<SEC-DOCUMENT>0001171843-18-006385.txt : 20180905
<SEC-HEADER>0001171843-18-006385.hdr.sgml : 20180905
<ACCEPTANCE-DATETIME>20180904175027
ACCESSION NUMBER:		0001171843-18-006385
CONFORMED SUBMISSION TYPE:	10-Q/A
PUBLIC DOCUMENT COUNT:		3
CONFORMED PERIOD OF REPORT:	20180331
FILED AS OF DATE:		20180905
DATE AS OF CHANGE:		20180904

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			XBiotech Inc.
		CENTRAL INDEX KEY:			0001626878
		STANDARD INDUSTRIAL CLASSIFICATION:	PHARMACEUTICAL PREPARATIONS [2834]
		IRS NUMBER:				000000000
		STATE OF INCORPORATION:			A1
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		10-Q/A
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	001-37347
		FILM NUMBER:		181053338

	BUSINESS ADDRESS:	
		STREET 1:		8201 E. RIVERSIDE DRIVE
		STREET 2:		BUILDING 4, SUITE 100
		CITY:			AUSTIN
		STATE:			TX
		ZIP:			78744
		BUSINESS PHONE:		512-386-2930

	MAIL ADDRESS:	
		STREET 1:		8201 E. RIVERSIDE DRIVE
		STREET 2:		BUILDING 4, SUITE 100
		CITY:			AUSTIN
		STATE:			TX
		ZIP:			78744
</SEC-HEADER>
<DOCUMENT>
<TYPE>10-Q/A
<SEQUENCE>1
<FILENAME>f10q_090418.htm
<DESCRIPTION>FORM 10-Q/A
<TEXT>
<HTML><HEAD>
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<p style="margin: 0"></p>

<p style="font-size: 18pt; text-align: center; margin: 0pt 0"><font style="font-size: 12pt"><b>UNITED STATES</b></font></p>

<p style="font-size: 18pt; text-align: center; margin: 0pt 0"><font style="font-size: 12pt"><b>SECURITIES AND EXCHANGE COMMISSION</b></font></p>

<p style="font-size: 10pt; text-align: center; margin: 0pt 0"><b>Washington, D.C. 20549</b></p>

<p style="font-size: 10pt; text-align: center; margin: 0pt 0">&nbsp;</p>

<p style="font-size: 18pt; text-align: center; margin: 0pt 0"><b>FORM 10-Q/A</b></p>

<p style="font-size: 10pt; text-align: center; margin: 0pt 0"><b>&nbsp;</b></p>

<table cellspacing="0" cellpadding="0" style="font-size: 10pt; width: 100%; border-collapse: collapse">
<tr>
    <td style="vertical-align: top; width: 5%; font-size: 10pt">&#9746;</td>
    <td style="vertical-align: bottom; width: 95%; font-size: 10pt"><b>Quarterly Report Pursuant to Section&nbsp;13 or 15(d) of the Securities Exchange Act of 1934</b></td></tr>
</table>
<p style="font-size: 10pt; text-align: center; margin: 0pt 0">&nbsp;</p>

<p style="font-size: 10pt; text-align: center; margin: 0pt 0"><b></b></p>

<p style="font-size: 10pt; line-height: 120%; text-align: center; margin: 0pt 0"><b>For the quarterly period ended March 31, 2018
</b></p>

<p style="font-size: 10pt; text-align: center; margin: 0pt 0">&nbsp;</p>

<p style="font-size: 10pt; text-align: center; margin: 0pt 0"><b>or</b></p>

<p style="font-size: 10pt; margin: 0pt 0">&nbsp;</p>

<table cellspacing="0" cellpadding="0" style="font-size: 10pt; width: 100%; border-collapse: collapse">
<tr>
    <td style="vertical-align: top; width: 5%; font-size: 10pt">&#9744;</td>
    <td style="vertical-align: bottom; width: 95%; font-size: 10pt"><b>Transition Report Pursuant to Section&nbsp;13 or 15(d) of the Securities Exchange Act of 1934</b></td></tr>
</table>
<p style="font-size: 10pt; text-align: center; margin: 0pt 0">&nbsp;</p>

<p style="font-size: 10pt; text-align: center; margin: 0pt 0"><b>Commission File Number 001-37437</b></p>

<p style="font-size: 10pt; text-align: center; margin: 0pt 0">&nbsp;</p>

<p style="font-size: 24pt; text-align: center; margin: 0pt 0"><b>XBIOTECH INC.</b></p>

<p style="font-size: 10pt; text-align: center; margin: 0pt 0"><b>(Exact name of registrant as specified in charter)</b></p>

<p style="font-size: 10pt; text-align: center; margin: 0pt 0">&nbsp;</p>

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<tr>
    <td style="vertical-align: top; width: 51%; text-align: center"><font style="font-size: 10pt"><b>British Columbia, Canada</b></font></td>
    <td style="vertical-align: bottom; width: 1%">&nbsp;</td>
    <td style="vertical-align: top; width: 48%; text-align: center"><font style="font-size: 10pt"><b>__</b></font></td></tr>
<tr>
    <td style="text-align: center"><font style="font-size: 10pt">(State or other jurisdiction of incorporation or organization)</font></td>
    <td style="vertical-align: bottom">&nbsp;</td>
    <td style="text-align: center"><font style="font-size: 10pt"><b>(IRS Employer Identification No.)</b></font></td></tr>
</table>
<p style="font-size: 10pt; text-align: center; margin: 0pt 0">&nbsp;</p>

<p style="font-size: 10pt; text-align: center; margin: 0pt 0"><b>8201 E. Riverside Drive, Bldg. 4, Suite 100</b></p>

<p style="font-size: 10pt; text-align: center; margin: 0pt 0"><b>Austin, TX 78744</b></p>

<p style="font-size: 10pt; text-align: center; margin: 0pt 0"><b>(Address of principal executive offices)(Zip Code)</b></p>

<p style="font-size: 10pt; text-align: center; margin: 0pt 0"><b>&nbsp;</b></p>

<p style="font-size: 10pt; text-align: center; margin: 0pt 0"><b>Telephone Number (512) 386-2900</b></p>

<p style="font-size: 10pt; text-align: center; margin: 0pt 0"><b>(Registrant&#8217;s telephone number, including Area Code)</b></p>

<p style="font-size: 10pt; text-align: center; margin: 0pt 0">&nbsp;</p>

<p style="font-size: 10pt; margin: 0pt 0">Indicate by check mark whether the registrant (1)&nbsp;has filed all
reports required to be filed by Section&nbsp;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)&nbsp;has been subject to such filing
requirements for the past 90 days.&nbsp;&nbsp;&nbsp;&nbsp;</p>

<p style="font-size: 10pt; margin: 0pt 0">Yes &#9746;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;No&nbsp;&nbsp;&#9744;</p>

<p style="font-size: 10pt; margin: 0pt 0">&nbsp;</p>

<p style="font-size: 10pt; margin: 0pt 0">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 (&#167;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).&nbsp;&nbsp;&nbsp;Yes&nbsp;&nbsp;&#9746;&nbsp;&nbsp;&nbsp;&nbsp;No&nbsp;&nbsp;&#9744;</p>

<p style="font-size: 10pt; margin: 0pt 0">&nbsp;</p>

<p style="font-size: 10pt; margin: 0pt 0"></p>

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<p style="font-size: 10pt; margin: 0pt 0">&nbsp;</p>

<p style="font-size: 10pt; margin: 0pt 0">Indicate by check mark whether the registrant is a large accelerated
filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of &#8220;large accelerated
filer,&#8221; &#8220;accelerated filer&#8221; and &#8220;smaller reporting company&#8221; in Rule 12b-2 of the Exchange Act.</p>

<p style="font-size: 10pt; margin: 0pt 0">&nbsp;</p>

<table cellspacing="0" cellpadding="0" style="width: 100%; border-collapse: collapse; font-size: 10pt">
<tr style="vertical-align: bottom">
    <td style="width: 22%"><font style="font-size: 10pt">Large&nbsp;accelerated&nbsp;filer</font></td>
    <td style="width: 42%">&#9744;</td>
    <td style="width: 28%"><font style="font-size: 10pt">Accelerated&nbsp;filer</font></td>
    <td style="width: 8%">&#9746;</td></tr>
<tr style="vertical-align: bottom">
    <td><font style="font-size: 10pt">Non-accelerated filer</font></td>
    <td>&#9744;<font style="font-size: 10pt">&nbsp;&nbsp;(Do not check if a smaller reporting company)</font></td>
    <td><font style="font-size: 10pt">Smaller&nbsp;reporting&nbsp;company</font></td>
    <td>&#9744;</td></tr>
<tr style="vertical-align: bottom">
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>Emerging growth company</td>
    <td>&#9746;</td></tr>
</table>
<p style="font-size: 10pt; margin: 0pt 0">&nbsp;</p>

<p style="font-size: 10pt; margin: 0pt 0"> If an emerging growth company, indicate by check mark if the registrant
has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided
pursuant to Section 13(a) of the Exchange Act.&nbsp;&nbsp;&#9744;</p>

<p style="font-size: 10pt; margin: 0pt 0">&nbsp;</p>

<p style="font-size: 10pt; margin: 0pt 0">Indicate by check mark whether the registrant is a shell company (as
defined in Rule 12b-2 of the Exchange&nbsp;Act).&nbsp;&nbsp;&nbsp;Yes&nbsp;&nbsp;&#9744;&nbsp;&nbsp;&nbsp;&nbsp;No&nbsp;&nbsp;&#9746;</p>

<p style="font-size: 10pt; margin: 0pt 0">&nbsp;</p>

<p style="font-size: 10pt; margin: 0pt 0">As of May 8, 2018, there were 35,519,772 shares of the Registrant's common stock
issued and outstanding.</p>

<p style="margin: 0pt 0">&nbsp;</p>

<p style="margin: 0pt 0">&nbsp;</p>

<p style="margin: 0pt 0">&nbsp;</p>

<p style="margin: 0pt 0">&nbsp;</p>

<p style="margin: 0pt 0">&nbsp;</p>

<p style="margin: 0pt 0">&nbsp;</p>

<p style="margin: 0pt 0"><br clear="ALL"></p>

<p style="font-size: 10pt; margin: 0pt 0"><b>&nbsp;</b></p>

<p style="font-size: 10pt; text-align: center; margin: 0pt 0"></p>

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<p style="font-size: 10pt; margin: 0pt 0">&nbsp;</P>

