in the development and commercialization of PIXUVRI or exercise its Development Rights for Opaxio.Baxter Agreement.

University of Vermont

We entered into an agreement with the University of Vermont, or UVM, Agreement, in March 1995, as amended, in March 2000,or the UVM Agreement, which grants us an exclusive license, with the right to sublicense, for the rights to PIXUVRI. Pursuant to the UVM Agreement, we acquired the rights to make, have made, sell and use PIXUVRI, and we are obligated to make royalty payments to UVM ranging from low-single digits to mid-single digits as a percentage of net sales. The higher royalty rate is payable for net sales in countries where specified UVM licensed patents exist, or where we have obtained orphan drug protection, until such UVM patents or such protection no longer exists. For a period of ten years after first commercialization of PIXUVRI, the lower royalty rate is payable for net sales in such countries after expiration of the designated UVM patents or loss of orphan

drug protection, and in all other countries without such specified UVM patents or orphan drug protection. Unless otherwise terminated, the term of the UVM Agreement continues for the life of the licensed patents in those countries in

which a licensed patent exists, and continues for ten years after the first sale of PIXUVRI in those countries where no such patents exist. We may terminate the UVM Agreement, on a country-by-country basis or on a patent-by-patent basis, at any time upon advance written notice. UVM may terminate the UVM Agreement upon advance written notice in the event royalty payments are not made. In addition, either party may terminate the UVM Agreement (a) in the event of an uncured material breach of the UVM Agreement by the other party;party or (b) in the event of bankruptcy of the other party.

S*BIO Pte Ltd

Pursuant to the S*BIO Agreement, weWe acquired the compounds SB1518 (which is referred to as “pacritinib”) and SB1578, which inhibit Janus Kinase 2, commonly referredJAK2, from S*BIO Pte Ltd, or S*BIO, in May 2012. Under our agreement with S*BIO, we are required to as JAK2, and we made an initial payment of $2 million in cash at signing. In consideration of the assets and rights acquired under the S*BIO Agreement, we made an additional payment of $13 million in cash and issued 15,000 shares of our Series 16 Preferred Stockmake milestone payments to S*BIO which were automatically converted into 2.5 million shares of our common stock. The S*BIO Agreement also provides S*BIO with a contingent right to certain milestone payments from us up to an aggregate amount of $132.5 million if certain U.S., E.U. and Japanese regulatory approvals are obtained or if certain worldwide net sales thresholds are met in connection with any pharmaceutical product containing or comprising any Seller Compoundcompound that we acquired from S*BIO for use for specific diseases, infections or other conditions. At our election, we may pay up to 50%50 percent of any milestone payments to S*BIO through the issuance of shares of our common stock or shares of our preferred stock convertible into our common stock. In addition, S*BIO will also be entitled to receive royalty payments from us at incremental rates in the low-single digits based on certain worldwide net sales thresholds on a product-by-product and country-by-country basis.

Chroma Therapeutics, Ltd.

We entered into an agreement, with Chroma, or the Chroma License Agreement, with Chroma Therapeutics, Ltd., or Chroma, in March 2011 under which we have an exclusive license to certain technology and intellectual property controlled by Chroma to develop and commercialize the drug candidate, tosedostat, in North, Central and South America, or the Licensed Territory. Pursuant to the terms of the Chroma License Agreement, we paid Chroma an upfront fee of $5.0 million upon execution of the agreement and willare required to make a milestone payment to Chroma of $5.0 million upon the initiation of the first pivotal trial. The Chroma License Agreement also includes additional development- and sales-based milestone payments related to acute myeloid leukemia, or AML, and certain other indications, up to a maximum amount of $209.0 million payable by us to Chroma if all development and sales milestones are achieved.

Under the Chroma License Agreement, we are required to pay Chroma royalties on net sales of tosedostat in any country within the Licensed Territory, commencingTerritory. Royalties commence on the first commercial sale of tosedostat in any country in the Licensed Territory and continuingcontinue with respect to that country until the laterlatest of (a) the expiration date of the last patent claim, covering tosedostat in that country, (b) the expiration of all regulatory exclusivity periods for tosedostat in that country or (c) ten years after the first commercial sale in that country. Royalty payments to Chroma are based on net sales volumes in any country within the Licensed Territory and range from the low- to mid-teens as a percentage of net sales.

Under the Chroma License Agreement, we are required to oversee and beare responsible for performing the development operations and commercialization activities in the Licensed Territory, and Chroma will oversee and beis responsible for performing the development operations and commercialization activities worldwide except for the Licensed Territory, or the ROW Territory. Development costs may not exceed $50.0 million for the first three years of the Chroma License Agreement unless agreed upon by the parties and weparties. We will be responsible for 75%75 percent of all development costs, while Chroma will be responsible for 25%25 percent of all development costs, subject to certain exceptions. Chroma is responsible for the manufacturing of tosedostat for development purposes in the Licensed Territory and the ROW Territory in accordance with the terms of the Chroma Supply Agreement.our supply agreement with Chroma. We have the

option of obtaining a commercial supply of tosedostat from Chroma or from another manufacturer at our sole discretion in the Licensed Territory. The Chroma License Agreement may be terminated by us at our convenience upon 120 days’ written notice to Chroma. The Chroma License Agreement may also be terminated by either party following a material breach by the other party subject to notice and cure periods.

By a letter dated July 18, 2012, Chroma notified us that Chroma alleges breaches under As discussed in Part I, Item 3, “Legal Proceedings,” the Chroma License Agreement. Chroma asserts that weparties have not complied with the Chroma License Agreement because we made decisions with respect to the development of tosedostat without the approval of the joint committees to be established pursuant to the terms of the Chroma License Agreement, did not hold meetings of those committees and have not used diligent efforts in the development of tosedostat. We dispute Chroma’s allegations and intend to vigorously defend our development activities and judgments. In particular, we dispute Chroma’s lack of diligence claim based in part on the appropriateness of completing the ongoing Phase 2 combination trials prior to developing a Phase 3 trial design. In addition, we believe that Chroma has failed to comply with its antecedent obligations with respect to the joint committees and failed to demonstrate an ability to manufacture tosedostat to the required standards under the terms of the Chroma License Agreement. Under the Chroma License Agreement there is a 90 day cure period for any nonpayment default, which period shall be extended to 180 days if the party is using efforts to cure. A party may terminate the Chroma License Agreement for a material breach only after arbitration in accordance with the terms of the Chroma License Agreement.

Effective September 25, 2012, we and Chroma entered into a three month standstill with respect to the parties’ respective claimscertain disputes arising under the Chroma License Agreement, but otherwise reserving the parties’ respective rightsalthough no court proceedings have commenced as of the commencementtime of the standstill period. Effective December 25, 2012, the standstill was subsequently extended until March 25, 2013 and is terminable by either party on one month’s notice.this filing.

Gynecologic Oncology Group

We entered into an agreement with the GOG or the GOG Agreement, in March 2004, as amended, on August 2008, related to the GOG-0212 trial of Opaxio in patients with ovarian cancer, which the GOG is conducting. We recorded a $1.7$0.9 million payment due to the GOG based on the 8001,100 patient enrollment milestone achieved in the secondthird quarter of 2011, of which $0.4 million was outstanding and included inaccounts payable as of December 31, 2012. Under this agreement,2013. In addition, we aremay be required to pay up to $1.8$1.2 million in additional milestone payments related toupon the trial,attainment of certain milestones, as well as other fees under certain circumstances, of which $0.5$0.7 million will become due upon receipthas been recorded as an accrued expense in our Consolidated Financial Statements as of the interim analysis and data transfer and $0.9 million will become due upon completion of the 1,100 patient enrollment milestone, both of which may occur inDecember 31, 2013.

PG-TXL

In November 1998, we entered into an agreement, with PG-TXL Company, L.P., or the PG-TXL Agreement, (aswith PG-TXL, as amended, in February 2006), which grants us an exclusive worldwide license for the rights to Opaxio and to all potential uses of PG-TXL’s polymer technology. Pursuant to the PG-TXL Agreement, we acquired the rights to research, develop, manufacture, market and sell anti-cancer drugs developed using this polymer technology. Pursuant to the PG-TXL Agreement, we are obligated to make payments to PG-TXL upon the achievement of certain development and regulatory milestones of up to $14.4 million. The timing of the remaining milestone payments under the PG-TXL Agreement is based on trial commencements and completions for compounds protected by PG-TXL license rights, and regulatory and marketing approval of those compounds by the FDA and the EMA. Additionally, we are required to make royalty payments to PG-TXL based on net sales. Our royalty payments range from low-single digits to mid-single digits as a percentage of net sales. Unless otherwise terminated, the term of the PG-TXL Agreement continues until no royalties are payable to PG-TXL. We may terminate the PG-TXL Agreement (i) upon advance written notice to PG-TXL in the event issues regarding the safety of the products licensed pursuant to the PG-TXL Agreement arise during development or clinical data obtained reveal a materially adverse tolerability profile for the licensed product in humans, or (ii) for any reason upon advance written notice. In addition, either party may terminate the PG-TXL Agreement (a) upon advance

written notice in the event certain license fee payments are not made; (b) in the event of an uncured material breach of the respective material obligations and conditions of the PG-TXL Agreement; or (c) in the event of liquidation or bankruptcy of a party.

Novartis

In January 2014, we entered into a termination agreement, or the Termination Agreement, with Novartis International Pharmaceutical Ltd., or Novartis, to reacquire the rights to PIXUVRI and Opaxio, or the Compounds, previously granted to Novartis under our License and Co-Development Agreement with Novartis entered into in September 2006, as amended, or the Original Agreement. Pursuant to the Termination Agreement, the Original Agreement was terminated in its entirety, other than certain customary provisions, including those pertaining to confidentiality and indemnification, which survive termination.

Under the Termination Agreement, we agreed not to transfer, license, sublicense or otherwise grant rights with respect to intellectual property of the Compounds unless the transferee/licensee/sublicensee agrees to be bound by the terms of the Termination Agreement. We also agreed to provide potential payments to Novartis, including a percentage ranging from the low double-digits to the mid-teens, of any consideration received by us or our affiliates in connection with any transfer, license, sublicense or other grant of rights with respect to intellectual property of PIXUVRI or Opaxio, respectively; provided that such payments will not exceed certain prescribed ceilings in the low-single digit millions. Novartis is entitled to receive potential payments of up to $16.6 million upon the successful achievement of certain sales milestones of the Compounds. Novartis is also eligible to receive tiered low single-digit percentage royalty payments for the first several hundred million in annual net sales, and ten percent royalty payments thereafter based on annual net sales of each Compound, subject to reduction in the event generic drugs are introduced and sold by a third party, causing the sale of PIXUVRI or Opaxio to fall by a percentage in the high double-digits. To the extent we are required to pay royalties on net sales of Opaxio pursuant to the PG-TXL Agreement, we may credit a percentage of the amount of such royalties paid to those payable to Novartis, subject to certain exceptions. Notwithstanding the foregoing,

royalty payments for both PIXUVRI and Opaxio are subject to certain minimum floor percentages in the low single-digits.

Nerviano Medical Sciences

Under aOur license agreement entered into with Nerviano Medical Sciences, S.r.l. for brostallicin, ordated October 6, 2006, provides for the Nerviano Agreement, we may be required to paypotential payment by us of up to $80.0$80 million in milestone payments based on the achievement of certain product development results. Due to the early stage of development thatof brostallicin, is in, we are not able to determine whether the clinical trials will be successful and, therefore, cannot make a determination that the milestone payments are reasonably likely to occur at this time.

Cephalon

Pursuant toIn June 2005, we entered into an acquisition agreement entered into with Cephalon, Inc., or Cephalon. Cephalon in June 2005,was subsequently acquired by Teva Pharmaceutical Industries Ltd., or Teva. Under the agreement, we have the right to receive up to $100.0$100 million in payments upon achievement by CephalonTeva of specified sales and development milestones related to TRISENOX. However, theIn November 2013, we received a $5 million payment related to achievement of any such milestones is uncertain at this time.a sales milestone.

Patents and Proprietary Rights

We dedicate significant resources to protecting our intellectual property, which is important to our business. We have filed numerous patent applications in the U.S. and various other countries seeking protection of inventions originating from our research and development, and we have also obtained rights to various patents and patent applications under licenses with third parties.parties and through acquisitions. Patents have been issued on many of these applications. We have pending patent applications or issued patents in the U.S. and foreign countries directed to PIXUVRI, Opaxio, pacritinib, tosedostat, Opaxio, brostallicin and other product candidates. However, the lives of these patents are limited. Patents for the individual products extend for varying periods according to the date of the patent filing or grant and the legal term of patents in the various countries where patent protection is obtained. The PIXUVRI-directed patents in the U.S. will expire in 2014. The Opaxio-directed U.S. patents will expire on various dates ranging from 2017 through 2018. The pacritinib-directed U.S. patents will expire from 2026 through 2029. The PIXUVRI-directed U.S. patents will expire in 2014. The tosedostat-directed U.S. patents will expire in 2017. The brostallicin-directed U.S. patents will expire on various dates ranging between 2017 through 2021. The PIXUVRI-directed patents currently in force in Europe will expire from 20132015 through 2023. Such patent expirations do not account for potential extensionsSome of these European patents are subject to Supplementary Protection Certificates such that may be available in certain countries. For example,the extended patents will expire from 2020 to 2027. Although certain PIXUVRI-directed patents may be subject to possible patent-term extensions that could provide extensions through 2019 in the U.S. and through 2027 in some additional countries in Europe. Supplementary Protection Certificates extending certain PIXUVRI-directed patents have been granted in Italy and Luxembourg, butEurope, there can be no guarantee of extensions of PIXUVRI-directed or other patents in other countries. The risks and uncertainties associated with our intellectual property, including our patents, are discussed in more detail in the following risk factors, which begin on page 2021 of this Annual Report on Form 10-K: “We hold rights under numerous patents that we have acquired or licensed or that protect inventions originating from our research and development, and the expiration of any one or more of these patents may allow our competitors to copy the inventions that are currently protected.”; “If we fail to adequately protect our intellectual property, our competitive position could be harmed.”; “Patent litigation is widespread in the biotechnology industry, and any patent litigation could harm our business.”; and “We may be unable to obtain or protect our intellectual property rights and we may be liable for infringing upon the intellectual property rights of others, which may cause us to engage in costly litigation and, if unsuccessful, could cause us to pay substantial damages and prohibit us from selling our products.”

Manufacturing, Distribution and Associated Matters

We currently use, and expect to continue to be dependent upon,Our manufacturing strategy utilizes third-party contract manufacturers for our products and contract service providersproduct candidates. We utilize third-party contractors for raw materials, active pharmaceutical ingredients and finished drug product, as well as for labeling, packaging, storing and distributing our products and product candidates. As

our business continues to manufacture, testexpand, we expect that our manufacturing, distribution and distribute eachassociated requirements will increase correspondingly. One such requirement becoming increasingly important relates to our commercial supply needs; while we currently have a commercial supply arrangement for PIXUVRI, we do not presently have any such arrangement in place for pacritinib (or for our other product candidates). In particular, as we have continued to advance the development of pacritinib and position such product for potential commercialization, procuring a qualified commercial supplier for pacritinib has become an important objective.

Integral to our product candidates and commercial product. We have established amanufacturing strategy is our quality control and quality assurance program, including a set ofwhich includes standard operating procedures and

specifications with the goal that our products and product candidates are manufactured in accordance with current Good Manufacturing Practices, or cGMPs, and other applicable global regulations. WeThe cGMP compliance includes strict adherence to regulations for quality control, quality assurance and the maintenance of records and documentation. The manufacturing facilities for products and product candidates must meet cGMP requirements, and with respect to the commercial products, must have acquired FDA, EMA and any other applicable regulatory approval. In this regard, we expect that we will need to invest in additional manufacturing development, manufacturing and supply chain resources, and may seek to enter into additional collaborative arrangements with other parties that have established manufacturing capabilities. It is likely that we will continue to rely on third-partycontract manufacturers for our development and commercial products on a contract basis. Currently, we have agreements with third-party vendors to produce testsufficient quantities of our products and distribute PIXUVRI, Opaxio, pacritinib, tosedostat and brostallicin drug supplyproduct candidates in accordance with cGMPs for use in clinical trials and commercial product for PIXUVRI. We will be dependent upon these third-party vendors to supply us in a timely manner with products manufactured in compliance with cGMPs or similar standards imposed by U.S. and/or foreign regulatory authorities where our products are being developed, tested, and/or marketed.distribution.

