Mr. Domenic Penna reports

INTELLIPHARMACEUTICS ANNOUNCES 2015 YEAR END RESULTS

IntelliPharmaCeutics International Inc. has released the results of operations for the year ended Nov. 30, 2015. (All dollar amounts referenced herein are in U.S. unless otherwise noted.)

Fiscal 2015 key highlights:

• Filed an investigational new drug (IND) application for the company's Rexista Oxycodone XR product candidate;
• U.S. Food and Drug Administration (FDA) granted fast-track designation to Rexista Oxycodone XR, incorporating the company's paradoxical overdose resistance activating system overdose prevention technology;
• Filed an IND for Regabatin XR, the company's once-a-day version of pregabalin (Lyrica).

Dr. Isa Odidi, chairman and chief executive officer, stated: "Our accomplishments in 2015 mark the repositioning and validation of IntelliPharmaCeutics as a specialty new drug delivery company. In light of this success, our start to 2016 looks even more promising given the positive results we announced in January, demonstrating that Rexista Oxycodone XR tested bioequivalent to Oxycontin, and the recent news of the FDA approval of our generic version of Keppra XR. We continue to make solid progress towards our stated objective of filing a new drug application (NDA) for Rexista Oxycodone XR within the next six months."

Corporate developments

In February, 2016, the company announced that the FDA granted final approval of its abbreviated new drug application (ANDA) for levetiracetam extended-release tablets for the 500- and 750-milligram strengths. The company's newly approved product is the generic equivalent of the branded product Keppra XR sold in the United States by UCB Inc. Keppra XR and the drug active levetiracetam are indicated for use in the treatment of partial-onset seizures associated with epilepsy. According to Symphony Health Solutions, sales in the United States for the 12 months ended December, 2015, of the 500- and 750-milligram strengths of Keppra XR and all generic equivalents were approximately $168-million. The company is actively exploring the best approach to maximize its commercial returns from the new approval.

In June, 2015, the FDA indicated that the company would have to meet newly imposed conditions for bioequivalency for the tentatively approved strengths of its generic Focalin XR (dexmethylphenidate hydrochloride extended release) capsules prior to receiving final approval. The only strengths affected were five mg, 10 mg, 20 mg and 40 mg, not the already-approved 15- and 30-milligram strengths now in the market. In July, 2015, the FDA indicated to the company that it had rescinded its previous requirement that the company meet the newly imposed conditions for bioequivalence prior to receiving final approval for the tentatively approved strengths of its generic Focalin XR. In August, 2015, the FDA reinstated its previously imposed (and subsequently rescinded) requirement that the tentatively approved strengths of the company's generic Focalin XR capsules would have to meet new conditions for bioequivalence prior to receiving final approval. The company will be required to demonstrate bioequivalence with Focalin XR for the 40-milligram strength under fed conditions as the basis for approval of each of the five mg, 10 mg, 20 mg and 40 mg affected strengths. The already-approved 15- and 30-milligram strengths of the company's generic Focalin XR capsules now in the market are not affected. The company, along with its commercialization partner, Par Pharmaceutical Inc., is co-operating to obtain FDA approval for the five-, 10-, 20- and 40-milligram affected strengths at the earliest opportunity. If approved, the company believes that Par will commercialize the approved strengths as soon as possible after approval.

The company previously reported that the FDA had accepted a preinvestigational new drug (pre-IND) meeting request for its once-a-day Regabatin XR non-generic controlled-release version of pregabalin under the NDA 505 (b) (2) regulatory pathway, with a view to possible commercialization in the United States at some time following the Dec. 30, 2018, expiry of the patent covering the pregabalin molecule. The company submitted an IND application for Regabatin XR in August, 2015. The FDA completed its review of the IND application and provided constructive input that the company will use toward further development of the program.

In May, 2015, the FDA provided the company with notification regarding its IND submission for Rexista Oxycodone XR (abuse deterrent oxycodone hydrochloride) extended-release tablets indicating that the company would not be required to conduct phase 3 studies if bioequivalence to Oxycontin was demonstrated based on pivotal bioequivalence studies. In January, 2016, the company announced that pivotal bioequivalence trials of its Rexista Oxycodone XR, dosed under fasted and fed conditions, had demonstrated bioequivalence to Oxycontin extended-release tablets as manufactured and sold in the U.S. by Purdue Pharma LP. The company believes that it will not be required to conduct phase 3 studies. The company is continuing to work toward satisfying the requirements to file an NDA for Rexista Oxycodone XR with the FDA and plans to complete this filing within the next six months. In May, 2015, the company also announced that the FDA had reviewed the company's request for fast-track designation for its Rexista Oxycodone XR development program incorporating its Podras and had concluded that the company meet the criteria for fast-track designation. The designation mandates the FDA to facilitate the development and expedite the review of drugs intended to treat serious or life-threatening conditions and that demonstrate the potential to address unmet medical needs.

In February, 2015, the company announced that it had entered into an agreement with Teva Pharmaceuticals USA Inc., by which the company had granted Teva an exclusive licence to market in the United States an extended-release drug product candidate for which the company has an ANDA pending FDA approval. The agreement contemplated the FDA granting regulatory approval by a date certain, which did not occur, and the agreement has been terminated subsequent to year-end. The company is in discussions with Teva concerning an alternative product candidate. There can, however, be no assurance that an acceptable alternative product candidate, or any terms relating thereto, will be agreed upon.