<P STYLE="font-size: 10pt; margin: 0pt 0"></P>

<P STYLE="font-size: 10pt; line-height: 120%; text-align: center; margin: 0pt 0"><B>EXPLANATORY NOTE</B></P>

<P STYLE="font-size: 10pt; line-height: 120%; text-align: center; margin: 0pt 0">&nbsp;</P>

<P STYLE="font-size: 10pt; line-height: 120%; text-indent: 0.5in; margin: 0pt 0">This Amendment No. 1 on Form 10-Q/A (&quot;Amendment&quot;)
to the Quarterly Report on Form 10-Q of XBiotech Inc. (the &quot;Company&quot;) for the fiscal quarter ended March 31, 2018 (the
&quot;Form 10-K&quot;), originally filed with the Securities and Exchange Commission (the &quot;SEC&quot;) on May 8, 2018, is being
filed for the sole purpose of including language from the introductory portion of paragraph 4 as well as paragraph 4(b) of the
Section 302 certification regarding the Company's internal control over financial reporting.</P>

<P STYLE="font-size: 10pt; line-height: 120%; text-indent: 0.5in; margin: 0pt 0">&nbsp;</P>

<P STYLE="font-size: 10pt; line-height: 120%; text-indent: 0.5in; margin: 0pt 0">Other than as expressly set forth above, no changes
have been made in this Amendment to amend, modify or restate any other information or disclosures presented in the Form 10-Q. This
Amendment does not reflect events occurring after the original filing of the Form 10-Q. As a result, the Company's Annual Report
on Form 10-Q for the fiscal quarter ended March 31, 2018 continues to speak as of May 8, 2018. This Amendment should be read in
conjunction with the Company's Form 10-Q and other Company filings made with the SEC.</P>



<P STYLE="font-size: 10pt; margin: 0pt 0"></P>

<P STYLE="font-size: 10pt; margin: 0pt 0">&nbsp;</P>

<P STYLE="font-size: 10pt; margin: 0pt 0">&nbsp;</P>

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<P STYLE="font-size: 10pt; margin: 0pt 0"></P>

<P STYLE="font-size: 10pt; margin: 0pt 0">&nbsp;</p>

<p style="font-size: 10pt; text-align: center; margin: 0pt 0"></p>

<p style="font-size: 10pt; text-align: center; margin: 0pt 0"><b>XBIOTECH INC.</b></p>

<p style="font-size: 10pt; text-align: center; margin: 0pt 0"></p>

<p style="font-size: 10pt; text-align: center; margin: 0pt 0"><b>THREE MONTHS ENDED MARCH 31, 2018</b></p>

<p style="font-size: 10pt; text-align: center; margin: 0pt 0"></p>

<p style="font-size: 10pt; text-align: center; margin: 0pt 0"><b>INDEX</b></p>

<p style="font-size: 10pt; margin: 0pt 0">&nbsp;</p>

<table cellspacing="0" cellpadding="0" style="width: 100%; border-collapse: collapse; font-size: 10pt">
<tr>
    <td colspan="3" style="text-align: center"><font style="font-size: 10pt"><b><u>PART&nbsp;I&#8212;FINANCIAL INFORMATION</u></b></font></td></tr>
<tr>
    <td colspan="3" style="text-align: center">&nbsp;</td></tr>
<tr>
    <td style="width: 12%"><font style="font-size: 10pt">Item&nbsp;1.</font></td>
    <td style="width: 81%"><font style="font-size: 10pt">Consolidated Financial Statements</font></td>
    <td nowrap style="vertical-align: bottom; width: 7%">&nbsp;</td></tr>
<tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td nowrap style="vertical-align: bottom">&nbsp;</td></tr>
<tr>
    <td>&nbsp;</td>
    <td><a href="#a_001"><font style="font-size: 10pt">Consolidated Balance Sheets as of March 31, 2018 (unaudited) and December&nbsp;31, 2017</font></a></td>
    <td style="text-align: right"><A HREF="#a_001">5</A><a href="#a_001"></a></td></tr>
<tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td style="text-align: right">&nbsp;</td></tr>
<tr>
    <td>&nbsp;</td>
    <td><a href="#a_002"><font style="font-size: 10pt">Consolidated Statements of Operations for the Three Months Ended March 31, 2018 (unaudited) and 2017 (unaudited)</font></a></td>
    <td style="text-align: right"><a href="#a_002"><font style="font-size: 10pt">6</font></a></td></tr>
<tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td style="text-align: right">&nbsp;</td></tr>
<tr>
    <td>&nbsp;</td>
    <td><a href="#a_003"><font style="font-size: 10pt">Consolidated Statements of Comprehensive Loss for the Three Months Ended March 31, 2018 (unaudited) and 2017 (unaudited)</font></a></td>
    <td nowrap style="vertical-align: bottom; text-align: right"><a href="#a_003"><font style="font-size: 10pt">7</font></a></td></tr>
<tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td nowrap style="vertical-align: bottom; text-align: right">&nbsp;</td></tr>
<tr>
    <td>&nbsp;</td>
    <td><a href="#a_004"><font style="font-size: 10pt">Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2018 (unaudited) and 2017 (unaudited)</font></a></td>
    <td style="text-align: right"><a href="#a_004"><font style="font-size: 10pt">8</font></a></td></tr>
<tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td style="text-align: right">&nbsp;</td></tr>
<tr>
    <td>&nbsp;</td>
    <td><a href="#a_005"><font style="font-size: 10pt">Notes to Consolidated Financial Statements (unaudited)</font></a></td>
    <td style="text-align: right"><A HREF="#a_005">9</A><a href="#a_005"></a></td></tr>
<tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td style="text-align: right">&nbsp;</td></tr>
<tr>
    <td><a href="#a_008"><font style="font-size: 10pt">Item&nbsp;4.</font></a></td>
    <td><a href="#a_008"><font style="font-size: 10pt">Controls and Procedures</font></a></td>
    <td style="text-align: right"><A HREF="#a_008">15</A><a href="#a_008"></a></td></tr>
<tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td style="text-align: right">&nbsp;</td></tr>
<TR>
    <TD><A HREF="#a_015">Item 6.</A></TD>
    <TD><A HREF="#a_015">Exhibits</A></TD>
    <TD STYLE="text-align: right"><A HREF="#a_015">16</A></TD></TR>
</table>
<p style="font-size: 10pt; margin: 0pt 0">&nbsp;</p>

<p style="font-size: 10pt; margin: 0pt 0"></p>

<p style="font-size: 10pt; margin: 0pt 0">SIGNATURES</p>

<p style="font-size: 10pt; margin: 0pt 0"></p>

<p style="font-size: 10pt; margin: 0pt 0">&nbsp;</P>

<P STYLE="font-size: 10pt; margin: 0pt 0"></p>

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<p style="font-size: 10pt; margin: 0pt 0"></p>

<p style="font-size: 10pt; margin: 0pt 0">&nbsp;</p>

<p style="font-size: 10pt; text-align: center; margin: 0pt 0"><b>XBiotech Inc. </b></p>

<p style="font-size: 10pt; text-align: center; margin: 0pt 0"></p>

<p style="font-size: 10pt; text-align: center; margin: 0pt 0"><a name="a_001"></a>Consolidated Balance Sheets</p>

<p style="font-size: 10pt; text-align: center; margin: 0pt 0"></p>

<p style="font-size: 10pt; text-align: center; margin: 0pt 0">(in thousands, except share data)</p>