We entered intobelieve our manufacturing strategy of utilizing qualified outside vendors allows us to direct our financial and managerial resources to development and commercialization activities, rather than to the establishment of a manufacturing supply agreement, or the NerPharMa Agreement, with NerPharMa, S.r.l., or NerPharMa (a pharmaceutical manufacturing company belonging to Nerviano Medical Sciences, S.r.l., in Nerviano, Italy), for our product, PIXUVRI. The NerPharMa Agreement is a five year non-exclusive agreement and provides for both the commercial and clinical supply of PIXUVRI. The NerPharMa Agreement commenced on July 9, 2010 and expires on the fifth anniversary date of the first government approval obtained either in the United States or Europe. The NerPharMa Agreement may be terminated for an uncured material breach, insolvency or the filing of bankruptcy, or by mutual agreement. We may also terminate the NerPharMa Agreement (i) upon prior written notice in the event of failure of three or more of seven consecutive lots of product or (ii) in the event NerPharMa is acquired or a substantial portion of NerPharMa’s assets related to the NerPharMa Agreement are sold to another entity.

We entered into a manufacturing and supply agreement, or the Chroma Supply Agreement, with Chroma for our drug candidate, tosedostat. The Chroma Supply Agreement is a non-exclusive agreement and provides for both the clinical and commercial drug supply of tosedostat. The Chroma Supply Agreement commenced on June 8, 2011 and expires two years from the date when tosedostat is granted first approval for commercial distribution by the applicable regulatory authority in the licensed territory. Upon expiration of the initial term, we have a one year renewal option. We have the right to terminate the Chroma Supply Agreement without cause with 90 days written notice to Chroma. Both parties have the right to terminate for breach, bankruptcy, mutual agreement, or termination of the development agreement.infrastructure.

Competition

Competition in the pharmaceutical and biotechnology industries is intense. We face competition from a variety of companies focused on developing oncology drugs. We compete with large pharmaceutical companies and with other specialized biotechnology companies. With respect to PIXUVRI, there are no other products approved in the E.U. as monotherapy for the treatment of adult patients with multiply relapsed or refractory aggressive non-Hodgkin lymphoma;NHL; however there are other agents approved to treat aggressive non-Hodgkin lymphomaNHL that could be used in this setting, including both branded and generic anthracyclines as well as mitoxanthrone.mitoxantrone. There are also other investigational candidates being tested in aggressive non-Hodgkin lymphoma whichNHL that, if approved, could compete with PIXUVRI.

With respect to our other investigational candidates, if approved, they may face competition from compounds that are currently approved or may be approved in the future. Pacritinib would compete with Incyte, which markets Jakafi^®, and potentially other candidates in development that target JAK inhibition to treat cancer. Tosedostat would compete with corporations such as Eisai Inc., which markets Dacogen^®; Celgene Corporation, which markets Vidaza^®, Revlimid^®, and Thalomid^®; Genzyme Corporation, which markets Clolar^® and new anti-cancer drugs that may be developed and marketed. Opaxio would compete with other taxanes, epothilones, and other cytotoxic agents, which inhibit cancer cells by a mechanism similar to taxanes, or similar products. Such corporations include, among others, Bristol-Myers Squibb Co. and others,, which market paclitaxel and generic forms of paclitaxel; Sanofi-Aventis U.S. LLC, which markets docetaxel; Genentech, Inc., Hoffmann-La Roche Inc. and OSI Pharmaceuticals,Astellas Pharma US, Inc., which market Tarceva^®; Genentech, Inc. and Hoffmann-La Roche Inc., which market Avastin^®; Eli Lilly & Company, which markets Alimta^®; and Celgene Corporation, which markets Abraxane^®. Tosedostat would compete with corporations such as Eisai, which markets Dacogen^®; Celgene, which markets Vidaza^®, Revlimid^®, and Thalomid^®; Genzyme which markets Clolar^® and new anti-cancer drugs that may be developed and marketed.

Many of our existing or potential competitors have substantially greater financial, technical and human resources than us and may be better equipped to develop, manufacture and market products. Smaller companies may also prove to be significant competitors, particularly through collaborative arrangements with large pharmaceutical and established biotechnology companies. Many of these competitors have products that have been approved or are in development and operate large, well-funded research and development programs.

We expect to encounter significant competition for the principal pharmaceutical products we plan to develop. Companies that complete clinical trials, obtain required regulatory approvals and commence commercial sales of their products before us may achieve a significant competitive advantage if their products work through a similar mechanism as our products and if the approved indications are similar. We do not believe competition is as intense among products that treat cancer through novel delivery or therapeutic mechanisms

where these mechanisms translate into a clinical advantage in safety and/or efficacy. A number of biotechnology and pharmaceutical companies are developing new products for the treatment of the same diseases being targeted by us. In some instances, such products have already entered late-stage clinical trials or received FDA or EC approval. However, cancer drugs with distinctly different mechanisms of action are often used together in combination for treating cancer, allowing several different products to target the same cancer indication or disease type. Such combination therapy is typically supported by clinical trials that demonstrate the advantage of combination therapy over that of a single-agent treatment.

We believe that our ability to compete successfully will be based on our ability to create and maintain scientifically advanced technology, develop proprietary products, attract and retain scientific personnel, obtain patent or other protection for our products, obtain required regulatory approvals and manufacture and successfully market our products, either alone or through outside parties. We will continue to seek licenses with respect to technology related to our field of interest and may face competition with respect to such efforts. See the risk factor, “We face direct and intense competition from our competitors in the biotechnology and pharmaceutical industries, and we may not compete successfully against them.” in Part I, Item 1A, “Risk Factors” of this Annual Report on Form 10-K for additional information regarding the risks and uncertainties we face due to competition in our industry.

Government Regulation

The research, development, testing, manufacture, labeling, promotion, advertising, distribution and marketing, among other things, of our products are extensively regulated by governmental authorities in the United StatesU.S. and other countries.

U.S. Regulation.

In the United States,U.S., the FDA regulates drugs under the Federal Food, Drug, and Cosmetic Act, or FDCA, Public Health Service Act, or PHSA, and their implementing regulations. Failure to comply with applicable U.S. requirements may subject us to administrative or judicial sanctions, such as FDA refusal to approve pending new drug applications or supplemental applications, warning letters, product recalls, product seizures, total or partial suspension of production or distribution, injunctions and/or criminal prosecution.

Drug Approval Process.    None of our drugs may be marketed in the United StatesU.S. until such drug has received FDA approval. The steps required before a drug may be marketed in the United StatesU.S. include:

Preclinical tests include laboratory evaluation of product chemistry, toxicity and formulation, as well as animal studies. The conduct of the preclinical tests and formulation of the compounds for testing must comply with federal regulations and requirements. The results of the preclinical tests, together with manufacturing information and analytical data, are submitted to the FDA as part of an IND, which must become effective before human clinical trials may begin. An IND will automatically become effective 30 days after receipt by the FDA

unless, before that time, the FDA raises concerns or questions about issues such as the conduct of the trials as outlined in the IND. In such a case, the IND sponsor and the FDA must resolve any outstanding FDA concerns or questions before clinical trials can proceed. We cannot be sure that submission of an IND will result in the FDA allowing clinical trials to begin.

Clinical trials involve the administration of the investigational product to human subjects under the supervision of qualified investigators. Clinical trials are conducted under protocols detailing the objectives of the study, the parameters to be used in monitoring safety and the effectiveness criteria to be evaluated. Each protocol must be submitted to the FDA as part of the IND.

Clinical trials typically are conducted in three sequential phases, but the phases may overlap or be combined. The study protocol and informed consent information for study subjects in clinical trials must also be approved by an Institutional Review Board for each institution where the trials will be conducted. Study subjects must sign an informed consent form before participating in a clinical trial. Phase 1 usually involves the initial introduction of the investigational product into people to evaluate its short-term safety, dosage tolerance, metabolism, pharmacokinetics and pharmacologic actions, and, if possible, to gain an early indication of its effectiveness. Phase 2 usually involves trials in a limited patient population to (i) evaluate dosage tolerance and appropriate dosage, (ii) identify possible adverse effects and safety risks, and (iii) evaluate preliminarily the efficacy of the product candidate for specific indications. Phase 3 trials usually further evaluate clinical efficacy and test further for safety by using the product candidate in its final form in an expanded patient population. There can be no assurance that Phase 1, Phase 2 or Phase 3 testing will be completed successfully within any specified period of time, if at all. Furthermore, we or the FDA may suspend clinical trials at any time on various grounds, including a finding that the subjects or patients are being exposed to an unacceptable health risk.

The FDA and IND sponsor may agree in writing on the design and size of clinical trials intended to form the primary basis of an effectiveness claim in an NDA application. This process is known as a SPA. These agreements may not be changed after the clinical trials begin, except in limited circumstances. The existence of a SPA, however, does not assure approval of a product candidate.

Assuming successful completion of the required clinical testing, the results of the preclinical studies and of the clinical trials, together with other detailed information, including information on the manufacture and composition of the investigational product, are submitted to the FDA in the form of an NDA requesting approval to market the product for one or more indications. The testing and approval process requires substantial time, effort and financial resources. Submission of an NDA requires payment of a substantial review user fee to the FDA. The FDA will review the application and may deem it to be inadequate to support commercial marketing, and we cannot be sure that any approval will be granted on a timely basis, if at all. The FDA may also seek the advice of an advisory committee, typically a panel of clinicians practicing in the field for which the product is intended, for review, evaluation and a recommendation as to whether the application should be approved. The FDA is not bound by the recommendations of the advisory committee.

The FDA has various programs, including fast track, priority review and accelerated approval that are intended to expedite or simplify the process for reviewing drugs and/or provide for approval on the basis of surrogate endpoints. Generally, drugs that may be eligible for one or more of these programs are those for serious or life threatening conditions, those with the potential to address unmet medical needs and those that provide meaningful benefit over existing treatments. We cannot be sure that any of our drugs will qualify for any of these programs, or that, if a drug does qualify, the review time will be reduced or the product will be approved.

Before approving a NDA, the FDA usually will inspect the facility or the facilities where the product is manufactured, tested and distributed and will not approve the product unless cGMP compliance is satisfactory. If the FDA evaluates the NDA and the manufacturing facilities as acceptable, the FDA may issue an approval letter, or in some cases, a complete response letter. A complete response letter contains a number of conditions that must be met in order to secure final approval of the NDA. When and if those conditions have been met to the

FDA’s satisfaction, the FDA will issue an approval letter. The approval letter authorizes commercial marketing of the drug for specific indications. As a condition of approval, the FDA may require post-marketing testing and surveillance to monitor the product’s safety or efficacy, or impose other post-approval commitment conditions.

After approval, certain changes to the approved product, such as adding new indications, making certain manufacturing changes or making certain additional labeling claims, are subject to further FDA review and approval. Obtaining approval for a new indication generally requires that additional clinical trials be conducted.

Post-Approval Requirements.    Holders of an approved NDA are required to: (i) report certain adverse reactions to the FDA, (ii) comply with certain requirements concerning advertising and promotional labeling for their products, and (iii) continue to have quality control and manufacturing procedures conform to cGMP after approval. The FDA periodically inspects the sponsor’s records related to safety reporting and/or manufacturing and distribution facilities; this latter effort includes assessment of compliance with cGMP. Accordingly, manufacturers must continue to expend time, money and effort in the area of production, quality control and distribution to maintain cGMP compliance. We use and will continue to use third-party manufacturers to produce our products in clinical and commercial quantities, and future FDA inspections may identify compliance issues at our facilities or at the facilities of our contract manufacturers that may disrupt production or distribution, or require substantial resources to correct. In addition, discovery of problems with a product after approval may result in restrictions on a product, manufacturer or holder of an approved NDA, including withdrawal of the product from the market.

Marketing of prescription drugs is also subject to significant regulation through federal and state agencies tasked with consumer protection and prevention of medical fraud, waste and abuse. We must comply with restrictions on off-label use promotion, anti-kickback, ongoing clinical trial registration, and limitations on gifts and payments to physicians. In December 2007, we entered into a corporate integrity agreement, or CIA, with the Office of the Inspector General, Health and Human Services, or OIG-HHS, as part of our settlement agreement with the United StatesU.S. Attorney’s Office, or USAO, for the Western District of Washington arising out of their investigation into certain of our prior marketing practices relating to TRISENOX, which was divested to Cephalon Inc. in July 2005. The term of the CIA, and the requirement that we establish a compliance committee and compliance program and adopt a formal code of conduct, expired as of December 22, 2012, however we intend to continue to abide by PhRMAthe Pharmaceutical Research and Manufacturers of America Code and FDA regulations.

Non-U.S. Regulation.Regulation.

Before our products can be marketed outside of the United States,U.S., they are subject to regulatory approval similar to that required in the United States,U.S., although the requirements governing the conduct of clinical trials, including additional clinical trials that may be required, product licensing, pricing and reimbursement vary widely from country to country. No action can be taken to market any product in a country until an appropriate application has been approved by the regulatory authorities in that country. The current approval process varies from country to country, and the time spent in gaining approval varies from that required for FDA approval. In

certain countries, the sales price of a product must also be approved. The pricing review period often begins after market approval is granted. Even if a product is approved by a regulatory authority, satisfactory prices may not be approved for such product.

In Europe, marketing authorizations may be submitted at a centralized, a decentralized or national level. The centralized procedure is mandatory for the approval of biotechnology products and provides for the grant of a single marketing authorization that is valid in all E.U. members’ states. Similar to accelerated approval regulations in the U.S., conditional marketing authorizations are granted in the E.U. to medicinal products with a positive benefit/risk assessment that address unmet medical needs and whose availability would result in a significant public health benefit. A conditional marketing authorization is renewable annually. Under the provisions of the conditional marketing authorization for PIXUVRI, we are required to complete a post-marketing study aimed at confirming the clinical benefit previously observed.

The approval of new drugs in the E.U. may be achieved using a mutual recognition procedure, which is available at the request of the applicant for all medicinal products that are not subject to the centralized procedure. These procedures apply in the EUE.U. member states, plus the European Economic Area countries,as well as in Norway and Iceland. Since the E.U. does not have jurisdiction over patient reimbursement or pricing matters in its member states, we are working or planning to work with individual countries on such matters across the region. However, there can be no assurance that our reimbursement strategy will secure reimbursement on a timely basis or at all.

Environmental Regulation

In connection with our research and development activities, we are subject to federal, state and local laws, rules, regulations and policies governing the use, generation, manufacture, storage, air emission, effluent discharge, handling and disposal of certain materials, biological specimens and wastes. Although we believe that we have complied with these laws, regulations and policies in all material respects and have not been required to take any significant action to correct any noncompliance, we may be required to incur significant costs to comply with environmental and health and safety regulations in the future. Our research and development involves the controlled use of hazardous materials, including, but not limited to, certain hazardous chemicals and radioactive materials. Although we believe that our safety procedures for handling and disposing of such materials comply with the standards prescribed by federal, state and local regulations, the risk of accidental contamination or injury from these materials cannot be eliminated. In the event of such an accident, we could be held liable for any damages that result and any such liability could exceed our resources. See the risk factor, “Since we use hazardous materials in our business, we may be subject to claims relating to improper handling, storage or disposal of these materials.” in Part I, Item 1A, “Risk Factors” of this Annual Report on Form 10-K for additional information regarding the risks and uncertainties we face due to the use of hazardous materials we use in our business.

Employees

As of December 31, 2012,2013, we employed 111106 individuals in the United States,U.S., including two employees at our majority-owned subsidiary Aequus Biopharma, Inc., and threefive in Europe. Our U.S. and U.K. employees do not have a collective bargaining agreement. One employeeTwo employees in Italy isare subject to a collective bargaining agreement. We believe our relations with our employees are good.

Information regarding our executive officers is set forth in Part III, Item 10 of this Annual Report on Form 10-K,below, which information is incorporated herein by reference.

Corporate Information

We were incorporated in Washington in 1991. We completed our initial public offering in 1997 and our shares are listed on The NASDAQ Capital Market in the U.S. and the Mercato Telemarico Azionario, (MTA)or the MTA, in Italy,

where our symbol is CTIC. Our principal executive offices are located at 3101 Western Avenue, Suite 600, Seattle, Washington 98121. Our telephone number is (206) 282-7100. Our website address ishttp://www.celltherapeutics.com. However, information found on our website is not incorporated by reference into this report. “CTI”, “PIXUVRI” and “Opaxio” are our proprietary marks. All other product names, trademarks and trade names referred to in this Form 10-K are the property of their respective owners. We make available free of charge on our website our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and other filings pursuant to Section 13(a) or 15(d) of the Exchange Act and amendments to such filings, as soon as reasonably practicable after each is electronically filed with, or furnished to, the U.S. Securities and Exchange Commission, or the SEC.

In addition, you may review a copy of this Annual Report on Form 10-K, including exhibits and any schedule filed herewith, and obtain copies of such materials at prescribed rates, at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains a website (http://www.sec.gov) that contains reports, proxy and information statements and other information regarding registrants, including the Company, that file electronically with the SEC.

Item 1a.