There can be no assurances that the company will not be required to conduct further studies for Rexista Oxycodone XR, that the company will be successful in filing an NDA for Rexista Oxycodone XR in six months time, that the fast-track designation for Rexista Oxycodone XR will translate to a faster development and review process with the FDA, that the company's tentatively approved strengths of generic Focalin XR will be granted final FDA approval or sold commercially, that the company's approved generic of Keppra XR will be commercialized, that the company will be successful in submitting any additional ANDAs, abbreviated new drug submissions (ANDSs) or NDAs with the FDA or similar applications with Health Canada, that the FDA or Health Canada will approve any of the company's current or future product candidates for sale in the U.S. market and Canadian market, or that they will ever be commercialized and produce significant revenue for the company.

Full-year financial results

Revenue related to the company's licence and commercialization agreement with Par was $4.1-million for the year ended Nov. 30, 2015, versus $8.8-million for the year ended Nov. 30, 2014. As the first filer for generic Focalin XR capsules in the 15-milligram strength, the company had 180 days (up to May 19, 2014) of exclusivity of sales for that strength from the date of launch on Nov. 19, 2013, in the United States by the company's partner, Par. Subsequent to May 19, 2014, the company no longer retained generic exclusivity of the 15-milligram strength. Consequently, the company faced four generic competitors in 2014 through the first half of 2015, and a softening of pricing conditions and market share, consistent with industry postexclusivity experience. In the second half of 2015, the company faced one additional competitor on the 15-milligram strength, and while the company was able to preserve market share, it came at the expense of price/margin erosion.

The company recorded net loss for the year ended Nov. 30, 2015, of $7.4-million or 31 cents per common share, compared with a net loss of $3.9-million or 17 cents per common share for the year ended Nov. 30, 2014. The net loss for the year ended Nov. 30, 2015, is higher than the comparable prior period primarily due to the lower revenues during the fiscal year 2015 as explained above and is also attributed to the continuing research and development and selling, general and administrative expenses, including an increase in expenditures on biostudies. During the year ended Nov. 30, 2014, the net loss is attributed to the continuing R&D and selling, general and administrative expense, and salary increases to certain non-management employees, partially offset by licensing and milestone revenue.

Research and development (R&D) expenditures in the year ended Nov. 30, 2015, were $7.2-million in comparison with $8.0-million in the year ended Nov. 30, 2014. The decrease over the prior year is primarily the result of lower expenses for stock-based compensation for R&D employees. In 2014, the company's shareholders approved a two-year extension of the performance-based stock option expiry date. As a result of this modification, the company recorded additional compensation costs of $1.1-million in the previous year. These lower compensation costs were partially offset by increased R&D spending on furthering the development of generic and NDA product candidates in the 2015 fiscal year.

Selling, general and administrative expenses were $3.6-million for the year ended Nov. 30, 2015, in comparison with $3.9-million for the year ended Nov. 30, 2014. The decrease is due to lower expenses related to wages, partially offset by an increase in administrative costs and marketing costs. The decrease in wages was primarily due to the payment of bonuses to certain management and non-management employees, and salary increases for certain non-management employees during the year ended Nov. 30, 2014, whereas no bonuses were paid during the year ended Nov. 30, 2015.

The company had cash of $1.8-million as at Nov. 30, 2015, compared with $4.2-million as at Nov. 30, 2014. As of Feb. 25, 2016, the company had a cash balance of $400,000. The decrease in cash is mainly a result of lower cash receipts relating to commercial sales of the company's generic Focalin XR capsules for the 15- and 30-milligram strengths, an increase in cash flow used in operating activities related to R&D activities, and a decrease in cash flows provided from financing activities, which were mainly from common share sales under the company's at-the-market offering program, partially offset by a decrease in purchases of production, laboratory and computer equipment. For the year ended Nov. 30, 2015, net cash flows provided from financing activities of $1.7-million related principally to at-the-market issuances of 471,439 of the company's common shares sold on the Nasdaq Stock Market for net proceeds of $1.3-million, and to the exercise of 225,000 warrants for net proceeds of $600,000, partially offset by capital lease and financing cost payments. Net cash flows provided from financing activities for the year ended Nov. 30, 2014, were $5.9-million related primarily to at-the-market issuances.

The audited consolidated financial statements, accompanying notes to the audited consolidated financial statements, and management's discussion and analysis for the year ended Nov. 30, 2015, will be accessible on IntelliPharmaCeutics's website and will be available on SEDAR and EDGAR.

A summary financial table is provided herein.

                                               
             CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS         
                             (stated in U.S. dollars)   
                                                            For the years ended Nov. 30, 
                                                          2015          2014          2013
Revenues
Licensing                                           $4,093,781    $8,415,540    $1,481,719
Milestone                                                   --       354,153        43,209
Other incidental services                                   --            --         2,546
Total revenues                                       4,093,781     8,769,693     1,527,474
Expenses
Research and development                             7,247,473     8,020,201     5,076,236
Selling, general and administrative                  3,581,913     3,900,803     2,873,091
Depreciation                                           377,849       381,385       396,814
Total expenses                                      11,207,235    12,302,389     8,346,141
(Loss) from operations                              (7,113,454)   (3,532,696)   (6,818,667)
Fair value adjustment of derivative liabilities             --            --    (3,889,683)
Financing expense                                           --            --      (115,056)
Net foreign exchange gain (loss)                        46,211        10,896      (359,554)
Interest income                                          1,507         4,898         2,839
Interest expense                                      (256,629)     (339,451)     (314,896)
Extinguishment (loss)                                 (114,023)           --            --
Net (loss)                                          (7,436,388)   (3,856,353)  (11,495,017)
Other comprehensive income (loss)
Foreign exchange translation adjustment                     --            --       524,431
Comprehensive (loss)                                (7,436,388)   (3,856,353)  (10,970,586)
(Loss) per common share, basic and diluted               (0.31)        (0.17)        (0.58)

We seek Safe Harbor.