<p style="font-size: 10pt; text-align: center; margin: 0pt 0">&nbsp;</p>

<div data-td-taggable-table="" data-td-statement-type="balance-sheet"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%">
<tr style="vertical-align: bottom">
    <td style="font-size: 10pt">&nbsp;</td><td style="font-size: 10pt; font-weight: bold; border-bottom: Black 1pt solid">&nbsp;</td>
    <td colspan="3" style="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">March 31, 2018<br> (unaudited)</td><td style="font-size: 10pt; font-weight: bold; border-bottom: Black 1pt solid">&nbsp;</td>
    <td colspan="3" style="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid; vertical-align: top">December 31, 2017</td></tr>
<tr style="vertical-align: bottom">
    <td style="font-size: 10pt; font-weight: bold">Assets</td><td style="font-size: 10pt">&nbsp;</td>
    <td colspan="3" style="font-size: 10pt; text-align: right">&nbsp;</td><td style="font-size: 10pt">&nbsp;</td>
    <td colspan="3" style="font-size: 10pt; text-align: right">&nbsp;</td></tr>
<tr style="vertical-align: bottom">
    <td style="font-size: 10pt; text-align: left">Current assets:</td><td style="font-size: 10pt">&nbsp;</td>
    <td colspan="3" style="font-size: 10pt; text-align: right">&nbsp;</td><td style="font-size: 10pt">&nbsp;</td>
    <td colspan="3" style="font-size: 10pt; text-align: right">&nbsp;</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="width: 70%; font-size: 10pt; text-align: left; padding-left: 10pt">Cash and cash equivalents</td><td style="width: 1%; font-size: 10pt">&nbsp;</td>
    <td style="width: 1%; font-size: 10pt; text-align: left">$</td><td style="width: 12%; font-size: 10pt; text-align: right">28,416</td><td style="width: 1%; font-size: 10pt; text-align: left">&nbsp;</td><td style="width: 1%; font-size: 10pt">&nbsp;</td>
    <td style="width: 1%; font-size: 10pt; text-align: left">$</td><td style="width: 12%; font-size: 10pt; text-align: right">31,768</td><td style="width: 1%; font-size: 10pt; text-align: left">&nbsp;</td></tr>
<tr style="vertical-align: bottom; background-color: White">
    <td style="font-size: 10pt; text-align: left; padding-bottom: 1pt; padding-left: 10pt">Prepaid expenses and other current assets</td><td style="font-size: 10pt; border-bottom: Black 1pt solid">&nbsp;</td>
    <td style="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</td><td style="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">1,333</td><td style="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</td><td style="font-size: 10pt; border-bottom: Black 1pt solid">&nbsp;</td>
    <td style="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</td><td style="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">1,564</td><td style="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font-size: 10pt; text-align: left">Total current assets</td><td style="font-size: 10pt">&nbsp;</td>
    <td style="font-size: 10pt; text-align: left">&nbsp;</td><td style="font-size: 10pt; text-align: right">29,749</td><td style="font-size: 10pt; text-align: left">&nbsp;</td><td style="font-size: 10pt">&nbsp;</td>
    <td style="font-size: 10pt; text-align: left">&nbsp;</td><td style="font-size: 10pt; text-align: right">33,332</td><td style="font-size: 10pt; text-align: left">&nbsp;</td></tr>
<tr style="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt">Property and equipment, net</td><TD STYLE="font-size: 10pt; border-bottom: Black 1pt solid">&nbsp;</td>
    <TD STYLE="font-size: 10pt; text-align: left; border-bottom: Black 1pt solid">&nbsp;</td><TD STYLE="font-size: 10pt; text-align: right; border-bottom: Black 1pt solid">29,111</td><TD STYLE="font-size: 10pt; text-align: left; border-bottom: Black 1pt solid">&nbsp;</td><TD STYLE="font-size: 10pt; border-bottom: Black 1pt solid">&nbsp;</td>
    <TD STYLE="font-size: 10pt; text-align: left; border-bottom: Black 1pt solid">&nbsp;</td><TD STYLE="font-size: 10pt; text-align: right; border-bottom: Black 1pt solid">29,640</td><TD STYLE="font-size: 10pt; text-align: left; border-bottom: Black 1pt solid">&nbsp;</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font-size: 10pt; text-align: left; padding-bottom: 2.25pt">Total assets</td><td style="font-size: 10pt; border-bottom: Black 2.25pt double">&nbsp;</td>
    <td style="border-bottom: Black 2.25pt double; font-size: 10pt; text-align: left">$</td><td style="border-bottom: Black 2.25pt double; font-size: 10pt; text-align: right">58,860</td><td style="border-bottom: Black 2.25pt double; font-size: 10pt; text-align: left">&nbsp;</td><td style="font-size: 10pt; border-bottom: Black 2.25pt double">&nbsp;</td>
    <td style="border-bottom: Black 2.25pt double; font-size: 10pt; text-align: left">$</td><td style="border-bottom: Black 2.25pt double; font-size: 10pt; text-align: right">62,972</td><td style="border-bottom: Black 2.25pt double; font-size: 10pt; text-align: left">&nbsp;</td></tr>
<tr style="vertical-align: bottom; background-color: White">
    <td style="font-size: 10pt">&nbsp;</td><td style="font-size: 10pt">&nbsp;</td>
    <td style="font-size: 10pt; text-align: left">&nbsp;</td><td style="font-size: 10pt; text-align: right">&nbsp;</td><td style="font-size: 10pt; text-align: left">&nbsp;</td><td style="font-size: 10pt">&nbsp;</td>
    <td style="font-size: 10pt; text-align: left">&nbsp;</td><td style="font-size: 10pt; text-align: right">&nbsp;</td><td style="font-size: 10pt; text-align: left">&nbsp;</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font-size: 10pt; font-weight: bold; text-align: left">Liabilities and shareholders&#8217; equity</td><td style="font-size: 10pt">&nbsp;</td>
    <td style="font-size: 10pt; text-align: left">&nbsp;</td><td style="font-size: 10pt; text-align: right">&nbsp;</td><td style="font-size: 10pt; text-align: left">&nbsp;</td><td style="font-size: 10pt">&nbsp;</td>
    <td style="font-size: 10pt; text-align: left">&nbsp;</td><td style="font-size: 10pt; text-align: right">&nbsp;</td><td style="font-size: 10pt; text-align: left">&nbsp;</td></tr>
<tr style="vertical-align: bottom; background-color: White">
    <td style="font-size: 10pt; text-align: left">Current liabilities:</td><td style="font-size: 10pt">&nbsp;</td>
    <td style="font-size: 10pt; text-align: left">&nbsp;</td><td style="font-size: 10pt; text-align: right">&nbsp;</td><td style="font-size: 10pt; text-align: left">&nbsp;</td><td style="font-size: 10pt">&nbsp;</td>
    <td style="font-size: 10pt; text-align: left">&nbsp;</td><td style="font-size: 10pt; text-align: right">&nbsp;</td><td style="font-size: 10pt; text-align: left">&nbsp;</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font-size: 10pt; text-align: left; padding-left: 10pt">Accounts payable</td><td style="font-size: 10pt">&nbsp;</td>
    <td style="font-size: 10pt; text-align: left">$</td><td style="font-size: 10pt; text-align: right">1,160</td><td style="font-size: 10pt; text-align: left">&nbsp;</td><td style="font-size: 10pt">&nbsp;</td>
    <td style="font-size: 10pt; text-align: left">$</td><td style="font-size: 10pt; text-align: right">1,730</td><td style="font-size: 10pt; text-align: left">&nbsp;</td></tr>
<tr style="vertical-align: bottom; background-color: White">
    <td style="font-size: 10pt; text-align: left; padding-bottom: 1pt; padding-left: 10pt">Accrued expenses</td><td style="font-size: 10pt; border-bottom: Black 1pt solid">&nbsp;</td>
    <td style="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</td><td style="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">1,274</td><td style="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</td><td style="font-size: 10pt; border-bottom: Black 1pt solid">&nbsp;</td>
    <td style="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</td><td style="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">1,062</td><td style="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font-size: 10pt; text-align: left">Total current liabilities</td><td style="font-size: 10pt">&nbsp;</td>
    <td style="font-size: 10pt; text-align: left">&nbsp;</td><td style="font-size: 10pt; text-align: right">2,434</td><td style="font-size: 10pt; text-align: left">&nbsp;</td><td style="font-size: 10pt">&nbsp;</td>
    <td style="font-size: 10pt; text-align: left">&nbsp;</td><td style="font-size: 10pt; text-align: right">2,792</td><td style="font-size: 10pt; text-align: left">&nbsp;</td></tr>
<tr style="vertical-align: bottom; background-color: White">
    <td style="font-size: 10pt; text-align: left">Long-term liabilities:</td><td style="font-size: 10pt">&nbsp;</td>
    <td style="font-size: 10pt; text-align: left">&nbsp;</td><td style="font-size: 10pt; text-align: right">&nbsp;</td><td style="font-size: 10pt; text-align: left">&nbsp;</td><td style="font-size: 10pt">&nbsp;</td>
    <td style="font-size: 10pt; text-align: left">&nbsp;</td><td style="font-size: 10pt; text-align: right">&nbsp;</td><td style="font-size: 10pt; text-align: left">&nbsp;</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font-size: 10pt; text-align: left; padding-bottom: 1pt; padding-left: 10pt">Deferred rent</td><td style="font-size: 10pt; border-bottom: Black 1pt solid">&nbsp;</td>
    <td style="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</td><td style="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">16</td><td style="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</td><td style="font-size: 10pt; border-bottom: Black 1pt solid">&nbsp;</td>
    <td style="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</td><td style="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">18</td><td style="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</td></tr>
<tr style="vertical-align: bottom; background-color: White">
    <td style="font-size: 10pt; text-align: left; padding-bottom: 1pt">Total liabilities</td><td style="font-size: 10pt; border-bottom: Black 1pt solid">&nbsp;</td>
    <td style="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</td><td style="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">2,450</td><td style="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</td><td style="font-size: 10pt; border-bottom: Black 1pt solid">&nbsp;</td>
    <td style="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</td><td style="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">2,810</td><td style="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font-size: 10pt">&nbsp;</td><td style="font-size: 10pt">&nbsp;</td>
    <td style="font-size: 10pt; text-align: left">&nbsp;</td><td style="font-size: 10pt; text-align: right">&nbsp;</td><td style="font-size: 10pt; text-align: left">&nbsp;</td><td style="font-size: 10pt">&nbsp;</td>
    <td style="font-size: 10pt; text-align: left">&nbsp;</td><td style="font-size: 10pt; text-align: right">&nbsp;</td><td style="font-size: 10pt; text-align: left">&nbsp;</td></tr>
<tr style="vertical-align: bottom; background-color: White">
    <td style="font-size: 10pt; font-weight: bold; text-align: left">Shareholders&#8217; equity:</td><td style="font-size: 10pt">&nbsp;</td>
    <td style="font-size: 10pt; text-align: left">&nbsp;</td><td style="font-size: 10pt; text-align: right">&nbsp;</td><td style="font-size: 10pt; text-align: left">&nbsp;</td><td style="font-size: 10pt">&nbsp;</td>
    <td style="font-size: 10pt; text-align: left">&nbsp;</td><td style="font-size: 10pt; text-align: right">&nbsp;</td><td style="font-size: 10pt; text-align: left">&nbsp;</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font-size: 10pt; text-align: left">Preferred stock, no par value, unlimited shares authorized, no shares outstanding</td><td style="font-size: 10pt">&nbsp;</td>
    <td style="font-size: 10pt; text-align: left">&nbsp;</td><td style="font-size: 10pt; text-align: right">-</td><td style="font-size: 10pt; text-align: left">&nbsp;</td><td style="font-size: 10pt">&nbsp;</td>
    <td style="font-size: 10pt; text-align: left">&nbsp;</td><td style="font-size: 10pt; text-align: right">-</td><td style="font-size: 10pt; text-align: left">&nbsp;</td></tr>
<tr style="vertical-align: bottom; background-color: White">
    <td style="font-size: 10pt; text-align: left">Common stock, no par value, unlimited shares authorized, 35,519,772 and 35,439,272 shares outstanding at March 31, 2018 and December 31, 2017, respectively</td><td style="font-size: 10pt">&nbsp;</td>
    <td style="font-size: 10pt; text-align: left">&nbsp;</td><td style="font-size: 10pt; text-align: right">277,803</td><td style="font-size: 10pt; text-align: left">&nbsp;</td><td style="font-size: 10pt">&nbsp;</td>
    <td style="font-size: 10pt; text-align: left">&nbsp;</td><td style="font-size: 10pt; text-align: right">277,492</td><td style="font-size: 10pt; text-align: left">&nbsp;</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font-size: 10pt; text-align: left; padding-left: 10pt">Accumulated other comprehensive loss</td><td style="font-size: 10pt">&nbsp;</td>
    <td style="font-size: 10pt; text-align: left">&nbsp;</td><td style="font-size: 10pt; text-align: right">(762</td><td style="font-size: 10pt; text-align: left">)</td><td style="font-size: 10pt">&nbsp;</td>
    <td style="font-size: 10pt; text-align: left">&nbsp;</td><td style="font-size: 10pt; text-align: right">(768</td><td style="font-size: 10pt; text-align: left">)</td></tr>
<tr style="vertical-align: bottom; background-color: White">
    <td style="font-size: 10pt; text-align: left; padding-bottom: 1pt; padding-left: 10pt">Accumulated deficit</td><td style="font-size: 10pt; border-bottom: Black 1pt solid">&nbsp;</td>
    <td style="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</td><td style="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">(220,631</td><td style="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">)</td><td style="font-size: 10pt; border-bottom: Black 1pt solid">&nbsp;</td>
    <td style="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</td><td style="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">(216,562</td><td style="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">)</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font-size: 10pt; text-align: left; padding-bottom: 1pt">Total shareholders&#8217; equity</td><td style="font-size: 10pt; border-bottom: Black 1pt solid">&nbsp;</td>
    <td style="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</td><td style="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">56,410</td><td style="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</td><td style="font-size: 10pt; border-bottom: Black 1pt solid">&nbsp;</td>
    <td style="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</td><td style="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">60,162</td><td style="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</td></tr>
<tr style="vertical-align: bottom; background-color: White">
    <td style="font-size: 10pt; padding-bottom: 2.25pt">&nbsp;</td><td style="font-size: 10pt; border-bottom: Black 2.25pt double">&nbsp;</td>
    <td style="border-bottom: Black 2.25pt double; font-size: 10pt; text-align: left">&nbsp;</td><td style="border-bottom: Black 2.25pt double; font-size: 10pt; text-align: right">&nbsp;</td><td style="border-bottom: Black 2.25pt double; font-size: 10pt; text-align: left">&nbsp;</td><td style="font-size: 10pt; border-bottom: Black 2.25pt double">&nbsp;</td>
    <td style="border-bottom: Black 2.25pt double; font-size: 10pt; text-align: left">&nbsp;</td><td style="border-bottom: Black 2.25pt double; font-size: 10pt; text-align: right">&nbsp;</td><td style="border-bottom: Black 2.25pt double; font-size: 10pt; text-align: left">&nbsp;</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font-size: 10pt; font-weight: bold; text-align: left; padding-bottom: 2.25pt">Total liabilities and shareholders&#8217; equity</td><td style="font-size: 10pt; border-bottom: Black 2.25pt double">&nbsp;</td>
    <td style="border-bottom: Black 2.25pt double; font-size: 10pt; text-align: left">$</td><td style="border-bottom: Black 2.25pt double; font-size: 10pt; text-align: right">58,860</td><td style="border-bottom: Black 2.25pt double; font-size: 10pt; text-align: left">&nbsp;</td><td style="font-size: 10pt; border-bottom: Black 2.25pt double">&nbsp;</td>
    <td style="border-bottom: Black 2.25pt double; font-size: 10pt; text-align: left">$</td><td style="border-bottom: Black 2.25pt double; font-size: 10pt; text-align: right">62,972</td><td style="border-bottom: Black 2.25pt double; font-size: 10pt; text-align: left">&nbsp;</td></tr>
</table></div>