Risk Factors

This Annual Report on Form 10-K contains forward-looking statements that involve risks and uncertainties. The occurrence of any of the following risks described below and elsewhere in this document, including the risk that our actual results may differ materially from those anticipated in these forward-looking statements, could materially adversely affect our business, financial condition, operating results or prospects and the trading price of our securities. Additional risks and uncertainties that we do not presently know or that we currently deem immaterial may also harm our business, financial condition, operating results and prospects and the trading price of our securities.

Factors Affecting Our Operating Results and Financial Condition

IfWe expect that we are unable to generate significant product revenues from the sale of PIXUVRI, we may never become profitable.

We anticipate that, for at least the next several years, our ability to generate revenues and become profitable will depend in large part on the commercial success of our only marketed product candidate, PIXUVRI. One of the priorities of our business strategy is to successfully execute the commercial launch of PIXUVRI in Europe. PIXUVRI is not approved for marketing in the United States. In September 2012, we began making PIXUVRI available for commercial sale in the E.U. PIXUVRI is currently available in eight countries: Austria, Denmark, Finland, Germany, Netherlands, Norway, Sweden and the United Kingdom. We plan to extend the availability of PIXUVRI to France, Italy and Spain, as well as other European countries, in 2013; however, we may not be able to successfully commercialize PIXUVRI in Europe as planned. Our ability to successfully commercialize PIXUVRI will depend on several factors, including, without limitation, our ability to:

We currently have limited resources and the continued development of a commercial organization to market PIXUVRI will be expensive and time-consuming. Our subsidiary CTI Life Sciences Limited, or CTILS, has entered into a services agreement with Quintiles Commercial Europe Limited, or Quintiles, whereby CTILS has engaged Quintiles to provide a variety of services, which may include, market access services, promotion and detailing services, strategic planning, project management, pricing and reimbursement support, pharmacovigilance, medical information and other regulatory services and consultancy advice to CTILS and affiliates in relation to the commercialization of PIXUVRI in Europe. Because we rely on third parties for the manufacture, distribution and marketing and sale of PIXUVRI, we may have limited control over the efforts of these third parties and we may receive less revenue than if we commercialized these products ourselves. In the event we are unable to successfully develop our own commercial organization or collaborate with third-party organizations, we may not be able to successfully commercialize or generate meaningful sales from PIXUVRI or other product candidates. As a result, we may be unable to generate sufficient revenues to grow or sustain our business and we may never become profitable, and our business, financial condition, operating results and prospects and the trading price of our securities could be harmed.

We need to continue to raise additional financing to operate,develop our business, but additional funds may not be available on acceptable terms, or at all. Any inability to raise required capital when needed could impair our ability to make our contractually obligated payments and harm our liquidity, financial condition, business, operating results and prospects.

We have substantial operating expenses associated with the development of our product candidates.candidates and the commercialization of PIXUVRI, and we have significant contractual payment obligations. Our available cash and cash equivalents were $50.4$71.6 million as of December 31, 2012.2013. At our currently planned spending rate, we believe that our present financial resources, in additiontogether with pacritinib milestone payments projected to be earned and received over the course of 2014 and 2015 under our collaboration with Baxter and expected receiptsEuropean sales from European PIXUVRI, sales, will be sufficient to fund our operations into the fourththird quarter of 2013.2015. Cash forecasts and capital requirements are subject to change as a result of a variety of risks and uncertainties. Changes in manufacturing, clinical trial expenses, andany expansion of our sales and marketing organization in Europe and other unplanned business developments may consume capital resources earlier than planned. Additionally, we may not receive the country reimbursement ratesanticipated pacritinib milestone payments or sales from PIXUVRI. Due to these and other factors, our forecast for the period for which we will have sufficient resources to fund our operations, as well as any other operational or business projection we have disclosed, or may, from time to time, disclose, may fail.

We have $15.0 million outstanding under our senior secured term loan agreement. We are required to make monthly interest payments of approximately $158,000, and commencing May 1, 2014 through October 1, 2016, we will be required to make monthly interest plus principal payments in Europe for PIXUVRIthe aggregate amount of approximately $584,000. The loan agreement also requires us to comply with restrictive covenants, including those that we currently assumelimit our operating flexibility and ability to borrow additional funds. A failure to make a required loan payment or an uncured covenant breach could lead to an event of default, and in planning for 2013such case, all amounts then outstanding may become due and 2014.payable immediately.

We expect that we will need to raiseacquire additional funds andin order to develop our business, including in the event our costs are currently exploring alternative sources of debt and other non-dilutive capital.greater than anticipated or our cash inflow projections fail, or in the event we seek to expand our operations. We may seek to raise such capital through equity or debt financings, partnerships, collaborations, joint ventures, disposition of assets or other sources, but our ability to do so is subject to a number of risks and uncertainties, including:

However, additionalAdditional funding may not be available on favorable terms or at all. If we fail to obtain additional capital when needed, we may be required to delay, scale back or eliminate some or all of our research and

development programs, as well as reduce our selling, general and administrative expenses and/or refrain from making our contractually required payments when due, which could materially harm our business, financial condition, operating results and prospects.

We may continue to incur net losses, and we may never achieve profitability.

We were incorporated in 1991 and have incurred a net operating loss every year since our formation. As of December 31, 2012,2013, we had an accumulated deficit of $1.8$1.9 billion. We are pursuing regulatory approvalapprovals for PIXUVRI, pacritinib, Opaxio, tosedostat and brostallicin.Opaxio. We will need to continue to conduct research, development, testing and regulatory compliance activities and undertakeprocure manufacturing and drug supply activitiesservices, the costs of which, together with projected general and administrative expenses, may result in operating losses for the foreseeable future. There can be no assurances that we will ever achieve profitability.

If our collaboration with Baxter with respect to pacritinib or any other collaboration for our products or product candidates is not successful, or if we are unable to enter into additional collaborations, we may not be able to effectively develop and/or commercialize the applicable product(s), which could have a material adverse effect on our business.

Under the Baxter Agreement, we rely heavily on Baxter to collaborate with us in respect of the development and global commercialization of our lead product candidate, pacritinib. As a result of our dependence on our relationship with Baxter, the eventual success or commercial viability of pacritinib is, to a certain extent, beyond our control. We are subject to a number of specific risks associated with our dependence on our collaborative relationship with Baxter, including: possible disagreements between Baxter and us as to the timing, nature and extent of our development plans, including clinical trials or regulatory approval strategy; changes in personnel at Baxter who are key to the collaboration efforts; any changes in Baxter’s business strategy adverse to our interests; and possible disagreements with Baxter regarding ownership of proprietary rights. Furthermore, the contingent financial returns under our collaboration with Baxter depend in large part on the achievement of development and commercialization milestones, plus a share of revenues from any sales. Therefore, our success, and any associated future financial returns to us and our investors, will depend in large in part on the performance of both Baxter and us under the Baxter Agreement.

The continued development of our other product candidates also depends on our ability to enter into and/or maintain collaborations. We have entered into a third-party service provider agreement with Quintiles Commercial Europe Limited, or Quintiles, whereby Quintiles provides a variety of services related to the commercialization of PIXUVRI in Europe. We are also pursuing potential partners for commercializing PIXUVRI in other markets outside of the U.S. and our current target E.U. markets discussed in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Because we rely on third parties to manufacture, distribute, and market and sell PIXUVRI, we have limited control over the efforts of these third parties, and we may receive less revenue than if we commercialized PIXUVRI ourselves. We are also a party to other agreements with third parties for our product candidates, including an agreement with the GOG, to perform a Phase 3 trial of Opaxio in patients with ovarian cancer.

If we fail to enter into additional collaborative arrangements or to maintain existing or future arrangements and service provider relationships, we may be unable to further develop and commercialize product candidates, generate revenues to grow, sustain our business or achieve profitability, which would harm our business, financial condition, operating results and prospects.

Our clinical trials may take longer to complete than expected, or they may not be completed at all.

Our business is dependent on our ability, and to the extent applicable, the ability of our collaboration partners and other third parties (such as cooperative groups and ISTs), to successfully undertake extensive clinical testing on humans to demonstrate to the satisfaction of the applicable regulatory authority the safety and efficacy of the product for its intended use. For example, our ability to develop pacritinib depends on the successful completion of two Phase 3 trials, one of which initiated in January 2013 and the second of which opened for enrollment in March 2014. Preclinical and clinical data can be interpreted in different ways, which could delay, limit or prevent regulatory approval. Negative or inconclusive results or adverse medical events during a clinical trial could delay, limit or prevent regulatory approval. We forecast the commencement and completion of clinical trials for planning purposes, but actual commencement or completion may take longer than planned or not be completed at all due to a number of reasons, including:

In addition, the failure of third parties, including, where applicable, contract research organizations, academic institutions, collaborators, cooperative groups and/or investigator sponsors, to conduct, oversee and monitor clinical trials, as well as to process clinical results, manage test requests and meet applicable standards, can affect the timing and outcome of the applicable trials. In particular, the clinical trials currently underway for tosedostat and Opaxio are being conducted as cooperative group trials and ISTs, and as such, are not under our control.

A delay in, or failure to commence or complete, any present or planned clinical trials, or the need to perform more or larger clinical trials than planned, could result in an increase in development costs, which could harm our ability to commercialize our product candidates, and our business, financial condition, operating results or prospects.

Products that appear promising in research and development may be delayed or fail to reach later stages of development or the market.

The successful development of anti-cancer drugs and other pharmaceutical products is highly uncertain, and obtaining regulatory approval to market drugs to treat cancer is expensive, difficult and speculative. A number of companies in the pharmaceutical industry, including us, have suffered significant setbacks in advanced clinical trials, even after reporting promising results in earlier trials. For example, our Phase 3 clinical trials for Opaxio for the treatment of non-small cell lung cancer failed to meet their primary endpoints. In addition, in June 2013, the FDA implemented a partial clinical hold on tosedostat, which prevented new patients from entering any ongoing tosedostat clinical trials. This hold was lifted in December 2013.

Products that appear promising in research and development may be delayed or fail to reach later stages of development or the market for several reasons, including:

If the development of our product candidates is delayed, our development costs may increase, the product may not reach later stages of development and/or the ability to commercialize our product candidates may be harmed, which could harm our business, financial condition, operating results or prospects.

We or our collaboration partners may not obtain or maintain the regulatory approvals required to commercialize some or all of our products.

We are subject to rigorous and extensive regulation by the FDA in the U.S. and by comparable agencies in other states and countries, including the EMA in the E.U. Pacritinib and all of our other compounds are currently in research or development and, other than conditional marketing authorization for PIXUVRI in the E.U., we have not received marketing approval for these other compounds or FDA marketing approval of PIXUVRI (and we are not currently pursuing FDA marketing approval of PIXUVRI). Information about the status of the regulatory approval of PIXUVRI, pacritinib, tosedostat and Opaxio can be found in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and is incorporated by reference herein. Our products may not be marketed in the U.S. until they have been approved by the FDA and may not be marketed in other countries until they have received approval from the appropriate agencies. Each product candidate requires significant research, development and preclinical testing and extensive clinical investigation before submission of any regulatory application for marketing approval. Obtaining regulatory approval requires substantial time, effort and financial resources, and we may not be able to obtain approval of any of our products on a timely basis, or at all. The number and focus of preclinical and clinical trials that will be

required for approval by the FDA, the EMA or any other foreign regulatory agency varies depending on the drug candidate, the disease or condition that the drug candidate is designed to address and the regulations applicable to any particular drug candidate. Preclinical and clinical data can be interpreted in different ways, which could delay, limit or preclude regulatory approval. The FDA, the EMA and other foreign regulatory agencies can delay, limit or deny approval of a drug candidate for many reasons, including, but not limited to:

Any delay or failure by us to obtain regulatory approvals of our products could adversely affect the marketing of our products. If our products are not approved quickly enough to provide net revenues to defray our operating expenses, our business, financial condition and operating results will be harmed.

Even if our drug candidates are successful in clinical trials and receive regulatory approvals, we or our collaboration partners may not be able to successfully commercialize them.

Pacritinib, Opaxio and tosedostat are currently in clinical trials; the development and clinical trials of these products may not be successful and, even if they are, such products may never be successfully developed into commercial products. Even if our products are successful in clinical trials or in obtaining other regulatory approvals, our products (even those that have been granted conditional marketing authorization, such as PIXUVRI) may not reach the market for a number of reasons including:

In particular, with respect to the future potential commercialization of pacritinib, we will be heavily dependent on our collaboration partner, Baxter. Under the terms of our agreement, Baxter has exclusive commercialization rights for all indications for pacritinib outside the U.S., while Baxter and CTI share commercialization rights in the U.S.

The failure of Baxter (or any other applicable collaboration partner) to fulfill its commercialization obligations with respect to a product, or the occurrence of any of the events itemized in the foregoing list, could adversely affect the commercialization of our products. If we fail to commercialize products or if our future products do not achieve significant market acceptance, we will not likely generate significant revenues or become profitable.

If users of our products are unable to obtain adequate reimbursement from third party payers, market acceptance of our products may be limited and we may not achieve anticipated revenues.

To the extent our products are successfully introduced to market, they may not be considered cost-effective and third-party or government reimbursement might not be available or sufficient. Governmental and other third-party payors continue to attempt to contain healthcare costs by strictly controlling, directly or indirectly, pricing and reimbursement, and we expect pressures on pricing and reimbursement from both governments and private payers inside and outside the U.S. to continue. In almost all European markets, pricing and choice of prescription pharmaceuticals are subject to governmental control. Therefore, the price of our products and their reimbursement in Europe is and will be determined by national regulatory authorities. A variety of factors are considered in making reimbursement decisions, including whether there is sufficient evidence to show that treatment with the product is more effective than current treatments, that the product represents good value for money for the health service it provides and that treatment with the product works at least as well as currently available treatments. Reimbursement decisions from any of the European markets may impact reimbursement decisions in other European markets. The continuing efforts of government and insurance companies, health maintenance organizations and other payers of healthcare costs to contain or reduce costs of health care may affect our future revenues and profitability, and the future revenues and profitability of our potential customers, suppliers and collaborative partners and the availability of capital.

We may never be able to generate significant product revenues from the sale of PIXUVRI.

We anticipate that, for at least the next several years, our ability to generate revenues and become profitable even if we are ablewill depend on the commercial success in Europe of our only marketed product candidate, PIXUVRI. PIXUVRI is not approved for marketing in the U.S. PIXUVRI is available to healthcare providers in certain countries in the E.U. See Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for a discussion of the reimbursement status in the applicable E.U. countries. However, our ability to continue to commercialize PIXUVRI orin Europe will depend on our ability to obtain an annual renewal of our conditional marketing authorization for PIXUVRI in the E.U. and to timely complete the post-marketing study of PIXUVRI aimed at confirming the clinical benefit previously observed in PIXUVRI. A failure of such study could result in a cessation of commercialization of PIXUVRI in the E.U.

In addition, the successful commercialization of PIXUVRI in the E.U. depends heavily on our ability to obtain and maintain favorable reimbursement rates for users of PIXUVRI, as well as on various additional factors, including, without limitation, our ability to:

If we are unable to successfully commercialize PIXUVRI in development or otherwise.Europe as planned, our business, financial condition, operating results and prospects could be harmed.

We have in the past received and may in the future receive audit reports with an explanatory paragraph on our consolidated financial statements.

Our independent registered public accounting firm included an explanatory paragraph in its reports on our consolidated financial statements for each of the years ended December 31, 2007 through December 31, 2011 regarding their substantial doubt as to our ability to continue as a going concern. Although our independent registered public accounting firm removed this going concern explanatory paragraph in its report on our

December 31, 2012 consolidated financial statements, we expect to continue to need to raise additional financing to funddevelop our operationsbusiness and satisfy obligations as they become due. The inclusion of a going concern explanatory paragraph in future years may negatively impact the trading price of our common stock and make it more difficult, time consuming or expensive to obtain necessary financing, and we cannot guarantee that we will not receive such an explanatory paragraph in the future.

We may not be able to maintain our listings on The NASDAQ Capital Market and the Mercato Telematico Azionario stock marketMTA in Italy, or the MTA, or trading on these exchanges may otherwise be halted or suspended, which may make it more difficult for investors to sell shares of our common stock.

Maintaining the listing of our common stock on The NASDAQ Capital Market requires that we comply with certain listing requirements. We have in the past and may in the future fail to continue to meet one or more listing requirements. For example, in June 2012, we received a notification from The NASDAQ Stock Market LLC, or NASDAQ, indicating non-compliance with the requirement to maintain a minimum closing bid price of $1.00 per share and that we would be delisted if we did not timely regain compliance prior to the expiration of a 180 day grace period.compliance. We regained compliance through a reverse stock split in September 2012, but we could fail to meet the continued listing requirements as a result of a decrease in our stock price or otherwise.

If our common stock ceases to be listed for trading on The NASDAQ Capital Market for any reason, it may harm our stock price, increase the volatility of our stock price, decrease the level of trading activity and make it more difficult for investors to buy or sell shares of our common stock. Our failure to maintain a listing on The NASDAQ Capital Market may constitute an event of default under our senior secured term loan and any future indebtedness, which would accelerate the maturity date of such future debt or trigger other obligations. In addition, certain institutional investors that are not permitted to own securities of non-listed companies may be required to sell their shares adversely affecting the trading price of our common stock. If we are not listed on The NASDAQ Capital Market or if our public float falls below $75 million, we will be limited in our ability to file new shelf registration statements on SEC Form S-3 and/or to fully use one or more registration statements on SEC Form S-3. We have relied significantly on shelf registration statements on SEC Form S-3 for most of our financings in recent years, so any such limitations may harm our ability to raise the capital we need. Delisting from The NASDAQ Capital Market could also affect our ability to maintain our listing or trading on the Borsa Italiana.MTA. Trading in our common stock has been halted or suspended on both The NASDAQ Capital Market and Borsa ItalianaMTA in the past and may also be halted or suspended in the future due to market or trading conditions at the discretion of The NASDAQ Stock Market LLC, the Commissione Nazionale per le Società e la

Borsa, or “CONSOB”CONSOB (which is the public authority responsible for regulating the Italian securities markets), or the Borsa Italiana (which ensures the development of the managed markets in Italy). Any halt or suspension in the trading in our common stock may negatively impact the trading price of our common stock.

We may be unable to obtain a quorum for meetings of our shareholders or obtain necessary shareholder approvals and therefore be unable to take certain corporate actions.

Our articles of incorporation require that a quorum, generally consisting of one-third of the outstanding shares of voting stock, be represented in person, by telephone or by proxy in order to transact business at a meeting of our shareholders. In addition, amendments to our articles of incorporation, such as an amendment to increase our authorized capital stock, generally require the approval of a majority of our outstanding shares. Failure to meet a quorum or obtain shareholder approval can prevent us from raising capital through equity financing or otherwise taking certain actions that may be in the best interest of the company and shareholders.

A substantial majority of our common shares are held by Italian institutions and, under Italian laws and regulations, it is difficult to communicate with the beneficial holders of those shares to obtain votes. In 2006, we were unable to obtain a quorum at two scheduled annual meetings. Following that failure to obtain a quorum, we contacted certain depository banks in Italy where significant numbers of shares of our common stock were held and asked them to cooperate by making a book-entry transfer of their share positions at Monte Titoli to their U.S.

correspondent bank, who would then transfer the shares to an account of the Italian bank at a U.S. broker-dealer that is an affiliate of that bank. Certain of the banks contacted agreed to make the share transfer pursuant to these arrangements as of the record date of the meeting, subject to the relevant beneficial owner being given notice before such record date and taking no action to direct the voting of such shares. Obtaining a quorum at future meetings and obtaining necessary shareholder approvals at shareholder meetings will depend in part upon the willingness of the Italian depository banks to continue participating in the custody transfer arrangements, and we cannot be assured that those banks that have participated in the past will continue to participate in custody transfer arrangements in the future.

As a result of the foregoing, we may be unable to obtain a quorum or shareholder approval of proposals, when needed, at future annual or special meetings of shareholders or obtain shareholder approval of proposals when needed.

shareholders. Even if we are able to obtain a quorum at our shareholder meetings, we may not obtain enough votes to approve matters to be resolved upon at those meetings. For example, a proposal to approve a reverse stock split failed to receive sufficient votes to pass at the March 2009 shareholders meeting. Moreover, under Rule 452 of the New York Stock Exchange, or Rule 452, the U.S. broker-dealer may only vote shares absent direction from the beneficial owner on certain specified “routine” matters, such as certain amendments to our articles of incorporation to increase authorized shares that are to be used for general corporate purposes and the ratification of our auditors. If our shareholders do not instruct their brokers on how to vote their shares on “non-routine” matters, then we may not obtain the necessary number of votes for approval. “Non-routine” matters include, for example, proposals that relate to the authorization or creation of indebtedness or preferred stock. Revisions to Rule 452 that further limit matters for which broker discretionary voting is allowed, such as the revisions imposed in August 2010 by the Dodd-Frank Wall Street Reform and Consumer Protection Act to prohibit broker discretionary voting on matters related to executive compensation and in the election of directors, may further harm our abilityAny failure to obtain a quorum and shareholder approval of certain matters. Therefore it is possible that even if we are able to obtainor the requisite vote on a quorum for our meetings of the shareholders we still may not receive enough votes to approve proxy proposals presented at such meeting and, depending on the proposal in question including if a proposal is submitted to our shareholders to increase the number of authorized shares of common stock, such failure could harm us.

We could fail in financing efforts or be delisted from NASDAQ if we fail to receive shareholder approval when needed.

We are required under the NASDAQ Marketplace Rules to obtain shareholder approval for any issuance of additional equity securities that would comprise more than 20%20 percent of the total shares of our common stock

outstanding before the issuance of such securities sold at a discount to the greater of book or market value in an offering that is not deemed to be a “public offering” by the NASDAQ Marketplace Rules or NASDAQ. NASDAQ Marketplace Rules also require shareholder approval if an issuance would result in a change of control as definedwell as under the NASDAQ Marketplace Rules andcertain other circumstances. We have in the past and may in the future issue additional equity securities that would comprise more than 20%20 percent of the total shares of our common stock outstanding in order to fund our operations. However, we might not be successful in obtaining the required shareholder approval for any future issuance that requires shareholder approval pursuant to the NASDAQ Marketplace Rules, particularly in light of the difficulties we have experienced in obtaining a quorum and holding shareholder meetings discussed above. If we are unable to in the future, obtain financing due to shareholder approval difficulties, such failure may harm our ability to continue operations.

We are subject to limitations on our ability to issue additional shares of our common stock or undertake other business initiatives due to Italian regulatory requirements.

Compliance with Italian regulatory requirements may delay additional issuances of our common stock or other business initiatives. Under Italian law, we must publish a registration document, securities note and summary that have to be approved by CONSOB prior to issuing common stock that exceeds, in any twelve-month period, 10%10 percent of the number of shares of our common stock outstanding at the beginning of that period, subject to certain exceptions. If we are unable to obtain and maintain a registration document, securities note or summary to cover general financing efforts under Italian law, we may be required to raise money using alternative forms of securities. For example, we may need to usehave in the past issued convertible preferred stock and may in the future issue convertible debt sincesecurities because the common stock resulting from the conversion of such securities, subject to the current provisions of European Directive No. 71/2003 and, according to the current interpretations of the Committee of European Securities Regulators, is not subject to the 10%10 percent limitation imposed by E.U. and Italian law. However, there can be no assurance that these exceptionsany changes to the registration document requirement are not changed from timeItalian regulatory requirements, exemptions or interpretations may increase compliance costs or limit our ability to time.issue securities.

We are subject to Italian regulatory requirements, which could result in administrative and other challenges and additional expenses.

Because our common stock is traded on the MTA, we are required to also comply with the rules and regulations of CONSOB and the Borsa Italiana, which regulate companies listed on Italy’s public markets. Compliance with these regulations and responding to periodic information requests from Borsa Italiana and CONSOB requires us to devote additional time and resources to regulatory compliance matters and to incur

additional expenseexpenses of engaging additional outside counsel, accountants and other professional advisors. Actual or alleged failure to comply with Italian regulators can also subject us to regulatory investigations. For more information on current investigations, see the regulatory investigations that are discussed in more detail in Part I, Item 3, “Legal Proceedings.”

We will incur a variety of costs for and may never realize the anticipated benefits of any acquisitions we may make, including our acquisition of pacritinib.acquisitions.

We evaluate and acquire assets and technologies from time to time. If appropriate opportunities become available, we may attempt to acquire other businesses and assets that we believe are a strategic fit with our business. The process of negotiating an acquisition and integrating an acquired business and assets including the acquisition of pacritinib, may result in operating difficulties and expenditures. In addition, our acquisitions may require significant management attention that would otherwise be available for ongoing development of our business, whether or not any such transaction is ever consummated. Moreover, we may never realize the anticipated benefits of any acquisition, including the acquisition of pacritinib.acquisition. Any additional acquisitions could result in potentially dilutive issuances of equity securities, the incurrence of debt, contingent liabilities and/or amortization expenses related to intangible assets, which could harm our business, financial condition, operating results and prospects and the trading prices of our securities.or prospects.

We may owe additional amounts for value added taxes related to our operations in Europe.

Our European operations are subject to value added tax, or VAT, which is usually applied to all goods and services purchased and sold throughout Europe. The VAT receivable was $8.1$5.7 million and $5.0$8.1 million as of December 31, 20122013 and 2011,December 31, 2012, respectively. On April 14, 2009, December 21, 2009 and June 25, 2010, the Italian Tax Authority, or the ITA, issued notices of assessment to Cell Therapeutics Inc. – Sede Secondaria, or CTI (Europe), based on the ITA’s audit of CTI (Europe)’s VAT returns for the years 2003, 2005, and 2006 and 2007. The ITA audits concluded that CTI (Europe) did not collect and remit VAT on certain invoices issued to non-Italian clients for services performed by CTI (Europe). The assessments, including interest and penalties, for the years 2003, 2005, 2006 and 2007 are €0.5 million, €5.5 million, €2.5 million and €0.8 million, or approximately $0.7 million, $7.2 million, $3.3 million and $1.1 million converted using the currency exchange rate as of December 31, 2012, respectively. We believe that the services invoiced were non-VAT taxable consultancy services and that the VAT returnsmillion. While we are correct as originally filed. We are vigorously defending ourselves against the assessments both on procedural grounds and on the merits of the case.case, there can be no assurances that we will be successful in such defense. Further information pertaining to these cases can be found in Part I, Item 3, “Legal Proceedings” and is incorporated by reference herein. If the final decision of lower tax courts (i.e. the Provincial Tax Court or the Regional Tax Court) or of the Supreme Court is unfavourableunfavorable to us, or if, in the interim, the ITA were to make a demand for payment and we were to be unsuccessful in suspending collection efforts, we may be requested to pay to the ITA an amount up to €9.4 million (or approximately $12.4$12.9 million converted using the currency exchange rate as of December 31, 2012)2013) plus collection fees, notification expenses and additional interest for the period lapsed between the date in which the assessments were issued and the date of effective payment. Further information pertaining to these cases can be found in this Annual Report on Form 10-K under Item 3 “Legal Proceedings” and is incorporated by reference herein.

We may not realize any royalties, milestone payments or other benefits under the License and Co-Development Agreement entered into with Novartis Pharmaceutical Company Ltd.

We have entered into a license and co-development agreement related to Opaxio and PIXUVRI with Novartis pursuant to which Novartis received an exclusive worldwide license for the development and commercialization of Opaxio and an option to enter into an exclusive worldwide license to develop and commercialize PIXUVRI. We will not receive any royalty or milestone payments under this agreement unless Novartis exercises its option related to PIXUVRI and we are able to reach a definitive agreement or Novartis elects to participate in the development and commercialization of Opaxio. Novartis is under no obligation to make such election and enter into a definitive license agreement or exercise such right and may never do so. In addition, even if Novartis exercises such rights, any royalties and milestone payments we may be eligible to receive from Novartis are subject to the receipt of the necessary regulatory approvals and the attainment of certain sales levels. In the event Novartis does not elect to participate in the development of Opaxio or PIXUVRI, we may not be able to find another suitable partner for the commercialization and development of those products, which may have an adverse effect on our ability to bring those drugs to market. In addition, we would need to obtain a release from Novartis prior to entering into any agreement to develop and commercialize PIXUVRI or Opaxio with a third party. We may never receive the necessary regulatory approvals and our products may not reach the necessary sales levels to generate royalty or milestone payments even if Novartis elects to exercise its option with regard to PIXUVRI and enter into a definitive license agreement or to participate in the development and commercialization of Opaxio. In addition, the agreement imposes restrictions on activities relating to the development and commercialization of PIXUVRI and any actual or alleged failure to comply with the terms of the agreement could result in potential damage claims, legal expenses, loss of rights under the agreement or termination of the agreement. Novartis has the right under the agreement in its sole discretion to terminate such agreement at any time upon written notice to us.

Products that appear promising in research and development may be delayed or fail to reach later stages of development or the market.

The successful development of pharmaceutical products is highly uncertain and obtaining regulatory approval to market drugs to treat cancer is expensive, difficult and risky. Products that appear promising in research and development may be delayed or fail to reach later stages of development or the market for several reasons, including:

Preclinical and clinical data can be interpreted in different ways, which could delay, limit or prevent regulatory approval. Negative or inconclusive results or adverse medical events during a clinical trial could delay, limit or prevent regulatory approval. In addition, any significant problem in the production of our products, such as the inability of a supplier to provide raw materials or supplies used to manufacture our products, equipment obsolescence, malfunctions or failures, product quality or contamination problems, or changes in regulatory requirements or standards that require modifications to our manufacturing process could delay, limit or prevent regulatory approval which could harm our business, financial condition and results or the trading price of our securities. There can be no assurance as to whether or when we will receive regulatory approvals for our products.

We may take longer to complete our clinical trials than we expect, or we may not be able to complete them at all.

Before regulatory approval for any potential product can be obtained, we must undertake extensive clinical testing on humans to demonstrate to the satisfaction of the applicable regulatory authority the safety and efficacy of the product for its intended use. We forecast the commencement and completion of clinical trials for planning purposes, but actual commencement or completion may not occur as forecasted or planned due to a number of reasons, including:

If we fail to commence or complete, or experience delays in, any of our present or planned clinical trials or need to perform more or larger clinical trials than planned, our development costs may increase and/or our ability to commercialize our product candidates may be harmed. If delays or costs are significant, our financial results and our ability to commercialize our product candidates may be harmed.

We may not obtain or maintain the regulatory approvals required to commercialize some or all of our products.

We are subject to rigorous and extensive regulation by the FDA in the United States and by comparable agencies in other states and countries, including the EMA in the E.U. All of our other compounds are currently in research or development and, other than conditional marketing authorization for PIXUVRI in the E.U., have not received marketing approval for these other compounds or FDA marketing approval of PIXUVRI. Our products may not be marketed in the United States until they have been approved by the FDA and may not be marketed in other countries until they have received approval from the appropriate agencies. Each product candidate requires significant research, development and preclinical testing and extensive clinical investigation before submission of any regulatory application for marketing approval. Obtaining regulatory approval requires substantial time, effort and financial resources, and we may not be able to obtain approval of any of our products on a timely basis, or at all. The number and focus of preclinical and clinical trials that will be required for approval by the FDA, the EMA or any other foreign regulatory agency varies depending on the drug candidate, the disease or condition that the drug candidate is designed to address and the regulations applicable to any particular drug candidate. Preclinical and clinical data can be interpreted in different ways, which could delay, limit or preclude regulatory approval. The FDA, the EMA and other foreign regulatory agencies can delay, limit or deny approval of a drug candidate for many reasons, including, but not limited to:

Any delay or failure by us to obtain regulatory approvals of our products could diminish competitive advantages that we may attain and could adversely affect the marketing of our products. Each product candidate requires significant research, development and preclinical testing and extensive clinical investigation before submission of any regulatory application for marketing approval. The development of anti-cancer drugs,

including those we are currently developing, is unpredictable and subject to numerous risks. Failure to comply with regulatory requirements could result in various adverse consequences, including possible delay in approval or refusal to approve a product, withdrawal of approved products from the market, product seizures, injunctions, regulatory restrictions on our business and sales activities, monetary penalties, or criminal prosecution. If our products are not approved quickly enough to provide net revenues to defray our operating expenses, our business, financial condition and results of operations will be harmed.

Information about the status of the regulatory approval of PIXUVRI, pacritinib, Opaxio, tosedostat, and brostallicin can be found in this Annual Report on Form 10-K under Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and is incorporated by reference herein. Except for conditional marketing authorization of PIXUVRI in Europe, none of our current product candidates have received approval for marketing in any country.

Even if our drug candidates are successful in clinical trials andproducts receive regulatory approvals, we may not be able to successfully commercialize them.

Even if our products are successful in clinical trials and even products that have been granted conditional marketing authorization, such as PIXUVRI, or other regulatory approvals, our products may not reach the market for a number of reasons including that they may:

The occurrence of any of these events could adversely affect the commercialization of our products. Products, if introduced, may not be successfully marketed and/or may not achieve customer acceptance. If we fail to commercialize products or if our future products do not achieve significant market acceptance, we will not likely generate significant revenues or become profitable.

Even if regulatory approval, is obtained, we will be subject to ongoing obligations and continued regulatory review by the FDA, the EMA and other foreign regulatory agencies, as applicable, and may be subject to additional post-marketing obligations, all of which may result in significant expense and limit commercialization of our other products, including PIXUVRI.