<p style="font-size: 10pt; margin: 0pt 0">&nbsp;</p>

<p style="font-size: 10pt; margin: 0pt 0"><i>See accompanying notes.</i></p>

<p style="font-size: 10pt; margin: 0pt 0"><i>&nbsp;</i></p>

<p style="font-size: 10pt; margin: 0pt 0"><i></i></p>

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<p style="font-size: 10pt; margin: 0pt 0"><I>&nbsp;</I></P>

<P STYLE="font-size: 10pt; text-align: center; margin: 0pt 0"><B>XBiotech Inc.</B></P>



<P STYLE="font-size: 10pt; text-align: center; margin: 0pt 0"><B></b></p>

<p style="font-size: 10pt; text-align: center; margin: 0pt 0"><a name="a_002"></a>Consolidated Statements of Operations</p>

<p style="font-size: 10pt; text-align: center; margin: 0pt 0">(in thousands, except share and per share data)</p>

<p style="font-size: 10pt; text-align: center; margin: 0pt 0">&nbsp;</p>

<div data-td-taggable-table="" data-td-statement-type="income"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%">
<tr style="vertical-align: bottom">
    <td style="font-size: 10pt">&nbsp;</td><td style="font-size: 10pt; font-weight: bold">&nbsp;</td>
    <td colspan="7" style="font-size: 10pt; font-weight: bold; text-align: center">Three Months&nbsp;Ended&nbsp;March&nbsp;&nbsp;31,</td></tr>
<tr style="vertical-align: bottom">
    <td style="font-size: 10pt">&nbsp;</td><td style="font-size: 10pt; font-weight: bold; border-bottom: Black 1pt solid">&nbsp;</td>
    <td colspan="3" style="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2018<br> (unaudited)</td><td style="font-size: 10pt; font-weight: bold; border-bottom: Black 1pt solid">&nbsp;</td>
    <td colspan="3" style="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2017<br> (unaudited)</td></tr>
<tr style="vertical-align: bottom">
    <td style="font-size: 10pt">Operating expenses:</td><td style="font-size: 10pt">&nbsp;</td>
    <td colspan="3" style="font-size: 10pt">&nbsp;</td><td style="font-size: 10pt">&nbsp;</td>
    <td colspan="3" style="font-size: 10pt">&nbsp;</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="width: 70%; font-size: 10pt; text-align: left; padding-left: 10pt">Research and development</td><td style="width: 1%; font-size: 10pt">&nbsp;</td>
    <td style="width: 1%; font-size: 10pt; text-align: left">$</td><td style="width: 12%; font-size: 10pt; text-align: right">2,993</td><td style="width: 1%; font-size: 10pt; text-align: left">&nbsp;</td><td style="width: 1%; font-size: 10pt">&nbsp;</td>
    <td style="width: 1%; font-size: 10pt; text-align: left">$</td><td style="width: 12%; font-size: 10pt; text-align: right">8,188</td><td style="width: 1%; font-size: 10pt; text-align: left">&nbsp;</td></tr>
<tr style="vertical-align: bottom; background-color: White">
    <td style="font-size: 10pt; text-align: left; padding-bottom: 1pt; padding-left: 10pt">General and administrative</td><td style="font-size: 10pt; border-bottom: Black 1pt solid">&nbsp;</td>
    <td style="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</td><td style="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">1,157</td><td style="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</td><td style="font-size: 10pt; border-bottom: Black 1pt solid">&nbsp;</td>
    <td style="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</td><td style="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">2,083</td><td style="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font-size: 10pt; text-align: left; padding-bottom: 1pt">Total operating expenses</td><td style="font-size: 10pt; border-bottom: Black 1pt solid">&nbsp;</td>
    <td style="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</td><td style="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">4,150</td><td style="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</td><td style="font-size: 10pt; border-bottom: Black 1pt solid">&nbsp;</td>
    <td style="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</td><td style="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">10,271</td><td style="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</td></tr>
<tr style="vertical-align: bottom; background-color: White">
    <td style="font-size: 10pt; text-align: left">Loss from operations</td><td style="font-size: 10pt">&nbsp;</td>
    <td style="font-size: 10pt; text-align: left">&nbsp;</td><td style="font-size: 10pt; text-align: right">(4,150</td><td style="font-size: 10pt; text-align: left">)</td><td style="font-size: 10pt">&nbsp;</td>
    <td style="font-size: 10pt; text-align: left">&nbsp;</td><td style="font-size: 10pt; text-align: right">(10,271</td><td style="font-size: 10pt; text-align: left">)</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font-size: 10pt">&nbsp;</td><td style="font-size: 10pt">&nbsp;</td>
    <td style="font-size: 10pt; text-align: left">&nbsp;</td><td style="font-size: 10pt; text-align: right">&nbsp;</td><td style="font-size: 10pt; text-align: left">&nbsp;</td><td style="font-size: 10pt">&nbsp;</td>
    <td style="font-size: 10pt; text-align: left">&nbsp;</td><td style="font-size: 10pt; text-align: right">&nbsp;</td><td style="font-size: 10pt; text-align: left">&nbsp;</td></tr>
<tr style="vertical-align: bottom; background-color: White">
    <td style="font-size: 10pt; text-align: left">Other income (loss):</td><td style="font-size: 10pt">&nbsp;</td>
    <td style="font-size: 10pt; text-align: left">&nbsp;</td><td style="font-size: 10pt; text-align: right">&nbsp;</td><td style="font-size: 10pt; text-align: left">&nbsp;</td><td style="font-size: 10pt">&nbsp;</td>
    <td style="font-size: 10pt; text-align: left">&nbsp;</td><td style="font-size: 10pt; text-align: right">&nbsp;</td><td style="font-size: 10pt; text-align: left">&nbsp;</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font-size: 10pt; text-align: left; padding-left: 10pt">Interest income</td><td style="font-size: 10pt">&nbsp;</td>
    <td style="font-size: 10pt; text-align: left">&nbsp;</td><td style="font-size: 10pt; text-align: right">64</td><td style="font-size: 10pt; text-align: left">&nbsp;</td><td style="font-size: 10pt">&nbsp;</td>
    <td style="font-size: 10pt; text-align: left">&nbsp;</td><td style="font-size: 10pt; text-align: right">49</td><td style="font-size: 10pt; text-align: left">&nbsp;</td></tr>
<tr style="vertical-align: bottom; background-color: White">
    <td style="font-size: 10pt; text-align: left; padding-bottom: 1pt; padding-left: 10pt">Foreign exchange gain (loss)</td><td style="font-size: 10pt; border-bottom: Black 1pt solid">&nbsp;</td>
    <td style="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</td><td style="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">17</td><td style="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</td><td style="font-size: 10pt; border-bottom: Black 1pt solid">&nbsp;</td>
    <td style="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</td><td style="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">(341</td><td style="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">)</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font-size: 10pt; text-align: left; padding-bottom: 1pt">Total other income (loss)</td><td style="font-size: 10pt; border-bottom: Black 1pt solid">&nbsp;</td>
    <td style="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</td><td style="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">81</td><td style="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</td><td style="font-size: 10pt; border-bottom: Black 1pt solid">&nbsp;</td>
    <td style="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</td><td style="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">(292</td><td style="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">)</td></tr>
<tr style="vertical-align: bottom; background-color: White">
    <td style="font-size: 10pt; text-align: left; padding-bottom: 2.25pt">Net loss</td><td style="font-size: 10pt; border-bottom: Black 2.25pt double">&nbsp;</td>
    <td style="border-bottom: Black 2.25pt double; font-size: 10pt; text-align: left">$</td><td style="border-bottom: Black 2.25pt double; font-size: 10pt; text-align: right">(4,069</td><td style="border-bottom: Black 2.25pt double; font-size: 10pt; text-align: left">)</td><td style="font-size: 10pt; border-bottom: Black 2.25pt double">&nbsp;</td>
    <td style="border-bottom: Black 2.25pt double; font-size: 10pt; text-align: left">$</td><td style="border-bottom: Black 2.25pt double; font-size: 10pt; text-align: right">(10,563</td><td style="border-bottom: Black 2.25pt double; font-size: 10pt; text-align: left">)</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font-size: 10pt; text-align: left">Net loss per share&#8212;basic and diluted</td><td style="font-size: 10pt">&nbsp;</td>
    <td style="font-size: 10pt; text-align: left">$</td><td style="font-size: 10pt; text-align: right">(0.11</td><td style="font-size: 10pt; text-align: left">)</td><td style="font-size: 10pt">&nbsp;</td>
    <td style="font-size: 10pt; text-align: left">$</td><td style="font-size: 10pt; text-align: right">(0.32</td><td style="font-size: 10pt; text-align: left">)</td></tr>
<tr style="vertical-align: bottom; background-color: White">
    <td style="font-size: 10pt; text-align: left">Shares used to compute basic and diluted net loss per share</td><td style="font-size: 10pt">&nbsp;</td>
    <td style="font-size: 10pt; text-align: left">&nbsp;</td><td style="font-size: 10pt; text-align: right">35,447,304</td><td style="font-size: 10pt; text-align: left">&nbsp;</td><td style="font-size: 10pt">&nbsp;</td>
    <td style="font-size: 10pt; text-align: left">&nbsp;</td><td style="font-size: 10pt; text-align: right">33,291,672</td><td style="font-size: 10pt; text-align: left">&nbsp;</td></tr>
</table></div>