Even if our other products receive regulatory approvals, we will be subject to numerous regulations and statutes regulating the manner of selling and obtaining reimbursement for those products. Regulatory approvals that we receive for our products may be subject to limitations on the indicated uses for which the product may be marketed or require potentially costly post-marketing follow-up studies. Even if a product receives regulatory approval, we may not be able to maintain compliance with regulatory requirements, which could result in the product being withdrawn from the market, product seizures, injunctions, regulatory restrictions on our business and sales activities, monetary penalties or criminal prosecution. In addition, PIXUVRI is subject to extensive regulatory requirements regarding its labeling, packaging, adverse event reporting, storage, advertising, promotion and record-keeping. If the FDA, the EMA or other foreign regulatory agency approves any of our other products, they will also be subject to similar extensive regulatory requirements. The subsequent discovery of previously unknown problems with PIXUVRI or any of our other products, including adverse events of

unanticipated severity or frequency, or the discovery that adverse effects or unknown toxicities observed in preclinical research or clinical trials that were believed to be minor actually constitute more serious problems, may result in restrictions on the marketing of the product or withdrawal of the drug from the market. If we are

not granted full approval of PIXUVRI in the E.U. or we are unable to renew our conditional marketing authorization for PIXUVRI in the E.U., our business, financial condition, operating results and results of operationsprospects would be harmed.

We cannot predict the outcome of our clinical trial for PIXUVRI or whether our clinical trial for PIXUVRI will serve as either a post-marketing commitment trial or as a pivotal trial.

In March 2011, we initiated a randomized pivotal trial of PIXUVRI for the treatment of relapsed or refractory aggressive B-cell NHL. This clinical trial, referred to as PIX-R, or PIX306, or PIX-R, will comparecompares a combination of PIXUVRI plus rituximab to a combination of gemcitabine plus rituximab in patients who have relapsed after one to three prior regimens for aggressive B-cell NHL and who are not eligible for autologous stem cell transplant. We cannot predict the outcome of PIX-RPIX306 or whether PIX-RPIX306 will serve as either a post-marketing commitment trial or as a pivotal trial. Moreover,We may not be able to demonstrate the FDA may requestclinical benefit of PIXUVRI in patients who had previously received rituximab or that we conductPIXUVRI is more clinically effective than treatments currently used in clinical trials in addition to PIX-R to obtain FDA approval of our NDA for PIXUVRI and we do not know what this trial will cost or how long it would take to execute this study and provide additional information to the FDA.practice. We may not be able to complete the PIX306 clinical trial by June 2015 or at all. If we are unable to submit the clinical trial data from our ongoing randomized Phase 3 clinical trial, PIX306 by June 2015, it may result in the withdrawal of the conditional marketing authorization by the E.U. We may also need to take additional steps to obtain regulatory approval of PIXUVRI. The expense to design and conduct clinical trials are substantial and any additional clinical trials or actions we may need to pursue to obtain approval of PIXUVRI may negatively affect our business, financial condition, andoperating results of operations.or prospects. Failure to meet clinical trial deadlines canmay also result in the withdrawal of our conditional marketing authorization.

If we do not successfully develop our product candidates into marketable products, we may be unable to generate significant revenue or become profitable.

Currently only our product PIXUVRI is approvedauthorization for marketing in the European Union. Pacritinib, Opaxio, tosedostat and brostallicin are currently in clinical trials; the development and clinical trials of these products may not be successful and, even if they are, we may not be successful in developing any of them into a commercial product. For example, our STELLAR Phase 3 clinical trials for Opaxio for the treatment of non-small cell lung cancer failed to meet their primary endpoints. In addition, a number of companies in the pharmaceutical industry, including us, have suffered significant setbacks in advanced clinical trials, even after reporting promising results in earlier trials. We will need to commit significant time and resources to develop these and any additional product candidates. Even if our trials are viewed as successful, we may not get regulatory approval. Our product candidates will be successful only if:

We are dependent on the successful completion of these goals in order to generate revenues. The failure to generate such revenues may preclude us from continuing our research and development of these and other product candidates.

We may be delayed, limited or precluded from obtaining regulatory approval of Opaxio as a maintenance therapy for advanced-stage ovarian cancer and as a radiation sensitizer.

We are currently developing Opaxio as a potential maintenance therapy for women with advanced-stage ovarian cancer who achieve a complete remission following first-line therapy with paclitaxel and carboplatin and

as a radiation sensitizer. This Phase 3 clinical trial, or the GOG-0212 trial, is under the control of the Gynecologic Oncology Group, or the GOG, and is expected to enroll 1,100 patients. On January 31, 2013, the Data Safety Monitoring Board recommended continuation of the GOG-0212 trial of Opaxio for maintenance therapy in ovarian cancer with no changes following the first planned interim survival analysis. Three prior pivotal clinical trials for Opaxio have not been successful and failure of the GOG-0212 trial could delay, limit or preclude regulatory approval of Opaxio.PIXUVRI.

We may be subject to fines, penalties, injunctions and other sanctions if we are deemed to be promoting the use of our products for non-FDA-approved, or off-label, uses.

Our business and future growth depend on the development, use and ultimate sale of products that are subject to FDA, EMA and or other regulatory agencies regulation, clearance and approval. Under the U.S. Federal Food, Drug, and Cosmetic Act and other laws, we are prohibited from promoting our products for off-label uses. This means that in the United States,U.S., we may not make claims about the safety or effectiveness of our products and may not proactively discuss or provide information on the use of our products, except as allowed by the FDA.

Government investigations concerning the promotion of off-label uses and related issues are typically expensive, disruptive and burdensome, and generate negative publicity. If our promotional activities are found to bepublicity and may result in violationfines or payments of applicable law or if we agree to a settlement in connection with an enforcement action, we would likely face significant fines and penalties and would likely be required to substantially change our sales, promotion, grant and educational activities.awards. For example, in April 2007, we paid a civil penalty of $10.6 million and entered into a settlement agreement with the U.S. Attorney’s OfficeUSAO for the Western District of Washington arising out of their investigation into certain of our prior marketing practices relating to TRISENOX, which was divested to Cephalon Inc. in July 2005. As part of that settlement agreement and in connection with the acquisition of Zevalin, we also entered into a corporate integrity agreement with the Office of Inspector General of the U.S. Department of Health and Human Services,OIG-HHS, which required us to establish a compliance committee and compliance program and adopt a formal code of conduct. If our promotional activities are found to be in violation of applicable law or if we agree to a settlement in connection with an enforcement action, we would likely face significant fines and penalties and would likely be required to substantially change our sales, promotion, grant and educational activities.

A failure to comply with laws and regulations that govern our cross-border conduct, as well as with healthcare fraud and abuse and false claims laws and regulations, could result in substantial penalties and prosecution.

We are subject to risks associated with doing business outside of the U.S., which exposes us to complex foreign and U.S. regulations. For example, we are subject to regulations imposed by the Foreign Corrupt

Practices Act, or FCPA, and other anti-corruption laws that generally prohibit U.S. companies and their intermediaries from offering, promising, authorizing or making improper payments to foreign government officials for the purpose of obtaining or retaining business. The SEC and U.S. Department of Justice have increased their enforcement activities with respect to the FCPA. Internal control policies and procedures and employee training and compliance programs that we have implemented to deter prohibited practices may not be effective in prohibiting our employees, contractors or agents from violating or circumventing our policies and the law.

In addition, we are subject to various state and federal fraud and abuse laws, including, without limitation, the federal Anti-Kickback Statute and federal False Claims Act. There are similar laws in other countries. These laws may impact, among other things, the sales, marketing and education programs for our drugs. The federal Anti-Kickback Statute prohibits persons from knowingly and willingly soliciting, offering, receiving or providing remuneration, directly or indirectly, in exchange for or to induce either the referral of an individual, or the furnishing or arranging for a good or service, for which payment may be made under a federal healthcare program. The federal False Claims Act prohibits persons from knowingly filing, or causing to be filed, a false claim to, or the knowing use of false statements to obtain payment from the federal government. Suits filed under the False Claims Act can be brought by any individual on behalf of the government and such individuals, commonly known as “whistleblowers,” may share in any amounts paid by the entity to the government in fines or settlement. Many states have also adopted laws similar to the federal Anti-Kickback Statute and False Claims Act.

We are unable to predict whether we could be subject to actions under any of the foregoing or similar laws and regulations, or the impact of such actions. If we failwere to establish and maintain collaborations,be found to be in violation of these laws or regulations, we may be unablesubject to developpenalties, including civil and commercializecriminal penalties, damages, fines, exclusion from government healthcare reimbursement programs and the curtailment or restructuring of our product candidates.

Weoperations, all of which could have entered into collaborative arrangements with third-parties to develop and/or commercialize product candidatesa material adverse effect on our business and are currently seeking additional collaborations. For example, we entered into an agreement with the GOG to perform a Phase 3 trialresults of Opaxio in patients with ovarian cancer. Additional collaborations might be necessary in order for us to fund our research and development activities and third-party manufacturing arrangements, seek and obtain regulatory approvals and successfully commercialize our existing and future product candidates. If we fail to enter into additional collaborative arrangements or fail to maintain our existing collaborative arrangements, the number of product candidates from which we could receive future revenues would decline.operations.

Our dependenceWe are dependent on collaborative arrangements with third parties will subject us to a number of risks that could harm our ability to develop and commercialize products.

Our collaborative arrangements with third parties, subject us to a number of risks, including:

The occurrence of any of these events could harm the development or commercialization of our products.

Our dependence on third-party manufacturers means that we do not always have direct control overthird-parties for the manufacture, testing orand distribution of products and product candidates. Any failure or delay in manufacturing, or in obtaining a qualified vendor when needed, could delay the clinical development and commercialization of the applicable product(s) and product candidate(s) and harm our products.business.

We do not currently have internal analytical laboratory or manufacturing facilities to allow the testing or production and distribution of drug products in compliance with cGMPs. WecGMPs, and we instead utilize third party vendors. In particular, we are dependent on a single vendor for the manufacturing of each of PIXUVRI, pacritinib and tosedostat. With respect to Opaxio, we are presently relying on stored inventory of the drug, as such,we do not presently have a manufacturing agreement in place for Opaxio. Because we do not have direct control over the manufacture, testing or distribution of PIXUVRI. The active pharmaceutical ingredients and drug products for our products under development, pacritinib, tosedostat and brostallicin, are manufactured by single vendors. Finished product manufacture and distribution for these products are to be manufactured and distributed by different single vendors. In addition, one of our other products under development, Opaxio, has a complex manufacturing process and supply chain, which may prevent us from obtaining a sufficient supply of drug product for the clinical trials and commercial activities currently planned or underway on a timely basis, if at all. Becauseinfrastructure, we do not directly control our suppliers, these vendors may not be able to provide us with finished product when we need it. If our vendors fail to comply with regulatory requirements or we experience a delay in the manufacturing of our finished products, we may experience a delay in the distribution of our products, which may impact the related clinical trials and our commercial activities currently planned or underway.

If our contract manufacturers and/or our products fail to comply with FDA, EMA or other applicable regulations, we may have to curtail or stop the manufacture of such products which would harm our sales.

We are dependent upon third partiesour vendors to supply us in a timely manner with products manufactured in compliance with cGMPs or similar manufacturing standards imposed by United Statesthe U.S. and/or applicable foreign regulatory authorities, where our products will be tested and/or marketed. Whileincluding the FDA EMA and other regulatory authorities maintain oversight for cGMP complianceEMA. Any of drug manufacturers, contract manufacturers and contract service providers may at times violate cGMPs. The FDA, EMA and othersuch regulatory authorities may take action against a contract manufacturer who violates cGMPs. Failure to comply with FDA, EMA or other applicable regulations may cause us to curtail or stop the manufacture of such products until we obtain regulatory compliance. Both before and after approval, our contract manufacturers and our products are subject to numerous regulatory requirements covering, among other things, testing, manufacturing, quality control, labeling, advertising, promotion, distribution and export. Manufacturing processes must conform to current Good Manufacturing Practice, or cGMPs. The FDA, EMA and other regulatory authorities periodically inspect manufacturing facilities to assess compliance with cGMPs. Failure of our manufacturers to comply with FDA, EMA or other applicable regulations may cause us to curtail or stop the manufacture of such products until we obtain regulatory compliance.

With respect to commercial supply arrangements, we currently have such an arrangement in place for PIXUVRI, but we do not presently have one in place for pacritinib (or for our other product candidates). In particular, as we have continued to advance the development of pacritinib and position such product for potential commercialization, procuring a qualified commercial supplier for pacritinib has become an important objective.

Any failure or delay in the manufacturing and testing of a product or product candidate in compliance which wouldwith applicable regulations, or in obtaining and maintaining qualified vendors (including qualified commercial suppliers) to provide the requisite services when needed, could delay the clinical development and commercialization of the applicable product or product candidate and harm our business, financial condition and results of operations.business.

Our financial condition may be harmed if third parties default in the performance of contractual obligations.

Our business is dependent on the performance by third parties of their responsibilities under contractual relationships. For example, in 2005 we sold our product TRISENOX to Cephalon and, pursuant to the terms of the purchase agreement under which TRISENOX was sold, we are entitled to receive milestone payments upon

the approval by the FDA of new labeled uses for TRISENOX; however, Cephalon may decide not to submit any additional information to the FDA to apply for label expansion of TRISENOX, in which case we would not receive a milestone payment under the agreement. In September 2012, our wholly-owned subsidiary CTI Life Sciences Ltd.,Limited, or CTILS, entered into a Logistics Agreement with Movianto Nederland BV, or Movianto, pursuant to which Movianto agreed to provide certain warehousing, transportation, distribution, order processing and cash collection services and all related activities to CTILS and its affiliates for PIXUVRI in certain agreed territories in Europe. Movianto provides a variety of services related to our sales of PIXUVRI, including the receipt, unloading and checking, warehousing and inventory control; customer order management; distribution and transportation; lot number and expiry date control; returned goods processing; return and recall; product quality assurance; and reporting, credit management and debt collection. If Movianto, or other third parties we may enter into contracts with default on the performance of their contractual obligations, we could suffer significant financial losses and operational problems, which could in turn adversely affect our financial performance, cash flows or operating results of operations and may jeopardize our ability to maintain our operations.

We face direct and intense competition from our competitors in the biotechnology and pharmaceutical industries, and we may not compete successfully against them.

Competition in the oncology market is intense and is accentuated by the rapid pace of technological and product development. We anticipate that we will face increased competition in the future as new companies enter the market. Our competitors in the United StatesU.S. and elsewhere are numerous and include, among others, major multinational pharmaceutical companies, specialized biotechnology companies and universities and other research institutions. Specifically:

Many of our competitors, particularly the multinational pharmaceutical companies, either alone or together with their collaborators, have substantially greater financial and technical resources and substantially larger development and marketing teams than us, as well as significantly greater experience than we do in developing, manufacturing and marketing products. As a result, products of our competitors might come to market sooner or

might prove to be more effective, less expensive, have fewer side effects or be easier to administer than ours. In

any such case, sales of our current or future products would likely suffer and we might never recoup the significant investments we are making to develop these product candidates.

If users of our products are unableThe pharmaceutical business is subject to obtain adequate reimbursement from third party payers, or if new restrictive legislation is adopted, market acceptance of our products may be limited and we may not achieve anticipated revenues.

Even if we succeed in bringing any of our proposed products to market, they may not be considered cost-effective and third-party orincreasing government reimbursement might not be available or sufficient. The continuing efforts of government and insurance companies, health maintenance organizationsprice controls and other payers of healthcare costsrestrictions on pricing, reimbursement, and access to contain or reduce costs of health care maydrugs, which could affect our future revenues and profitability if new restrictive legislation is adopted.

Legislation and regulations affecting the future revenues and profitabilitypricing of pharmaceuticals may change in ways adverse to us before or after any of our potential customers, suppliersproposed products are approved for marketing. In the U.S., we are subject to substantial pricing, reimbursement and collaborative partnersaccess pressures from state Medicaid programs, private insurance programs and pharmacy benefit managers, and implementation of U.S. health care reform legislation is increasing these pricing pressures. The Patient Protection and Affordable Care Act (HR 3590) instituted comprehensive health care reform in 2010 and includes provisions that, among other things, reduce and/or limit Medicare reimbursement, require all individuals to have health insurance (with limited exceptions) and impose new and/or increased taxes. These measures could significantly influence the availabilitypurchase of capital. Governmentalhealthcare services and other third-party payors continueproducts, resulting in lower prices and reducing demand for our products. In addition, many state legislative proposals could further negatively affect our pricing and reimbursement for, or access to, attempt to contain healthcare costs by:our products.

Globally, governments are becoming increasingly aggressive in imposing health care cost-containment measures such as:

Federal statutes generally prohibit providing certain discounts and payments to physicians to encourage them to prescribe our product. Violations of such regulations or statutes may result in treble damages, criminal or civil penalties, fines or exclusion of us or our employees from participation in federal and state health care programs. Although we have policies prohibiting violations of relevant regulations and statutes, unauthorized actions of our employees or consultants, or unfavorable interpretations of such regulations or statutes may result in third parties or regulatory agencies bringing legal proceedings or enforcement actions against us. Because we will likely need to develop a new sales force for any future marketed products, we may have a greater risk of such violations from lack of adequate training or experience. The expense to retain and pay legal counsel and consultants to defend against any such proceedings would be substantial, and together with the diversion of management’s time and attention to assist in any such defense, may negatively affect our business, financial condition and results of operations.

In the United States, under the Patient Protection and Affordable Care Act (HR 3590), or the PPACA, instituted comprehensive health care reform in 2010 and we believe the U.S. Congress and state legislatures will likely continue to focus on health care reform, the cost of healthcare services and products and on the reform of the Medicare and Medicaid systems. The announcement or adoption of these proposals could significantly influence the purchase of healthcare services and products, resulting in lower prices and reducing demand for our products. In addition, in almost all European markets, pricing and choice of prescription pharmaceuticals are subject to governmental control. Therefore, the price of our products and their reimbursement in Europe will be determined by national regulatory authorities. For example, the pricing of PIXUVRI in Europe is subject to governmental control and we are focused on obtaining reimbursement in the five major market European countries (France, Germany, Italy, Spain and the United Kingdom), as well as smaller territories in Western and Northern Europe, in 2013.

If adequate third-party or government coverage is not available, or if new restrictive legislation is adopted, market acceptance of our products may be limited and we may not be able to maintain price levels sufficient to realize an appropriate return on our investment in research and product development or achieve anticipated revenues. In addition, legislation and regulations affecting the pricing of pharmaceuticals may change in ways adverse to us before or after any of our proposed products are approved for marketing.

If any of our license agreements for intellectual property underlying PIXUVRI, pacritinib, Opaxio, tosedostat, brostallicin, or any other productsour compounds are terminated, we may lose the right to develop or market that product.

We have acquired or licensed intellectual property from third parties, including patent applications and patents relating to intellectual property for PIXUVRI, pacritinib tosedostat, and brostallicin.tosedostat. We have also licensed the intellectual property for our drug delivery technology relating to Opaxio, which uses polymers that are linked to drugs known as polymer-drug conjugates. Some of our product development programs depend on our ability to maintain rights under these licenses. Each licensor has the power to terminate its agreement with us if we fail to meet our obligations under these licenses. We may not be able to meet our obligations under these licenses. If we default under any license agreement, we may lose our right to market and sell any products based on the licensed technology and may be forced to cease operations, liquidate our assets and possibly seek bankruptcy protection. Bankruptcy may result in the termination of agreements pursuant to which we license certain intellectual property rights, including the rights to PIXUVRI, pacritinib, Opaxio, tosedostat, and brostallicin.rights.

If we are unable to enter into new in-licensing arrangements, our future product portfolio and potential profitability could be harmed.

One component of our business strategy is in-licensing drug compounds developed by other pharmaceutical and biotechnology companies or academic research laboratories. Our product candidates PIXUVRI, Opaxio, tosedostat and brostallicinOpaxio, which are in clinical and pre-clinical development, and arePIXUVRI, which is in a post-approval commitment study, have been in-licensed or acquired from third-parties.

Competition for new promising compounds and commercial products can be intense. If we are not able to identify future in-licensing opportunities and enter into future licensing arrangements on acceptable terms, our future product portfolio and potential profitability could be harmed.

We hold rights under numerous patents that we have acquired or licensed or that protect inventions originating from our research and development, and the expiration of any one or more of these patents may allow our competitors to copy the inventions that are currently protected.

We dedicate significant resources to protecting our intellectual property, which is important to our business. We have filed numerous patent applications in the United StatesU.S. and various other countries seeking protection of inventions originating from our research and development, and we have also obtained rights to various patents and patent applications under licenses with third parties and through acquisitions. Patents have been issued on many of these applications. We have pending patent applications or issued patents in the United StatesU.S. and foreign countries directed to PIXUVRI, pacritinib, Opaxio, tosedostat, brostallicinOpaxio and other product candidates. However, the lives of these patents are limited. Patents for the individual products extend for varying periods according to the date of the patent filing or grant and the legal term of patents in the various countries where patent protection is obtained. The Opaxio-directed patents will expire on various dates ranging from 2017 through 2018. The pacritinib-directed U.S. patents will expire from 2026 through 2029. The PIXUVRI-directed U.S. patents will expire in 2014. The tosedostat-directed U.S. patents will expire in 2017. The brostallicin-directed U.S. patents will expire on various dates ranging between 2017 through 2021. The PIXUVRI-directed patents currently in force in Europe will expire from 20132015 through 2023. Such patent expirations do not account for potential extensionsSome of these European patents are subject to Supplementary Protection Certificates such that may be available in certain countries. For example,the extended patents will expire from 2020 to 2027. Although certain PIXUVRI-directed patents may be subject to possible patent-term extensions that could provide extensions through 2019 in the United StatesU.S. and through 2027 in some additional countries in Europe. Supplementary Protection Certificates extending certain PIXUVRI-directed patents have been granted in Italy and Luxembourg, butEurope, there can be no guarantee of extensions of PIXUVRI-directed or other patents in other countries. The expiration of these patents may allow our competitors to copy the inventions that are currently protected and better compete with us.

If we fail to adequately protect our intellectual property, our competitive position could be harmed.

Development and protection of our intellectual property are critical to our business. If we do not adequately protect our intellectual property, competitors may be able to practice our technologies. Our success depends in part on our ability to:

The patent position of biopharmaceutical firms generally is highly uncertain and involves complex legal and factual questions. The U.S. Patent and Trademark Office has not established a consistent policy regarding the breadth of claims that it will allow in biotechnology patents. If it allows broad claims, the number and cost of patent interference proceedings in the United StatesU.S. and the risk of infringement litigation may increase. If it allows narrow claims, the risk of infringement may decrease, but the value of our rights under our patents, licenses and patent applications may also decrease. Patent applications in which we have rights may never issue as patents, and the claims of any issued patents may not afford meaningful protection for our technologies or products. In

addition, patents issued to us or our licensors may be challenged and subsequently narrowed, invalidated or circumvented. Litigation, interference proceedings or other governmental proceedings that we may become involved in with respect to our proprietary technologies or the proprietary technology of others could result in substantial cost to us.

We also rely upon trade secrets, proprietary know-how and continuing technological innovation to remain competitive. Third parties may independently develop such know-how or otherwise obtain access to our technology. While we require our employees, consultants and corporate partners with access to proprietary information to enter into confidentiality agreements, these agreements may not be honored.

Patent litigation is widespread in the biotechnology industry, and any patent litigation could harm our business.

Costly litigation might be necessary to protect a patent position or to determine the scope and validity of third-party proprietary rights, and we may not have the required resources to pursue any such litigation or to protect our patent rights. Any adverse outcome in litigation with respect to the infringement or validity of any patents owned by third parties could subject us to significant liabilities to third parties, require disputed rights to be licensed from third parties or require us to cease using a product or technology. With respect to our in-licensed patents, if we attempt to initiate a patent infringement suit against an alleged infringer, it is possible that our applicable licensor will not participate in or assist us with the suit and as a result we may not be able to effectively enforce the applicable patents against the alleged infringers.

We may be unable to obtain or protect our intellectual property rights and we may be liable for infringing upon the intellectual property rights of others, which may cause us to engage in costly litigation and, if unsuccessful, could cause us to pay substantial damages and prohibit us from selling our products.

At times, we may monitor patent filings for patents that might be relevant to some of our products and product candidates in an effort to guide the design and development of our products to avoid infringement, but may not have not conducted an exhaustive search. We may not be able to successfully challenge the validity of third-party patents and could be required to pay substantial damages, possibly including treble damages, for past infringement and attorneys’ fees if it is ultimately determined that our products infringe such patents. Further, we may be prohibited from selling our products before we obtain a license, which, if available at all, may require us to pay substantial royalties.

Moreover, third parties may challenge the patents that have been issued or licensed to us. We do not believe that PIXUVRI, pacritinib or any of the productsother compounds we are currently developing infringe upon the rights of any third parties nor

are they infringed upon by third parties; however, there can be no assurance that our technology will not be found in the future to infringe upon the rights of others or be infringed upon by others. In such a case, others may assert infringement claims against us, and should we be found to infringe upon their patents, or otherwise impermissibly utilize their intellectual property, we might be forced to pay damages, potentially including treble damages, if we are found to have willfully infringed on such parties’ patent rights. In addition to any damages we might have to pay, we may be required to obtain licenses from the holders of this intellectual property, enter into royalty agreements or redesign our drug candidates so as not to utilize this intellectual property, each of which may prove to be uneconomical or otherwise impossible. Conversely, we may not always be able to successfully pursue our claims against others that infringe upon our technology and the technology exclusively licensed from any third parties. Thus, the proprietary nature of our technology or technology licensed by us may not provide adequate protection against competitors.

Even if infringement claims against us are without merit, or if we challenge the validity of issued patents, lawsuits take significant time, may, even if resolved in our favor, be expensive and divert management attention from other business concerns. concerns.Uncertainties resulting from the initiation and continuation of any litigation could limit our ability to continue our operations.

We are currently and may in the future be subject to litigation proceedings that could harm our financial condition and results of operations.operating results.

We may be subject to legal claims or regulatory matters involving shareholder, consumer, regulatory and other issues. As described in “Legal Proceedings” in Part I, Item 3, of this Form 10-K,“Legal Proceedings,” we are currently engaged in a number of litigation matters. Litigation is subject to inherent uncertainties, and unfavorable rulings could occur. Adverse outcomes in some or all of such pending cases may result in significant monetary damages or injunctive relief against us. If an unfavorable ruling were to occur in any of the legal proceedings we are or may be subject to, our business, financial condition, operating results of operations and the trading price of our securities mayprospects could be harmed for the period in which the ruling occurred or future periods.harmed.

We are subject to a variety of claims and lawsuits from time to time, some of which arise in the ordinary course of our business. The ultimate outcome of litigation and other claims is subject to inherent uncertainties, and our view of these matters may change in the future.

It is possible that our financial condition and operating results of operations could be harmed in any period in which the effect of an unfavorable final outcome becomes probable and reasonably estimable. For example, as described in “Legal Proceedings” in Part I, Item 3, of this Form 10-K,“Legal Proceedings,” CONSOB has not yet notified us of a resolution with respect to its claim that our disclosure related to the contents of the opinion expressed by Stonefield Josephson, Inc., an independent public accounting firm, with respect to our 2008 financial statements was late. However, based on our assessment, we believe the likelihood that it is probable that CONSOB will impose a pecuniary administrative sanction for such asserted violation.

In the past, following periods of volatility in the market price of a company’s securities, securities class action litigation has often been instituted. For example, we and certain of our officers and directors were named as defendants in purported securitiesSecurities class action and shareholder derivative lawsuits broughtare often instituted against issuers, and we have been subjected to such actions. For example, on behalfMay 31, 2013, we settled a shareholder derivative lawsuit pursuant to which we agreed to implement certain corporate governance measures and were required to pay $1.4 million in plaintiffs’ attorneys’ fees and reimbursement of a putative classexpenses, all of purchasers ofwhich amount was covered by our securities from March 25, 2008 through March 22, 2010 that we subsequently settled. insurance.

We could notcannot predict with certainty the eventual outcome of pending litigation. Furthermore, we may have to incur substantial expenses in connection with thesesuch lawsuits and our management’s attention and resources could be diverted from operating our business as we respond to the litigation. Our insurance is subject to high deductibles and there is no guarantee that the insurance will cover any specific claim that we currently face or may face in the future, or that it will be adequate to cover all potential liabilities and damages.

Prior to when commercial sales of PIXUVRI began, we had an exclusive manufacturing contract for drug substance with a different manufacturer. We are currently disputing our right to cancel the exclusive manufacturing contract between us and the former manufacturer of PIXUVRI. We assert multiple grounds for

terminating this exclusive manufacturing agreement, which the former manufacturer disputes. The former manufacturer has asserted that we do not have the right to terminate the manufacturing contracts and has filed a lawsuit in the Court of Milan to compel us to source PIXUVRI from that manufacturer. A hearing was held on January 21, 2010 to discuss preliminary matters and set a schedule for future filings and hearings. On November 11, 2010, a hearing was held aimed at examining and discussing the requests for evidence submitted by the parties in the briefs filed pursuant to article 183, paragraph 6 of the Italian code of civil procedure. At the hearing on November 1,1 2010, the judge declared that the case does not require any discovery or evidentiary phase, as it may be decided on the basis of the documents and pleadings filed by the parties. At the hearing on October 11, 2012, the parties informed the court about the ongoing negotiations pending between them and asked the court, accordingly, to postpone the case. At the request of the parties, the court extended the final hearing until March 21, 2013.

If there is an adverse outcome in the shareholder derivative litigation that was filed against us, our business may be harmed.

In April 2010, three shareholder derivative complaints were filed against us and certain of our officers and directors in the U.S. District Court for the Western District of Washington. These derivative complaints allege that defendants breached their fiduciary duties to us by making or failing to prevent the issuance of certain alleged false and misleading statements related to the FDA approval process for PIXUVRI. In May 2010, Judge Marsha Pechman consolidated the shareholder derivative actions under the caption Shackleton v. Bauer (Case No. 2:10-cv-00414-MJP), and appointed the law firms of Robbins Umeda LLP (now Robbins Arroyo LLP) and Federman & Sherwood as co-lead counsel for derivative plaintiffs. Three more derivative complaints were filed in June, July and October 2010, and they have also been consolidated with Shackleton v. Bauer. In November 2012, co-lead counsel filed an executed Stipulation of Settlement, with attached exhibits, with the Court and derivative plaintiffs filed an Unopposed Motion for Preliminary Approval of Settlement, along with related documents. The Court issued an Order Preliminarily Approving Settlement and Providing for Notice on December 26, 2012, scheduling a settlement hearing for March 22, 2013 at 10:00 am. In February 2013, co-lead counsel filed Plaintiffs’ Unopposed Motion for Final Approval of the Settlement and Plaintiffs’ Application for Attorneys’ Fees, Reimbursement of Expenses, and Incentive Award, seeking up to $1.3 million in attorneys fees, reimbursement of $58,195.07 in expenses, and an incentive award of $1,500.00 for plaintiff Joseph Shackleton. We believe these fees and expenses will be covered by insurance. At this stage of the litigation, no probability of loss can be predicted in the event the settlement does not receive final approval.

As with any litigation proceeding, we cannot predict with certainty the eventual outcome of pending litigation. Furthermore, we may have to incur substantial expenses in connection with these lawsuits. In the event of an adverse outcome under any currently pending or future lawsuit, our business could be materially harmed.

We may be unable to obtain the raw materials necessary to produce our Opaxio product candidate in sufficient quantity to meet demand when and if such product is approved.

We may not be able to continue to purchase the materials necessary to produce Opaxio, including paclitaxel, in adequate volume and quality. Paclitaxel is derived from certain varieties of yew trees and the supply of paclitaxel is controlled by a limited number of companies. We purchase the raw materials paclitaxel and polyglutamic acid from single sources. If the paclitaxel or polyglutamic acid purchased from our sources is insufficient in quantity or quality, if a supplier fail to deliver in a timely fashion or at all, or if these relationships terminate, we may not be able to qualify and obtain a sufficient supply from alternate sources on acceptable terms, or at all.

Our net operating losses may not be available to reduce future income tax liability.

OurWe have substantial tax loss carryforwards for U.S. federal income tax purposes, but our ability to use such carryforwards to offset future income or tax liability is limited under section 382 of the Internal Revenue Code of 1986, as amended, as a result of prior changes in the stock ownership of the company. Moreover, future changes

in the ownership of our stock, including those resulting from issuance of shares of our common stock upon exercise of outstanding warrants, may further limit our ability to use our net operating losses.

Our operations in our European branches and subsidiaries make us subject to increased risk regarding currency exchange rate fluctuations.

We are exposed to risks associated with the translation of euro-denominated financial results and accounts into U.S. dollars for financial reporting purposes. The carrying value of the assets and liabilities, as well as the reported amounts of revenues and expenses, in our European branches and subsidiaries will be affected by fluctuations in the value of the U.S. dollar as compared to the euro. Changes in the value of the U.S. dollar as compared to the euro might have an adverse effect on our reported operating results and financial condition.

We may be unable to obtain the raw materials necessary to produce a particular product or product candidate.