<p style="font-size: 10pt; margin: 0pt 0">&nbsp;</p>

<p style="font-size: 10pt; margin: 0pt 0"><i>See accompanying notes.</i></p>

<p style="font-size: 10pt; margin: 0pt 0">&nbsp;</p>

<p style="font-size: 10pt; margin: 0pt 0">&nbsp;</p>

<p style="font-size: 10pt; margin: 0pt 0">&nbsp;</p>

<p style="font-size: 10pt; margin: 0pt 0">&nbsp;</p>

<!-- Field: Page; Sequence: 6 -->
    <div style="margin-top: 6pt; margin-bottom: 6pt; border-bottom: Black 4pt solid"><p style="margin-top: 0pt; text-align: center; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->6<!-- Field: /Sequence --></p></div>
    <div style="page-break-before: always; margin-top: 6pt; margin-bottom: 6pt"><p style="margin: 0pt"></p></div>
    <!-- Field: /Page -->

<p style="font-size: 10pt; margin: 0pt 0"></p>

<p style="font-size: 10pt; text-align: center; margin: 0pt 0">&nbsp;</p>

<p style="font-size: 10pt; text-align: center; margin: 0pt 0"><b>XBiotech Inc.</b></p>

<p style="font-size: 10pt; text-align: center; margin: 0pt 0"><a name="a_003"></a>Consolidated Statements of Comprehensive Loss</p>

<p style="font-size: 10pt; text-align: center; margin: 0pt 0"></p>

<p style="font-size: 10pt; text-align: center; margin: 0pt 0">(in thousands)</p>

<p style="font-size: 10pt; text-align: center; margin: 0pt 0">&nbsp;</p>

<div data-td-taggable-table="" data-td-statement-type="comprehensive-income"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%">
<tr style="vertical-align: bottom">
    <td style="font-size: 10pt">&nbsp;</td><td style="font-size: 10pt; font-weight: bold">&nbsp;</td>
    <td colspan="7" style="font-size: 10pt; font-weight: bold; text-align: center">Three Months Ended March 31,</td></tr>
<tr style="vertical-align: bottom">
    <td style="font-size: 10pt">&nbsp;</td><td style="font-size: 10pt; font-weight: bold; border-bottom: Black 1pt solid">&nbsp;</td>
    <td colspan="3" style="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2018<br> (unaudited)</td><td style="font-size: 10pt; font-weight: bold; border-bottom: Black 1pt solid">&nbsp;</td>
    <td colspan="3" style="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2017<br> (unaudited)</td></tr>
<tr style="vertical-align: bottom">
    <td style="font-size: 10pt">&nbsp;</td><td style="font-size: 10pt">&nbsp;</td>
    <td colspan="3" style="font-size: 10pt">&nbsp;</td><td style="font-size: 10pt">&nbsp;</td>
    <td colspan="3" style="font-size: 10pt">&nbsp;</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="width: 70%; font-size: 10pt; text-align: left">Net loss</td><td style="width: 1%; font-size: 10pt">&nbsp;</td>
    <td style="width: 1%; font-size: 10pt; text-align: left">$</td><td style="width: 12%; font-size: 10pt; text-align: right">(4,069</td><td style="width: 1%; font-size: 10pt; text-align: left">)</td><td style="width: 1%; font-size: 10pt">&nbsp;</td>
    <td style="width: 1%; font-size: 10pt; text-align: left">$</td><td style="width: 12%; font-size: 10pt; text-align: right">(10,563</td><td style="width: 1%; font-size: 10pt; text-align: left">)</td></tr>
<tr style="vertical-align: bottom; background-color: White">
    <td style="font-size: 10pt; text-align: left; padding-bottom: 1pt">Foreign currency translation adjustment</td><td style="font-size: 10pt; border-bottom: Black 1pt solid">&nbsp;</td>
    <td style="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</td><td style="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">7</td><td style="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</td><td style="font-size: 10pt; border-bottom: Black 1pt solid">&nbsp;</td>
    <td style="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</td><td style="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">110</td><td style="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font-size: 10pt; text-align: left; padding-bottom: 2.25pt">Comprehensive loss</td><td style="font-size: 10pt; border-bottom: Black 2.25pt double">&nbsp;</td>
    <td style="border-bottom: Black 2.25pt double; font-size: 10pt; text-align: left">$</td><td style="border-bottom: Black 2.25pt double; font-size: 10pt; text-align: right">(4,062</td><td style="border-bottom: Black 2.25pt double; font-size: 10pt; text-align: left">)</td><td style="font-size: 10pt; border-bottom: Black 2.25pt double">&nbsp;</td>
    <td style="border-bottom: Black 2.25pt double; font-size: 10pt; text-align: left">$</td><td style="border-bottom: Black 2.25pt double; font-size: 10pt; text-align: right">(10,453</td><td style="border-bottom: Black 2.25pt double; font-size: 10pt; text-align: left">)</td></tr>
</table></div>


<p style="font-size: 10pt; margin: 0pt 0">&nbsp;</p>

<p style="font-size: 10pt; margin: 0pt 0"><i>See accompanying notes. </i></p>

<p style="font-size: 10pt; margin: 0pt 0">&nbsp;</p>

<p style="font-size: 10pt; margin: 0pt 0">&nbsp;</p>

<p style="font-size: 10pt; margin: 0pt 0">&nbsp;</p>

<p style="font-size: 10pt; margin: 0pt 0">&nbsp;</p>

<p style="font-size: 10pt; margin: 0pt 0">&nbsp;</p>

<!-- Field: Page; Sequence: 7 -->
    <div style="margin-top: 6pt; margin-bottom: 6pt; border-bottom: Black 4pt solid"><p style="margin-top: 0pt; text-align: center; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->7<!-- Field: /Sequence --></p></div>
    <div style="page-break-before: always; margin-top: 6pt; margin-bottom: 6pt"><p style="margin: 0pt"></p></div>
    <!-- Field: /Page -->

<p style="font-size: 10pt; margin: 0pt 0"></p>

<p style="font-size: 10pt; margin: 0pt 0">&nbsp;</p>

<p style="font-size: 10pt; text-align: center; margin: 0pt 0"><b>XBiotech Inc. </b></p>

<p style="font-size: 10pt; text-align: center; margin: 0pt 0"></p>

<p style="font-size: 10pt; text-align: center; margin: 0pt 0"><a name="a_004"></a>Consolidated Statements of Cash Flows</p>

<p style="font-size: 10pt; text-align: center; margin: 0pt 0"></p>

<p style="font-size: 10pt; text-align: center; margin: 0pt 0"><font style="text-transform: uppercase">(</font>in thousands)</p>