We may not be able to purchase the materials necessary to produce a particular product or product candidate in adequate volume and quality. For example, paclitaxel, a material used to produce Opaxio, is derived from certain varieties of yew trees and the supply of paclitaxel is controlled by a limited number of companies. We purchase paclitaxel and polyglutamic acid (another material used to produce Opaxio) from single sources. If paclitaxel or polyglutamic acid, or any other raw material required to produce a product or product candidate, is insufficient in quantity or quality, if a supplier fails to deliver in a timely fashion or at all or if these relationships terminate, we may not be able to qualify and obtain a sufficient supply from alternate sources on acceptable terms, or at all.

Because there is a risk of product liability associated with our products, we face potential difficulties in obtaining insurance.insurance, and if product liability lawsuits were to be successfully brought against us, our business may be harmed.

Our business exposes us to potential product liability risks inherent in the testing, manufacturing and marketing of human pharmaceutical products. In particular, as a result of the commercialization of PIXUVRI, our risk with respect to potential product liability has increased. If theour insurance covering thea product use in our clinical trials for ouror product candidatescandidate is not maintained on acceptable terms or at all, we might not have adequate coverage against potential liabilities. Our inability to obtain sufficient insurance coverage at an acceptable cost or otherwise to protect against potential product liability claims could prevent or limit the commercialization of any products we develop. A successful product liability claim could also exceed our insurance coverage and could harm our financial condition and results of operations.

Our assets and liabilities in our European branches and subsidiaries make us subject to increased risk regarding currency exchange rate fluctuations.

We are exposed to risks associated with the translation of euro-denominated financial results and accounts into U.S. dollars for financial reporting purposes. The carrying value of the assets and liabilities held in our European branches and subsidiaries will be affected by fluctuations in the value of the U.S. dollar as compared to the euro. Changes in the value of the U.S. dollar as compared to the euro might have an adverse effect on our reported results of operations and financial condition.operating results.

Since we use hazardous materials in our business, we may be subject to claims relating to improper handling, storage or disposal of these materials.

Our research and development activities involve the controlled use of hazardous materials, chemicals and various radioactive compounds. We are subject to international, federal, state and local laws and regulations governing the use, manufacture, storage, handling and disposal of such materials and certain waste products. Although we believe that our safety procedures for handling and disposing of such materials comply with the standards prescribed by the regulations, the risk of accidental contamination or injury from these materials cannot be eliminated completely. In the event of such an accident, we could be held liable for any damages that result and any such liability not covered by insurance could exceed our resources. Compliance with environmental laws and regulations may be expensive, and current or future environmental regulations may impair our research, development or production efforts.

We may not be abledepend on sophisticated information technology systems to conduct animal testingoperate our business and a cyber-attack or other breach of these systems could have a material adverse effect on our business.

We rely on information technology systems to process, transmit and store electronic information in our day-to-day operations. The size and complexity of our information technology systems makes them vulnerable to a cyber-attack, malicious intrusion, breakdown, destruction, loss of data privacy or other significant disruption. Any such successful attacks could result in the theft of intellectual property or other misappropriation of assets, or otherwise compromise our confidential or proprietary information and disrupt our operations. Cyber-attacks are becoming more sophisticated and frequent. We have invested in our systems and the protection of our data to reduce the risk of an intrusion or interruption, and we monitor our systems on an ongoing basis for any current or potential threats. There can be no assurance that these measures and efforts will prevent future interruptions or breakdowns. If we fail to maintain or protect our information technology systems and data integrity effectively or fail to anticipate, plan for or manage significant disruptions to these systems, we could have difficulty preventing, detecting and controlling fraud, have disputes with customers, physicians and other health care professionals, have regulatory sanctions or penalties imposed, have increases in operating expenses, incur

expenses or lose revenues as a result of a data privacy breach or theft of intellectual property or suffer other adverse consequences, any of which could harm our research and development activities.

Certain of our research and development activities involve animal testing. Such activities have been the subject of controversy anda material adverse publicity. Animal rights groups and other organizations and individuals have attempted to stop animal testing activities by pressing for legislation and regulation in these areas and by disrupting activities through protests and other means. To the extent the activities of these groups are successful,effect on our business, could be materially harmed by delaying or interrupting our researchresults of operations, financial condition and development activities.cash flows.

Risks Related To the Securities Markets

The market price of shares of our common stock is extremely volatile, which may affect our ability to raise capital in the future and may subject the value of your investment in our securities to sudden decreases.

The market price for securities of biopharmaceutical and biotechnology companies, including ours, historically has been highly volatile, and the market from time to time has experienced significant price and volume fluctuations that are unrelated to the operating performance of such companies. The market price of our

common stock may be harmed by market conditions affecting the stock markets in general, including price and trading fluctuations on The NASDAQ Capital Market. For example, during the twelve month12-month period ended February 22, 2013,24, 2014, our stock price has ranged from a low of $1.14$0.97 to a high of $7.40 (as adjusted to reflect the one-for-five reverse stock split effective September 2, 2012).$4.25. Fluctuations in the trading price or liquidity of our common stock may harm the value of your investment in our common stock. These conditions may result in (i) volatility in the level of, and fluctuations in, the market prices of stocks generally and, in turn, our shares of common stock, and (ii) sales of substantial amounts of our common stock in the market, in each case that could be unrelated or disproportionate to changes in our operating performance.

Factors that may have a significant impact on the market price and marketability of our securities include:

Securities class action lawsuits are often brought against companies after periods of volatility in the market price of their securities. Such lawsuits have been filed against us in the past, and should any new lawsuits be filed, such matters could result in substantial costs and a diversion of resources and our senior management team’s attention.

Shares of common stock are equity securities and are subordinate to any preferred stock we may issue and to any existing or future indebtedness.

Shares of our common stock rank junior to any shares of our preferred stock that we may issue in the future and to anyour existing indebtedness, including our senior secured term loan agreement, or future indebtedness we

may incur and to all creditor claims and other non-equity claims against us and our assets available to satisfy claims on us, including claims in a bankruptcy or similar proceeding. AnyOur senior secured term loan agreement restricts, and any future indebtedness and preferred stock may restrict, payment of dividends on our common stock.

Additionally, unlike indebtedness, where principal and interest customarily are payable on specified due dates, in the case of our common stock, (i) dividends are payable only when and if declared by our boardBoard of directorsDirectors or a duly authorized committee of our boardBoard of directors,Directors, and (ii) as a corporation, we are restricted to making dividend payments and redemption payments out of legally available assets. We have never paid a dividend on our common stock and have no current intention to pay dividends in the future. Furthermore, our common stock places no restrictions on our business or operations or on our ability to incur indebtedness or engage in any transactions, subject only to the voting rights available to shareholders generally.

Future sales or other dilution of our equity may harm the market price of shares of our common stock.

We expect to issue additional equity securities to fund our operating expenses as well as for other purposes. The market price of our shares of common stock or preferred stock could decline as a result of sales of a large number of shares of our common stock or preferred stock or similar securities in the market, or the perception that such sales could occur in the future.

Anti-takeover provisions in our charter documents, in our shareholder rights plan, or rights plan, and under Washington law could make removal of incumbent management or an acquisition of us, which may be beneficial to our shareholders, more difficult.

Provisions of our amended and restated articles of incorporation and amended and restated bylaws may have the effect of deterring or delaying attempts by our shareholders to remove or replace management, to commence proxy contests or to effect changes in control. These provisions include:

Pursuant to our rights plan, an acquisition of 20%20 percent or more of our common stock by a person or group, subject to certain exceptions, could result in the exercisability of the preferred stock purchase right accompanying each share of our common stock (except those held by a 20%20 percent shareholder, which become null and void), thereby entitling the holder to receive upon exercise, in lieu of a number of units of preferred stock, that number of shares of our common stock having a market value of two times the exercise price of the right. The existence of our rights plan could have the effect of delaying, deferringdeterring or preventing a third party from making an acquisition proposal for us and may inhibit a change in control that some, or a majority, of our shareholders might believe to be in their best interest or that could give our shareholders the opportunity to realize a premium over the then-prevailing market prices for their shares. In addition, as a Washington corporation, we are subject to Washington’s anti-takeover statute, which imposes restrictions on some transactions between a corporation and certain significant shareholders. These provisions, alone or together, could have the effect of deterring or delaying changes in incumbent management, proxy contests or changes in control.

None.

Item 2.

Properties

We currently lease approximately 66,000 square feet of space at 3101 Western Avenue in Seattle, Washington. The term of this lease is for a period of 120 months, which commenced on May 1, 2012.2012 and has a term of 120 months. We also lease approximately 4,700 square feet of warehouse space in Seattle, Washington with a lease expiration of May 2013.2014. Additionally, we lease 2,700 square feet in Milan, Italy with a lease expiration of December 2015 and 660 square feet in Heathrow, United KingdomU.K. with a lease expiration of September 2013.2014. We believe our existing and planned facilities are adequate to meet our present requirements. We anticipate that additional space will be available, when needed, on commercially reasonable terms.

On December 10, 2009, CONSOB sent us a notice claiming, two violationsamong other things, violation of the provisions of Section 114, paragraph 1 of the Italian Legislative Decree no. 58/98 due to the asserted late disclosure of certain information then reported, at CONSOB’s request, in press releases disseminated on December 19, 2008 and March 23, 2009. Such information concerned, respectively: (i) the conversion by BAM Opportunity Fund LP of 9.66% notes into shares of common stock that occurred between October 24, 2008 and November 19, 2008; and (ii) the contents of the opinion expressed by Stonefield Josephson, Inc., an independent registered public accounting firm, with respect to our 2008 financial statements. The sanctionssanction established by Section 193, paragraph 1 of the Italian Legislative Decree no. 58/98 for such violations areviolation could require us to pay a pecuniary administrative sanctionssanction amounting to between €5,000$7,000 and €500,000, or approximately $7,000 to $659,000 converted using the currency exchange rate$689,000 upon conversion from euros as of December 31, 2012, applicable to each of the two asserted violations. In July 2010,2013. Until CONSOB’s right is barred, CONSOB notified us that it had begun the preliminary investigation for its decision on these administrative proceedings and provided us with a preliminary investigation report in response to the defenses we submitted in January 2010. In August 2010, we submitted further defenses that CONSOB had to evaluate before imposingmay, at any possible administrative sanctions. In March 2011, CONSOB notified us of a resolution confirmingtime, confirm the occurrence of the asserted violation asserted in clause (i) above and applied a fine in the amount of €40,000, or approximately $55,000 converted using the currency exchange rate as of March 10, 2011, which we paid on April 5, 2011. CONSOB has not yet notified us of a resolution with respect to the violation asserted in clause (ii) above, but based on our assessment we believe the likelihood thatapply a pecuniary administrative sanction will be imposed on us forwithin the violation asserted in clause (ii) is probable.foregoing range. To date, we have not received any such notification.

OnIn April 14, 2009, December 21, 2009 and June 25, 2010, the Italian Tax Authority, or the ITA issued notices of assessment to CTI (Europe) based on the ITA’s audit of CTI (Europe)’s VAT returns for the years 2003, 2005, and 2006 and 2007. The ITA audits concluded that CTI (Europe) did not collect and remit VAT on certain invoices issued to non-Italian clients for services performed by CTI (Europe). The assessments, including interest and penalties, for the years 2003, 2005, 2006 and 2007 are €0.5 million, €5.5 million, €2.5 million and €0.8 million, or approximately $0.7 million, $7.2 million, $3.3 million and $1.1 million converted using the currency exchange rate as of December 31, 2012, respectively.million. We believe that the services invoiced were non-VAT taxable consultancy services and that the VAT returns are correct as originally filed. We are vigorously defending ourselves against the assessments both on procedural grounds and on the merits of the case.case, although we can make no assurances regarding the ultimate outcome of these cases. If the final decision of the lower tax courts (i.e. the Provincial Tax Court or the Regional Tax Court) or of the Supreme Court is unfavourableunfavorable to us, or if, in the interim, the ITA were to make a demand for payment and we were to be unsuccessful in suspending collection efforts, we may be requested to pay to the ITA an amount up to €9.4 million, or approximately $12.4$12.9 million converted using the currency exchange rate as of December 31, 2012,2013, plus collection fees, notification expenses and additional interest for the period lapsed between the date in which the assessments were issued and the date of effective payment.

2003 VAT.    OnIn September 13, 2011, the Provincial Tax Court issued decision no. 229/3/2011, which (i) fully accepted the merits of our appeal, (ii) declared that no penalties can be imposed against us and (iii) found the ITA liable to pay us €10,000, or approximately $13,000 converted using the currency exchange rate as of December 31, 2012, as partial refund of the legal expenses we incurred for our appeal. OnIn October 16, 2012, the ITA appealed against this decision. TheIn June 2013, the Regional Tax Court has scheduled a hearing for discussionissued decision no. 119/50/13, which accepted the appeal of the

merits ITA and reversed the previous decision of the 2003 VAT case on May 31, 2013.Provincial Tax Court. We plan to defend ourselves in front ofappeal such decision to the Regional TaxSupreme Court both on procedural grounds and on the merits of the case. On January 2, 2014, we were notified that the ITA has requested partial payment of the 2003 VAT assessment in the amount of €0.4 million (or $0.6 million upon conversion from euros as of December 31, 2013). We paid such amount in March 2014.

2005 VAT.    OnIn January 13, 2011, the Provincial Tax Court issued decision No. 4/2010 which (i) partially accepted our appeal and declared that no penalties can be imposed against us, (ii) confirmed the right of the ITA to reassess the VAT (plus interest) in relation to the transactions identified in the 2005 notice of assessment and (iii) repealed the suspension of the notice of deposit payment. TheBoth the ITA and CTI appealed to the higher court against the decision that no penalties could be imposed on us. We do not believe that the Provincial Tax Court has carefully reviewed all of our arguments, relevant documents and other supporting evidence that our counsel filed and presented during the hearing, including an appraisal from an independent expert. Accordingly, we also filed an appeal against the Provincial Tax Court’s decision. OnIn October 15, 2012, the Regional Tax Court issued a decision no. 127/31/2012, which (i) fully accepted the merits of our appeal and (ii) confirmed that no penalties can be imposed against us. TheOn April 15, 2013, the ITA is entitled to appeal suchappealed the decision to the Italian Supreme Court within six months. We paid the required VAT deposit including interest and collection fees of €2.1 million. On January 3, 2013, the ITA refunded the VAT deposit including interest and collection fees of €2.1 million, or approximately $2.8 million converted using the currency exchange rate as of December 31, 2012.Court.

2006 VAT.    OnIn October 18, 2011, the Provincial Tax Court issued decision no. 276/21/2011 (jointly with the 2007 VAT case) in which it (i) fully accepted the merits of our appeal, (ii) declared that no penalties can be imposed against us and (iii) found that for the 2006 and 2007 VAT cases the ITA was liable to pay us €10,000 or approximately $13,000 converted using the currency exchange rate as of December 31, 2012, as partial refund of the legal expenses incurred for the appeal. In MarchDecember 2011, we paidthe ITA appealed this decision to the ITARegional Tax Court. On April 16, 2013, the required deposit in respect of the 2006 VAT for an amount of €0.4 million, or approximately $0.6 million converted using the currency exchange as of December 31, 2012 (including 50% of the assessed VAT, interest and collection fees). After the Provincial Tax Court’s decision at the end of the first quarter 2012, the ITA issued an order of refund of the deposit amount. Such refund was offset with the additional deposit payment made in April 2012 for 2005 VAT (please refer to “2005 VAT” above). The ITA appealed to the higher court against this decision. The Regional Tax Court scheduled the first hearing for November 6, 2012issued decision no. 57/35/13 (jointly with the 2007 VAT case). We defended ourselves against in which it fully rejected the merits of the ITA’s appeal, beforedeclared that no penalties can be imposed against us and found the higher Regional Tax Court; to-date no courtITA liable to pay us €12,000, as partial refund of the legal expenses we incurred for this appeal. The ITA appealed such decision has been issued.in November 2013.

2007 VAT.    OnIn October 18, 2011, the Provincial Tax Court issued decision no. 276/21/2011 (jointly with the 2006 VAT case)case described above) in which the Provincial Tax Court (i) fully accepted the merits of our appeal, (ii) declared that no penalties can be imposed against us, and (iii) found that for 2006 and 2007 VAT cases the ITA was liable to pay us €10,000 or approximately $13,000 converted using the currency exchange rate as of December 31, 2012, as partial refund of the legal expenses incurred for the appeal. On September 26,In December 2011, we paidthe ITA appealed this decision to the Regional Tax Court. On April 10, 2013, the ITA refunded the requiredVAT deposit in respect of the 2007 VAT in the amount of €0.1 million, or approximately $0.1 million converted using the currency exchange rate as of September 26, 2011 (including 50% of the assessed VAT,including interest and collection fees). Afterfees of €0.1 million. On April 16, 2013, the Provincial Tax Court’s decision at the end of the first quarter 2012, the ITA issued an order of refund of the deposit amount. Such refund has been suspended by the collection agent due to an assessment of social contribution due for an amount equal to €0.1 million, or approximately $0.1 million converted using the currency exchange rate as of December 31, 2012. We do not believe this social contribution was due and we are in the process of resolving the issue with the social contribution authorities. The ITA appealed to the higher court against this decision. The Regional Tax Court scheduled the first hearing for November 6, 2012issued decision no. 57/35/13 (jointly with the 2006 VAT case). We defended against in which it fully rejected the merits of the ITA’s appeal, beforedeclared that no penalties can be imposed against us and found the higher Regional Tax Court, but no courtITA liable to pay us €12,000 as partial refund of the legal expenses we incurred for this appeal. The ITA appealed such decision has been issued.in November 2013.