<p style="font-size: 10pt; text-align: center; margin: 0pt 0">&nbsp;</p>

<div data-td-taggable-table="" data-td-statement-type="cash-flows"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%">
<tr style="vertical-align: bottom">
    <td style="font-size: 10pt">&nbsp;</td><td style="font-size: 10pt; font-weight: bold">&nbsp;</td>
    <td colspan="7" style="font-size: 10pt; font-weight: bold; text-align: center">Three Months&nbsp;Ended&nbsp;March 31,</td></tr>
<tr style="vertical-align: bottom">
    <td style="font-size: 10pt">&nbsp;</td><td style="font-size: 10pt; font-weight: bold; border-bottom: Black 1pt solid">&nbsp;</td>
    <td colspan="3" style="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2018<br> (unaudited)</td><td style="font-size: 10pt; font-weight: bold; border-bottom: Black 1pt solid">&nbsp;</td>
    <td colspan="3" style="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2017<br> (unaudited)</td></tr>
<tr style="vertical-align: bottom">
    <td style="font-size: 10pt; font-weight: bold">Operating activities</td><td style="font-size: 10pt">&nbsp;</td>
    <td colspan="3" style="font-size: 10pt">&nbsp;</td><td style="font-size: 10pt">&nbsp;</td>
    <td colspan="3" style="font-size: 10pt">&nbsp;</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="width: 70%; font-size: 10pt; text-align: left">Net loss</td><td style="width: 1%; font-size: 10pt">&nbsp;</td>
    <td style="width: 1%; font-size: 10pt; text-align: left">$</td><td style="width: 12%; font-size: 10pt; text-align: right">(4,069</td><td style="width: 1%; font-size: 10pt; text-align: left">)</td><td style="width: 1%; font-size: 10pt">&nbsp;</td>
    <td style="width: 1%; font-size: 10pt; text-align: left">$</td><td style="width: 12%; font-size: 10pt; text-align: right">(10,563</td><td style="width: 1%; font-size: 10pt; text-align: left">)</td></tr>
<tr style="vertical-align: bottom; background-color: White">
    <td style="font-size: 10pt; text-align: left">Adjustments to reconcile net loss to net cash used in operating activities:</td><td style="font-size: 10pt">&nbsp;</td>
    <td style="font-size: 10pt; text-align: left">&nbsp;</td><td style="font-size: 10pt; text-align: right">&nbsp;</td><td style="font-size: 10pt; text-align: left">&nbsp;</td><td style="font-size: 10pt">&nbsp;</td>
    <td style="font-size: 10pt; text-align: left">&nbsp;</td><td style="font-size: 10pt; text-align: right">&nbsp;</td><td style="font-size: 10pt; text-align: left">&nbsp;</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font-size: 10pt; padding-left: 10pt">Depreciation</td><td style="font-size: 10pt">&nbsp;</td>
    <td style="font-size: 10pt; text-align: left">&nbsp;</td><td style="font-size: 10pt; text-align: right">588</td><td style="font-size: 10pt; text-align: left">&nbsp;</td><td style="font-size: 10pt">&nbsp;</td>
    <td style="font-size: 10pt; text-align: left">&nbsp;</td><td style="font-size: 10pt; text-align: right">296</td><td style="font-size: 10pt; text-align: left">&nbsp;</td></tr>
<tr style="vertical-align: bottom; background-color: White">
    <td style="font-size: 10pt; text-align: left; padding-left: 10pt">Share-based compensation expense</td><td style="font-size: 10pt">&nbsp;</td>
    <td style="font-size: 10pt; text-align: left">&nbsp;</td><td style="font-size: 10pt; text-align: right">110</td><td style="font-size: 10pt; text-align: left">&nbsp;</td><td style="font-size: 10pt">&nbsp;</td>
    <td style="font-size: 10pt; text-align: left">&nbsp;</td><td style="font-size: 10pt; text-align: right">724</td><td style="font-size: 10pt; text-align: left">&nbsp;</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font-size: 10pt; text-align: left; padding-left: 10pt">Changes in operating assets and liabilities:</td><td style="font-size: 10pt">&nbsp;</td>
    <td style="font-size: 10pt; text-align: left">&nbsp;</td><td style="font-size: 10pt; text-align: right">&nbsp;</td><td style="font-size: 10pt; text-align: left">&nbsp;</td><td style="font-size: 10pt">&nbsp;</td>
    <td style="font-size: 10pt; text-align: left">&nbsp;</td><td style="font-size: 10pt; text-align: right">&nbsp;</td><td style="font-size: 10pt; text-align: left">&nbsp;</td></tr>
<tr style="vertical-align: bottom; background-color: White">
    <td style="font-size: 10pt; text-align: left; padding-left: 20pt">Prepaid expenses and other current assets</td><td style="font-size: 10pt">&nbsp;</td>
    <td style="font-size: 10pt; text-align: left">&nbsp;</td><td style="font-size: 10pt; text-align: right">232</td><td style="font-size: 10pt; text-align: left">&nbsp;</td><td style="font-size: 10pt">&nbsp;</td>
    <td style="font-size: 10pt; text-align: left">&nbsp;</td><td style="font-size: 10pt; text-align: right">375</td><td style="font-size: 10pt; text-align: left">&nbsp;</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font-size: 10pt; text-align: left; padding-left: 20pt">Accounts payable</td><td style="font-size: 10pt">&nbsp;</td>
    <td style="font-size: 10pt; text-align: left">&nbsp;</td><td style="font-size: 10pt; text-align: right">(596</td><td style="font-size: 10pt; text-align: left">)</td><td style="font-size: 10pt">&nbsp;</td>
    <td style="font-size: 10pt; text-align: left">&nbsp;</td><td style="font-size: 10pt; text-align: right">(1,835</td><td style="font-size: 10pt; text-align: left">)</td></tr>
<tr style="vertical-align: bottom; background-color: White">
    <td style="font-size: 10pt; text-align: left; padding-left: 20pt">Accrued expenses</td><td style="font-size: 10pt">&nbsp;</td>
    <td style="font-size: 10pt; text-align: left">&nbsp;</td><td style="font-size: 10pt; text-align: right">212</td><td style="font-size: 10pt; text-align: left">&nbsp;</td><td style="font-size: 10pt">&nbsp;</td>
    <td style="font-size: 10pt; text-align: left">&nbsp;</td><td style="font-size: 10pt; text-align: right">(905</td><td style="font-size: 10pt; text-align: left">)</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font-size: 10pt; text-align: left; padding-bottom: 1pt; padding-left: 20pt">Deferred rent</td><td style="font-size: 10pt; border-bottom: Black 1pt solid">&nbsp;</td>
    <td style="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</td><td style="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">(3</td><td style="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">)</td><td style="font-size: 10pt; border-bottom: Black 1pt solid">&nbsp;</td>
    <td style="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</td><td style="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">-</td><td style="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</td></tr>
<tr style="vertical-align: bottom; background-color: White">
    <td style="font-size: 10pt; text-align: left">Net cash used in operating activities</td><td style="font-size: 10pt">&nbsp;</td>
    <td style="font-size: 10pt; text-align: left">&nbsp;</td><td style="font-size: 10pt; text-align: right">(3,526</td><td style="font-size: 10pt; text-align: left">)</td><td style="font-size: 10pt">&nbsp;</td>
    <td style="font-size: 10pt; text-align: left">&nbsp;</td><td style="font-size: 10pt; text-align: right">(11,908</td><td style="font-size: 10pt; text-align: left">)</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font-size: 10pt">&nbsp;</td><td style="font-size: 10pt">&nbsp;</td>
    <td style="font-size: 10pt; text-align: left">&nbsp;</td><td style="font-size: 10pt; text-align: right">&nbsp;</td><td style="font-size: 10pt; text-align: left">&nbsp;</td><td style="font-size: 10pt">&nbsp;</td>
    <td style="font-size: 10pt; text-align: left">&nbsp;</td><td style="font-size: 10pt; text-align: right">&nbsp;</td><td style="font-size: 10pt; text-align: left">&nbsp;</td></tr>
<tr style="vertical-align: bottom; background-color: White">
    <td style="font-size: 10pt; font-weight: bold; text-align: left">Investing activities</td><td style="font-size: 10pt">&nbsp;</td>
    <td style="font-size: 10pt; text-align: left">&nbsp;</td><td style="font-size: 10pt; text-align: right">&nbsp;</td><td style="font-size: 10pt; text-align: left">&nbsp;</td><td style="font-size: 10pt">&nbsp;</td>
    <td style="font-size: 10pt; text-align: left">&nbsp;</td><td style="font-size: 10pt; text-align: right">&nbsp;</td><td style="font-size: 10pt; text-align: left">&nbsp;</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt">Purchase of property and equipment</td><TD STYLE="font-size: 10pt; border-bottom: Black 1pt solid">&nbsp;</td>
    <TD STYLE="font-size: 10pt; text-align: left; border-bottom: Black 1pt solid">&nbsp;</td><TD STYLE="font-size: 10pt; text-align: right; border-bottom: Black 1pt solid">(34</td><TD STYLE="font-size: 10pt; text-align: left; border-bottom: Black 1pt solid">)</td><TD STYLE="font-size: 10pt; border-bottom: Black 1pt solid">&nbsp;</td>
    <TD STYLE="font-size: 10pt; text-align: left; border-bottom: Black 1pt solid">&nbsp;</td><TD STYLE="font-size: 10pt; text-align: right; border-bottom: Black 1pt solid">(607</td><TD STYLE="font-size: 10pt; text-align: left; border-bottom: Black 1pt solid">)</td></tr>
<tr style="vertical-align: bottom; background-color: White">
    <td style="font-size: 10pt; text-align: left">Net cash used in investing activities</td><td style="font-size: 10pt">&nbsp;</td>
    <td style="font-size: 10pt; text-align: left">&nbsp;</td><td style="font-size: 10pt; text-align: right">(34</td><td style="font-size: 10pt; text-align: left">)</td><td style="font-size: 10pt">&nbsp;</td>
    <td style="font-size: 10pt; text-align: left">&nbsp;</td><td style="font-size: 10pt; text-align: right">(607</td><td style="font-size: 10pt; text-align: left">)</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font-size: 10pt">&nbsp;</td><td style="font-size: 10pt">&nbsp;</td>
    <td style="font-size: 10pt; text-align: left">&nbsp;</td><td style="font-size: 10pt; text-align: right">&nbsp;</td><td style="font-size: 10pt; text-align: left">&nbsp;</td><td style="font-size: 10pt">&nbsp;</td>
    <td style="font-size: 10pt; text-align: left">&nbsp;</td><td style="font-size: 10pt; text-align: right">&nbsp;</td><td style="font-size: 10pt; text-align: left">&nbsp;</td></tr>
<tr style="vertical-align: bottom; background-color: White">
    <td style="font-size: 10pt; font-weight: bold; text-align: left">Financing activities</td><td style="font-size: 10pt">&nbsp;</td>
    <td style="font-size: 10pt; text-align: left">&nbsp;</td><td style="font-size: 10pt; text-align: right">&nbsp;</td><td style="font-size: 10pt; text-align: left">&nbsp;</td><td style="font-size: 10pt">&nbsp;</td>
    <td style="font-size: 10pt; text-align: left">&nbsp;</td><td style="font-size: 10pt; text-align: right">&nbsp;</td><td style="font-size: 10pt; text-align: left">&nbsp;</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font-size: 10pt; text-align: left">Issuance of common stock and warrants, net</td><td style="font-size: 10pt">&nbsp;</td>
    <td style="font-size: 10pt; text-align: left">&nbsp;</td><td style="font-size: 10pt; text-align: right">-</td><td style="font-size: 10pt; text-align: left">&nbsp;</td><td style="font-size: 10pt">&nbsp;</td>
    <td style="font-size: 10pt; text-align: left">&nbsp;</td><td style="font-size: 10pt; text-align: right">32,620</td><td style="font-size: 10pt; text-align: left">&nbsp;</td></tr>
<tr style="vertical-align: bottom; background-color: White">
    <td style="font-size: 10pt; text-align: left; padding-bottom: 1pt">Issuance of common stock under stock option plan</td><td style="font-size: 10pt; border-bottom: Black 1pt solid">&nbsp;</td>
    <td style="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</td><td style="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">201</td><td style="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</td><td style="font-size: 10pt; border-bottom: Black 1pt solid">&nbsp;</td>
    <td style="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</td><td style="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">93</td><td style="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font-size: 10pt; text-align: left">Net cash provided by financing activities</td><td style="font-size: 10pt">&nbsp;</td>
    <td style="font-size: 10pt; text-align: left">&nbsp;</td><td style="font-size: 10pt; text-align: right">201</td><td style="font-size: 10pt; text-align: left">&nbsp;</td><td style="font-size: 10pt">&nbsp;</td>
    <td style="font-size: 10pt; text-align: left">&nbsp;</td><td style="font-size: 10pt; text-align: right">32,713</td><td style="font-size: 10pt; text-align: left">&nbsp;</td></tr>
<tr style="vertical-align: bottom; background-color: White">
    <td style="font-size: 10pt; text-align: left; padding-bottom: 1pt">Effect of foreign exchange rate on cash and cash equivalents</td><td style="font-size: 10pt; border-bottom: Black 1pt solid">&nbsp;</td>
    <td style="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</td><td style="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">7</td><td style="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</td><td style="font-size: 10pt; border-bottom: Black 1pt solid">&nbsp;</td>
    <td style="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</td><td style="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">110</td><td style="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font-size: 10pt">&nbsp;</td><td style="font-size: 10pt">&nbsp;</td>
    <td style="font-size: 10pt; text-align: left">&nbsp;</td><td style="font-size: 10pt; text-align: right">&nbsp;</td><td style="font-size: 10pt; text-align: left">&nbsp;</td><td style="font-size: 10pt">&nbsp;</td>
    <td style="font-size: 10pt; text-align: left">&nbsp;</td><td style="font-size: 10pt; text-align: right">&nbsp;</td><td style="font-size: 10pt; text-align: left">&nbsp;</td></tr>
<tr style="vertical-align: bottom; background-color: White">
    <td style="font-size: 10pt; text-align: left">Net change in cash and cash equivalents</td><td style="font-size: 10pt">&nbsp;</td>
    <td style="font-size: 10pt; text-align: left">&nbsp;</td><td style="font-size: 10pt; text-align: right">(3,352</td><td style="font-size: 10pt; text-align: left">)</td><td style="font-size: 10pt">&nbsp;</td>
    <td style="font-size: 10pt; text-align: left">&nbsp;</td><td style="font-size: 10pt; text-align: right">20,308</td><td style="font-size: 10pt; text-align: left">&nbsp;</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font-size: 10pt; text-align: left; padding-bottom: 1pt">Cash and cash equivalents, beginning of period</td><td style="font-size: 10pt; border-bottom: Black 1pt solid">&nbsp;</td>
    <td style="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</td><td style="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">31,768</td><td style="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</td><td style="font-size: 10pt; border-bottom: Black 1pt solid">&nbsp;</td>
    <td style="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</td><td style="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">34,324</td><td style="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</td></tr>
<tr style="vertical-align: bottom; background-color: White">
    <td style="font-size: 10pt; text-align: left; padding-bottom: 2.25pt">Cash and cash equivalents, end of period</td><td style="font-size: 10pt; border-bottom: Black 2.25pt double">&nbsp;</td>
    <td style="border-bottom: Black 2.25pt double; font-size: 10pt; text-align: left">$</td><td style="border-bottom: Black 2.25pt double; font-size: 10pt; text-align: right">28,416</td><td style="border-bottom: Black 2.25pt double; font-size: 10pt; text-align: left">&nbsp;</td><td style="font-size: 10pt; border-bottom: Black 2.25pt double">&nbsp;</td>
    <td style="border-bottom: Black 2.25pt double; font-size: 10pt; text-align: left">$</td><td style="border-bottom: Black 2.25pt double; font-size: 10pt; text-align: right">54,632</td><td style="border-bottom: Black 2.25pt double; font-size: 10pt; text-align: left">&nbsp;</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font-size: 10pt">&nbsp;</td><td style="font-size: 10pt">&nbsp;</td>
    <td style="font-size: 10pt; text-align: left">&nbsp;</td><td style="font-size: 10pt; text-align: right">&nbsp;</td><td style="font-size: 10pt; text-align: left">&nbsp;</td><td style="font-size: 10pt">&nbsp;</td>
    <td style="font-size: 10pt; text-align: left">&nbsp;</td><td style="font-size: 10pt; text-align: right">&nbsp;</td><td style="font-size: 10pt; text-align: left">&nbsp;</td></tr>
<tr style="vertical-align: bottom; background-color: White">
    <td style="font-size: 10pt; font-weight: bold; text-align: left">Supplemental Information:</td><td style="font-size: 10pt">&nbsp;</td>
    <td style="font-size: 10pt; text-align: left">&nbsp;</td><td style="font-size: 10pt; text-align: right">&nbsp;</td><td style="font-size: 10pt; text-align: left">&nbsp;</td><td style="font-size: 10pt">&nbsp;</td>
    <td style="font-size: 10pt; text-align: left">&nbsp;</td><td style="font-size: 10pt; text-align: right">&nbsp;</td><td style="font-size: 10pt; text-align: left">&nbsp;</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font-size: 10pt; text-align: left">Accrued purchases of property and equipment</td><td style="font-size: 10pt">&nbsp;</td>
    <td style="font-size: 10pt; text-align: left">&nbsp;</td><td style="font-size: 10pt; text-align: right">25</td><td style="font-size: 10pt; text-align: left">&nbsp;</td><td style="font-size: 10pt">&nbsp;</td>
    <td style="font-size: 10pt; text-align: left">&nbsp;</td><td style="font-size: 10pt; text-align: right">101</td><td style="font-size: 10pt; text-align: left">&nbsp;</td></tr>
<tr style="vertical-align: bottom; background-color: White">
    <td style="font-size: 10pt; text-align: left">Receivable on issuance of common stock under stock option plan</td><td style="font-size: 10pt">&nbsp;</td>
    <td style="font-size: 10pt; text-align: left">&nbsp;</td><td style="font-size: 10pt; text-align: right">-</td><td style="font-size: 10pt; text-align: left">&nbsp;</td><td style="font-size: 10pt">&nbsp;</td>
    <td style="font-size: 10pt; text-align: left">&nbsp;</td><td style="font-size: 10pt; text-align: right">223</td><td style="font-size: 10pt; text-align: left">&nbsp;</td></tr>
</table></div>


<p style="font-size: 10pt; margin: 0pt 0">&nbsp;</p>

<p style="font-size: 10pt; margin: 0pt 0"><i>See accompanying notes. </i></p>

<p style="font-size: 10pt; margin: 0pt 0">&nbsp;</p>

<p style="font-size: 10pt; margin: 0pt 0">&nbsp;</p>

<p style="font-size: 10pt; margin: 0pt 0"></p>

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<p style="font-size: 10pt; margin: 0pt 0"></p>

<p style="font-size: 10pt; text-align: center; margin: 0pt 0"><b>XBiotech Inc. </b></p>

<p style="font-size: 10pt; text-align: center; margin: 0pt 0"></p>

<p style="font-size: 10pt; text-align: center; margin: 0pt 0"><a name="a_005"></a>Notes to Consolidated Financial Statements (Unaudited)</p>

<p style="font-size: 10pt; text-align: center; margin: 0pt 0">&nbsp;</p>

<p style="font-size: 10pt; margin: 0pt 0"><b></b></p><div data-td-statement-type="note"><p style="font-size: 10pt; margin: 0pt 0"><b>1.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Organization </b></p>

<p style="font-size: 10pt; margin: 0pt 0">&nbsp;</p>

<p style="font-size: 10pt; text-indent: 0.5in; margin: 0pt 0">XBiotech Inc. (&#8220;XBiotech&#8221; or &#8220;the Company&#8221;)
was incorporated in Canada on March&nbsp;22, 2005. XBiotech USA, Inc., a wholly-owned subsidiary of the Company, was incorporated
in Delaware, United States (&#8220;U.S.&#8221;) in November&nbsp;2007. XBiotech Switzerland AG, a wholly-owned subsidiary of the
Company, was incorporated in Zug, Switzerland in August&nbsp;2010. XBiotech Japan K.K., a wholly-owned subsidiary of the Company,
was incorporated in Tokyo, Japan in March 2013. XBiotech Germany GmbH, a wholly-owned subsidiary of the Company, was incorporated
in Germany in January 2014. The Company&#8217;s headquarters are located in Austin, Texas.</p>

<p style="font-size: 10pt; text-indent: 0.5in; margin: 0pt 0">&nbsp;</p>

<p style="font-size: 10pt; text-indent: 0.5in; margin: 0pt 0"></P>

<P STYLE="font-size: 10pt; text-indent: 0.5in; margin: 0pt 0">XBiotech Inc. is a pre-market biopharmaceutical company engaged
in discovering and developing True Human&trade; monoclonal antibodies for treating a variety of diseases. True Human&trade; monoclonal
antibodies are those which occur naturally in human beings&mdash;as opposed to being derived from animal immunization or otherwise
engineered. The Company believes that naturally occurring monoclonal antibodies have the potential to be safer and more effective
than their non-naturally occurring counterparts. XBiotech is focused on developing its True Human&trade; pipeline and manufacturing
system. The Company&rsquo;s pipeline consists of product candidates at various stages of development across an array of indications
including oncology, dermatology, other inflammatory conditions, such as peripheral vascular disease, type 2 diabetes, and infectious
diseases.</p>

<p style="font-size: 10pt; text-indent: 0.5in; margin: 0pt 0">&nbsp;</p></div><p style="font-size: 10pt; text-indent: 0.5in; margin: 0pt 0"></p>

<p style="font-size: 10pt; margin: 0pt 0"><b></b></p><div data-td-statement-type="note"><p style="font-size: 10pt; margin: 0pt 0"><b>2.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Significant Accounting Policies </b></p>

<p style="font-size: 10pt; margin: 0pt 0">&nbsp;</p>

<p style="font-size: 10pt; margin: 0pt 0"><b>Basis of Presentation </b></p>

<p style="font-size: 10pt; margin: 0pt 0">&nbsp;</p>

<p style="font-size: 10pt; text-indent: 0.5in; margin: 0pt 0"></P>

<P STYLE="font-size: 10pt; text-indent: 0.5in; margin: 0pt 0">These consolidated financial statements have been prepared in conformity
with accounting principles generally accepted in the United States (&ldquo;US GAAP&rdquo;). In the opinion of management, the
accompanying consolidated financial statements reflect all adjustments (consisting only of normal recurring items) considered
necessary to present fairly the Company&rsquo;s financial position at March 31, 2018 and December 31, 2017, the results of its
operations and comprehensive loss for the three month periods ended March 31, 2018 and 2017, and the cash flows for the three
month periods ended March 31, 2018 and 2017.</p>

<p style="font-size: 10pt; text-indent: 0.5in; margin: 0pt 0">&nbsp;</p>

<p style="font-size: 10pt; margin: 0pt 0"><b>Basis of Consolidation </b></p>

<p style="font-size: 10pt; margin: 0pt 0">&nbsp;</p>

<p style="font-size: 10pt; text-indent: 0.5in; margin: 0pt 0">The consolidated financial statements include the accounts of the
Company and its wholly-owned subsidiaries. All significant intercompany transactions have been eliminated upon consolidation.</p>