OnIn August 3, 2009, SICOR Società Italiana Corticosteroidi S.R.L., or Sicor, filed a lawsuit in the Court of Milan to obtain the Court’s assessment that we were bound to source athe chemical compound, whose chemical name is BBR2778, from Sicor according to the terms of a supply agreement executed between Sicor and Novuspharma S.p.A, or Novuspharma, a pharmaceutical company located in Italy, on October 4, 2002. We are the successor in interest to such agreement by virtue of our merger with Novuspharma in January 2004. Sicor allegesalleged that the agreement was not terminated according to its terms. We assertasserted that the supply agreement in question was properly terminated and that we have no further obligation to comply with its terms. A hearing was held on January 21, 2010 to discuss preliminary matters and set a schedule for future filings and hearings. The parties filed the authorized pleadings and submitted toOn December 30, 2013, the Court their requests for evidence.

On November 11, 2010, a hearing was held to examineof Milan issued its decision and discuss the requests for evidence submitted by the parties in the briefs filed pursuant to article 183, paragraph 6rejected all of Sicor’s claims; this proceeding has therefore concluded. The decision of the Italian codeCourt of civil procedure. At the hearing held on November 11, 2010, the judge declared that the case does not require any discovery or evidentiary phase, and may be decided on the basis of the documents and pleadings already filed by the parties. At the hearing held on October 11, 2012 the parties informed the Court about the ongoing negotiations pending between the parties and asked the Court, accordingly,Milan is subject to postpone the case. At the request of the parties, the Court extended the final hearing until March 21, 2013. No estimate of a loss, if any, can be made at this time in the event that we do not prevail.

In March 2010, three purported securities class action complaints were filed against the Company and certain of our officers and directors in the United States District Court for the Western District of Washington. On August 2, 2010, Judge Marsha Pechman consolidated the actions, appointed lead plaintiffs, and approved lead plaintiffs’ counsel. On September 27, 2010, lead plaintiff filed an amended consolidated complaint, captioned Sabbagh v. Cell Therapeutics, Inc. (Case No. 2:10-cv-00414-MJP), naming the Company, Dr. James A. Bianco, Louis A. Bianco, and Craig W. Philips as defendants. The amended consolidated complaint alleges that defendants violated the federal securities laws by making certain alleged false and misleading statements related to the FDA approval process for PIXUVRI. The action seeks damages on behalf of purchasers of our stock during a purported class period of March 25, 2008 through March 22, 2010. On October 27, 2010, defendants moved to dismiss the amended consolidated complaint. On February 4, 2011, the Court denied in large part the defendants’ motion. Defendants answered the amended consolidated complaint on March 28, 2011, and discovery commenced, with trial set for June 25, 2012. On December 14, 2011, the parties filed a letter with the Court indicating they had agreed to the general terms of a settlement, and asking the Court to remove the case deadlines from the Court calendar. On February 14, 2012, plaintiffs filed a motion for preliminary approval of the settlement, along with related documents. On March 16, 2012, the Court granted preliminary approval of the settlement, granted conditional certification to the proposed class, and approved the proposed forms of notice to the class. A settlement hearing occurred on July 20, 2012. The Court entered a Final Judgment and Order of Dismissal with Prejudice on July 25, 2012. The negotiated terms of the settlement include a $19.0 million dollar settlement fund, which was paid by our insurance carriers. As a result, there is no estimated loss to us.potential appeal.

In April 2010, three shareholder derivative complaints were filed against the Companyus and certain of itsour officers and directors in the United StatesU.S. District Court for the Western District of Washington. These derivative complaints allegealleged that defendants breached their fiduciary duties to the Companyus by making or failing to prevent the issuance of certain alleged false and misleading statements related to the FDA approval process for PIXUVRI. The allegations inIn May 2010, the derivative actions are substantially similar to those in the securities action. On May 10, 2010, Judge Marsha Pechmanwere consolidated the shareholder derivative actions under the caption Shackleton v. Bauer (Caseas In re Cell Therapeutics, Inc. Derivative Litigation (Master Docket No. 2:10-cv-00414-MJP), and appointed the law firms of Robbins Umeda LLP (now Robbins Arroyo LLP) and Federman & Sherwood as co-lead counsel for derivative plaintiffs.10-cv-00564-MJP). Three more derivative complaints were filed in June, July and October 2010 and they havewere also been consolidated with Shackleton v. Bauer.In re Cell Therapeutics, Inc. Derivative Litigation. On November 6, 2012, co-lead counsel filed an executed Stipulation of Settlement, with attached exhibits, with the Court. On November 13, 2012, derivative plaintiffs filed an Unopposed Motion for Preliminary Approval of Settlement, along with related documents. The Court issued an Order Preliminarily Approving Settlement and Providing for Notice on December 26, 2012, scheduling aSettlement. A settlement hearing for March 22,occurred on May 31, 2013, at 10:00 a.m. In Februaryand the Court entered a Final Judgment and Order of Dismissal on May 31, 2013, co-lead counsel filed Plaintiffs’ Unopposed Motion for Final Approvalpursuant to which we were required to pay an aggregate of the Settlement and Plaintiffs’ Application for Attorney’s Fees, Reimbursement of Expenses, and Incentive Award, seeking up to $1.3$1.4 million in attorney’splaintiffs’ attorneys’ fees and reimbursement of $58,195.07 in expenses, and an incentive awardall of $1,500.00 for plaintiff Joseph Shackleton. We believe these fees and expenses will bewhich amount was covered by insurance. At this stage of the litigation, no probability of loss can be predicted in the event the settlement does not receive final approval.

In December 2011, we were informed of a decree by the Italian Ministry for Education, University and Research, or the Ministry, dated July 7, 2011 revoking a financial support granted to Novuspharma S.p.A. (now the Company, following the merger of Novuspharma into the Company in January 2004) in July 2002, or the

Financial Support, and requesting the repayment of the amount paid to Novuspharma as grant for the expenses (i.e. €0.5 million, plus interest for an additional amount of €0.1 million) by January 15, 2012, or the January Decree. The Financial Support was granted (following a proper application by Novuspharma) for a research project about new compounds for the treatment of tumors of the gastrointestinal area, or the Project. The initial amount of the Financial Support was (i) up to €2.3 million as a subsidized loan, and (ii) up to €2.5 million as a grant for expenses (a portion of which, corresponding to €0.5 million, was effectively paid to Novuspharma). Following the interruption of the Project in June 2004, due to unforeseeable technical reasons not ascribable to the beneficiary company, the Financial Support was reduced (i) to €0.6 million for the subsidized loan, and (ii) to €0.6 million for the grant for expenses. In 2005, we requested the Ministry to authorize the joint ownership of the Project by both Cell Therapeutics Europe S.r.l., or CTE, and our Italian branch. In May 2007, the Ministry accepted such joint ownership of the Project subject to the issuance of a guarantee, or the Guarantee, for the portion corresponding to the subsidized loan, but we never issued such Guarantee. In 2009, our Italian branch’s research activities were terminated. Since we assert that the January Decree is unlawful and that the relevant issuance represents a breach of the Ministry’s duty of good faith and an abuse of right, on February 13, 2012, we served a writ of summons upon the Ministry, suing it in the civil Court of Rome in order to have the January Decree declared ineffective. However, if we are unable to successfully defend ourselves against the January Decree issued by the Ministry, we may be requested to pay €0.6 million (i.e., the amount paid to Novuspharma as grant for the expenses plus interest, as described above), or approximately $0.8 million converted using the currency exchange rate as of December 31, 2012, plus counterparty’s attorney’s fees, litigation costs and additional default interest for the period lapsed between January 16, 2012 and the date of the effective payment. While the parties were engaged in pending settlement negotiations, (i) the Ministry interrupted the recovery process of the relevant financial support, and (ii) at the first hearing before the Court of Rome that took place on July 20, 2012, the Ministry failed to appear at the hearing, with the consequence that the Judge declared it in default of appearance, and we requested a postponement to continue the negotiations with the Ministry; the judge granted the postponement and the next hearing is now scheduled for April 5, 2013. On September 17, 2012, we were informed of a decree, dated August 27, 2012, issued by the General Director of the Ministry, or the August Decree, that is aimed at rectifying the January Decree and according to which the revocation will apply to only the portion of the relevant financial support that had never been requested by or granted to the Company (i.e., €0.2 million as subsidized loan and €0.1 million as grant for expenses, that we never received and therefore not obliged to return). Such decree dated August 27, 2012 was subject to the registration by the Court of Auditors (Corte dei Conti) that was performed on October 31, 2012. We are currently discussing with the Ministry the modalities to terminate the aforesaid legal suit, which is formally still pending before the Court of Rome. At this time, considering the contents of the aforementioned decree dated August 27, 2012, as well as its registration by the Court of Auditors, the likelihood of an unfavorable outcome of these legal proceedings is remote.insurance.

In July 2012, Chroma sent us a complaint was filed against us in the Superior Court of Washington for King County captioned GLY Construction Inc. v. Cell Therapeutics, Inc. and Selig Holdings Company (Case No. 12-2-22742-0 SEA), naming the Company and Selig Holdings Company as defendants. The complaint asserts claims for breach of contract, unjust enrichment/quantum meruit and lien foreclosure, and allegesletter claiming that we failed to pay certain amounts to plaintiffs for work performed for construction improvements totaling approximately $4.0 million. We contend that these amounts should be offset by amounts owed under the lease agreement with Selig Holdings Company. We asserted cross-claims for breach of contract and business devastation against Selig in the above-referenced lawsuit. These cross-claims were based on Selig’s refusal to pay amounts owed under the lease agreement, including amounts owed to GLY and other expenses incurred. GLY, Selig and the Company reached a settlement on all of GLY’s claims on or around September 4, 2012. The settlement included a partial lump sum payment with subsequent monthly payments from both Selig and us. We still have claims against Selig for amounts owed under the lease agreement, including portions of the settlement amount paid by us to GLY and are currently negotiating potential settlement solutions.

In March 2011, we entered into a license and co-development agreement, orbreached the Chroma License Agreement with Chroma Therapeutics, Ltd., or Chroma, providing us with exclusive marketing and co-development rights to Chroma’s drug candidate, tosedostat, in North, Central and South America. By a letter

dated July 18, 2012 Chroma notified us that Chroma alleges breaches under the Chroma License Agreement. Chroma asserts that we have not complied with the Chroma License Agreement because we madeby allegedly making decisions with respectas to the development of tosedostat without therequisite approval, of the joint committeesfailing to be established pursuant to the terms of the Chroma License Agreement, didhold certain meetings and not hold meetings of those committees and have not usedusing diligent efforts in the development ofto develop tosedostat. We dispute Chroma’s allegations and intend to vigorously defend our development activities and judgments.the allegations. In particular, we dispute

Chroma’s lack of diligence claim based in part on the appropriateness of completing the ongoing Phase 2 combination trials prior to developing a Phase 3 trial design. In addition, we believe that Chroma has failed to comply with its antecedent obligations with respect to the joint committeescertain of Chroma’s claims and failed to demonstrate an ability to manufacture tosedostat to the required standards under the terms of the Chroma License Agreement.standards. Under the Chroma License Agreement, there is a 90 day90-day cure period for any nonpayment default, which period shallmay be extended to 180 days if the party is using efforts to cure.in certain circumstances. A party may terminate the Chroma License Agreement for a material breach only after arbitration in accordance witharbitration. For the terms of the Chroma License Agreement. Effectiveperiod commencing September 25, 2012 we and Chroma entered intothrough June 25, 2013, a three month standstill with respect towas in effect between the parties’ respective claims underparties. Although the Chroma License Agreement, but otherwise reserving the parties’ respective rightsstandstill period has not been renewed, court proceedings have not been initiated as of the commencementtime of the standstill period. Effective December 25, 2012, the standstill was extended for an additional three months. The standstill is terminable by either party on one month’s notice.

On June 16, 2012, Craig W. Philips delivered notice of his intention to resign as our President, effective July 16, 2012. Mr. Philips claimed that his departure was a result of diminution of responsibilities and that he is entitled to the compensation for termination without cause as specified in his Employment Agreement. On July 16, 2012, Craig W. Philips resigned as our President. We entered into a Settlement Agreement and Full and Final Release of Claims, dated as of October 25, 2012 (the “Philips Settlement Agreement”), with Mr. Philips. Under the Philips Settlement Agreement, Mr. Philips is entitled to receive a severance payment of $435,500, with 25% of such amount to be paid within 30 days of the effective date and the balance of such amount to be paid in twelve monthly installments thereafter. We have also agreed to pay Mr. Philips’ premiums to continue his health coverage for 13 months following his termination. Mr. Philips’ equity awards granted by us and Aequus Biopharma, Inc., a subsidiary of the Company, to the extent then outstanding and unvested, terminated as of June 16, 2012. Pursuant to the Philips Settlement Agreement, Mr. Philips has agreed to vote the existing shares of the Company that he owns in a manner consistent with the recommendation of our board of directors through October 13, 2013. The Philips Settlement Agreement also includes a release by Mr. Philips of claims against us and certain non-competition and other restrictive covenants by Mr. Philips in favor of us.

On November 15, 2012, Daniel G. Eramian separated from employment with us as our Executive Vice President, Corporate Communications. We agreed on December 27, 2012 to enter into a Settlement Agreement and Full and Final Release of Claims (the “Eramian Settlement Agreement”) with Mr. Eramian. Under the Eramian Settlement Agreement, Mr. Eramian is entitled to receive total cash severance payments of approximately $567,238. Of the total payments, approximately $252,238 will be paid in May 2013, and the balance will be paid in twelve monthly installments following May 2013. We will also pay the premiums to continue Mr. Eramian’s health coverage and life insurance provided by us for up to 18 months following his termination. In addition, the Eramian Settlement Agreement provides for accelerated vesting of certain equity awards granted to Mr. Eramian by us that were otherwise unvested such that he became vested in 33,712 shares of our common stock, and we may either settle a portion of such shares in cash or reacquire a portion of such shares to satisfy applicable tax withholding obligations. Any rights of Mr. Eramian to other equity awards granted by us, to the extent otherwise unvested, terminated. The Eramian Settlement Agreement also includes a mutual release of claims by the parties and certain restrictive covenants by Mr. Eramian in favor of us.this filing.

In addition to the items discussed above, we are from time to time subject to legal proceedings and claims arising in the ordinary course of business, some of which may be covered in whole or in part by insurance.business.

Not applicable.

PART II

Our common stock is currently traded on The NASDAQ Capital Market under the symbol “CTIC” and the MTA in Italy, also under the ticker symbol “CTIC”. Prior to January 8, 2009, our common stock was traded on the NASDAQ Global Market. The following table sets forth, for the periods indicated, the high and low reported sales prices per share of our common stock as reported on theThe NASDAQ Capital Market, our principal trading market.

On February 22, 2013,24, 2014, the last reported sale price of our common stock on The NASDAQ Capital Market was $1.34$3.56 per share. As of February 22, 2012,24, 2014, there were 181188 shareholders of record of our common stock.

Dividend Policy

We have never declared or paid any cash dividends on our common stock and do not currently anticipate declaring or paying cash dividends on our common stock in the foreseeable future. We currently intend to retain all of our future earnings, if any, to finance operations. Any future determination relating to our dividend policy will be made at the discretion of our boardBoard of directorsDirectors and will depend on a number of factors, including future earnings, capital requirements, financial conditions, future prospects, contractual restrictions and other factors that our boardBoard of directorsDirectors may deem relevant.

Sales of Unregistered Securities

Not applicable.

Stock Repurchases in the Fourth Quarter

The following table sets forth information with respect to purchases of our common stock during the three months ended December 31, 2012:2013:

Stock Performance Graph

The following graph sets forth the cumulative total shareholder return of our common stock during the five-year period ended December 31, 2012,2013, as well as the NASDAQ Stock Index (U.S.) and the NASDAQ Pharmaceutical Index:

The stock performance graph assumes $100 was invested on December 31, 2007.2008. The actual returns shown on the graph above are as follows:

Item 6.

Selected Financial Data

The data set forth below should be read in conjunction with Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the Consolidated Financial Statements and Notes thereto appearing at Item 8 of this Annual Report on Form 10-K.