<p style="font-size: 10pt; text-indent: 0.5in; margin: 0pt 0">&nbsp;</p>

<p style="font-size: 10pt; margin: 0pt 0"><b>Use of Estimates </b></p>

<p style="font-size: 10pt; margin: 0pt 0">&nbsp;</p>

<p style="font-size: 10pt; text-indent: 0.5in; margin: 0pt 0">The preparation of financial statements in accordance with accounting
principles generally accepted in the U.S. requires management to make estimates and assumptions that affect the reported values
of amounts in the financial statements and accompanying notes. Actual results could differ from those estimates.</p>

<p style="font-size: 10pt; text-indent: 0.5in; margin: 0pt 0">&nbsp;</p>

<p style="font-size: 10pt; margin: 0pt 0"><b>Research and Development Costs </b></p>

<p style="font-size: 10pt; margin: 0pt 0">&nbsp;</p>

<p style="font-size: 10pt; text-indent: 0.5in; margin: 0pt 0">All research and development costs are charged to expense as incurred.
Research and development costs include salaries and personnel-related costs, consulting fees, fees paid for contract clinical trial
research services, the costs of laboratory consumables, equipment and facilities, license fees and other external costs. Costs
incurred to acquire licenses for intellectual property to be used in research and development activities with no alternative future
use are expensed as incurred as research and development costs.</p>

<p style="font-size: 10pt; text-indent: 0.5in; margin: 0pt 0">&nbsp;</p>

<p style="font-size: 10pt; text-indent: 0.5in; margin: 0pt 0">Nonrefundable advance payments for goods or services to be received
in the future for use in research and development activities are deferred and capitalized. The capitalized amounts are expensed
as the related goods are delivered or the services are performed.</p>

<p style="font-size: 10pt; text-indent: 0.5in; margin: 0pt 0">&nbsp;</p>

<p style="font-size: 10pt; margin: 0pt 0"><b>Share-Based Compensation </b></p>

<p style="font-size: 10pt; margin: 0pt 0">&nbsp;</p>

<p style="font-size: 10pt; text-indent: 0.5in; margin: 0pt 0"></P>

<P STYLE="font-size: 10pt; text-indent: 0.5in; margin: 0pt 0">The Company accounts for its share-based compensation awards in
accordance with ASC Topic 718, <I>Compensation-Stock Compensation</I> (&ldquo;ASC 718&rdquo;). ASC 718 requires all share-based
payments to employees, including grants of employee stock options, to be recognized in the statements of operations based on their
grant date fair values. For stock options granted to employees and to members of the board of directors for their services on
the board of directors, the Company estimates the grant date fair value of each option award using the Black-Scholes option-pricing
model. The use of the Black-Scholes option-pricing model requires management to make assumptions with respect to the expected
term of the option, the expected volatility of the common stock consistent with the expected life of the option, risk-free interest
rates and expected dividend yields of the common stock. To determine the fair value of its common stock, the Company uses the
closing price of the Company&rsquo;s common stock as reported by NASDAQ. For awards subject to service-based vesting conditions,
the Company recognizes share-based compensation expense, equal to the grant date fair value of stock options on a straight-line
basis over the requisite service period. The Company accounts for forfeitures as they occur rather than on an estimated basis.</p>

<p style="font-size: 10pt; text-indent: 0.5in; margin: 0pt 0">&nbsp;</P>

<P STYLE="font-size: 10pt; text-indent: 0.5in; margin: 0pt 0"></P></DIV>

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<DIV><P STYLE="font-size: 10pt; text-indent: 0.5in; margin: 0pt 0"></P></DIV>



<DIV><P STYLE="font-size: 10pt; text-indent: 0.5in; margin: 0pt 0"></P>

<P STYLE="font-size: 10pt; text-indent: 0.5in; margin: 0pt 0">&nbsp;</p>

<p style="font-size: 10pt; text-indent: 0.5in; margin: 0pt 0">Share-based compensation expense recognized for the three months
ended March 31, 2018 and 2017 was included in the following line items on the Consolidated Statements of Operations (in thousands).</p>

<p style="font-size: 10pt; text-indent: 0.5in; margin: 0pt 0">&nbsp;</p>

<div data-td-taggable-table=""><table cellpadding="0" cellspacing="0" align="CENTER" style="border-collapse: collapse; width: 80%">
<tr style="vertical-align: bottom">
    <td style="font-size: 10pt">&nbsp;</td><td style="font-size: 10pt; font-weight: bold; border-bottom: Black 1pt solid">&nbsp;</td>
    <td colspan="7" style="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Three Months Ended<br> March 31,</td></tr>
<tr style="vertical-align: bottom">
    <td style="font-size: 10pt">&nbsp;</td><td style="font-size: 10pt; font-weight: bold; border-bottom: Black 1pt solid">&nbsp;</td>
    <td colspan="3" style="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2018</td><td style="font-size: 10pt; font-weight: bold; border-bottom: Black 1pt solid">&nbsp;</td>
    <td colspan="3" style="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2017</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="width: 64%; font-size: 10pt; text-align: left">Research and development</td><td style="width: 1%; font-size: 10pt">&nbsp;</td>
    <td style="width: 1%; font-size: 10pt; text-align: left">$</td><td style="width: 15%; font-size: 10pt; text-align: right">88</td><td style="width: 1%; font-size: 10pt; text-align: left">&nbsp;</td><td style="width: 1%; font-size: 10pt">&nbsp;</td>
    <td style="width: 1%; font-size: 10pt; text-align: left">$</td><td style="width: 15%; font-size: 10pt; text-align: right">294</td><td style="width: 1%; font-size: 10pt; text-align: left">&nbsp;</td></tr>
<tr style="vertical-align: bottom; background-color: White">
    <td style="font-size: 10pt; text-align: left; padding-bottom: 1pt">General and administrative</td><td style="font-size: 10pt; border-bottom: Black 1pt solid">&nbsp;</td>
    <td style="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</td><td style="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">22</td><td style="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</td><td style="font-size: 10pt; border-bottom: Black 1pt solid">&nbsp;</td>
    <td style="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</td><td style="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">430</td><td style="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font-size: 10pt; text-align: left; padding-bottom: 2.25pt">Total share-based compensation expense</td><td style="font-size: 10pt; border-bottom: Black 2.25pt double">&nbsp;</td>
    <td style="border-bottom: Black 2.25pt double; font-size: 10pt; text-align: left">$</td><td style="border-bottom: Black 2.25pt double; font-size: 10pt; text-align: right">110</td><td style="border-bottom: Black 2.25pt double; font-size: 10pt; text-align: left">&nbsp;</td><td style="font-size: 10pt; border-bottom: Black 2.25pt double">&nbsp;</td>
    <td style="border-bottom: Black 2.25pt double; font-size: 10pt; text-align: left">$</td><td style="border-bottom: Black 2.25pt double; font-size: 10pt; text-align: right">724</td><td style="border-bottom: Black 2.25pt double; font-size: 10pt; text-align: left">&nbsp;</td></tr>
</table></div>


<p style="font-size: 10pt; margin: 0pt 0">&nbsp;</p>

<p style="font-size: 10pt; text-indent: 0.5in; margin: 0pt 0">The fair value of each option is estimated on the date of grant using
the Black-Scholes method with the following assumptions:</p>

<p style="font-size: 10pt; text-indent: 0.5in; margin: 0pt 0">&nbsp;</p>

<div data-td-taggable-table=""><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%">
<tr style="vertical-align: bottom">
    <td style="font-size: 10pt">&nbsp;<br>
&nbsp;</td>
    <td style="font-size: 10pt">&nbsp;<b><br>
    &nbsp;</b></td>
    <td colspan="8" style="font-size: 10pt; text-align: center"><b>Three Months Ended<br>
    March 31,</b></td>
</tr>
<tr style="vertical-align: bottom">
    <td style="font-size: 10pt">&nbsp;</td><td style="font-size: 10pt; border-bottom: Black 1pt solid">&nbsp;</td>
    <td colspan="3" style="font-size: 10pt; text-align: center; border-bottom: Black 1pt solid">2<b>018</b></td><td style="font-size: 10pt; border-bottom: Black 1pt solid; text-align: center"><b>&nbsp;</b></td>
    <td colspan="4" style="font-size: 10pt; text-align: center; border-bottom: Black 1pt solid"><b>2017</b></td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font-size: 10pt; text-align: left">Dividend yield</td><td style="font-size: 10pt">&nbsp;</td>
    <td style="font-size: 10pt; text-align: center">&nbsp;</td>
    <td style="font-size: 10pt; text-align: center">-</td>
    <td style="font-size: 10pt; text-align: center">&nbsp;</td><td style="font-size: 10pt; text-align: center">&nbsp;</td>
    <td style="font-size: 10pt; text-align: center">&nbsp;</td>
    <td style="font-size: 10pt; text-align: center">-</td>
    <td style="font-size: 10pt; text-align: center">&nbsp;</td><td style="font-size: 10pt; text-align: center">&nbsp;</td></tr>
<tr style="vertical-align: bottom; background-color: White">
    <td style="width: 49%; font-size: 10pt; text-align: left">Expected volatility</td><td style="width: 1%; font-size: 10pt">&nbsp;</td>
    <td style="width: 8%; font-size: 10pt; text-align: center">67%</td>
    <td style="width: 8%; font-size: 10pt; text-align: center">-</td>
    <td style="width: 8%; font-size: 10pt; text-align: center">80%</td><td style="width: 1%; font-size: 10pt; text-align: center">&nbsp;</td>
    <td style="width: 8%; font-size: 10pt; text-align: center">65%</td>
    <td style="width: 8%; font-size: 10pt; text-align: center">-</td>
    <td style="width: 8%; font-size: 10pt; text-align: center">67%</td><td style="width: 1%; font-size: 10pt; text-align: center"></td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font-size: 10pt; text-align: left">Risk-free interest rate</td><td style="font-size: 10pt">&nbsp;</td>
    <td style="font-size: 10pt; text-align: center">2.38%</td>
    <td style="font-size: 10pt; text-align: center">-</td>
    <td style="font-size: 10pt; text-align: center">2.71%</td><td style="font-size: 10pt; text-align: center">&nbsp;</td>
    <td style="font-size: 10pt; text-align: center">2.11%</td>
    <td style="font-size: 10pt; text-align: center">-</td>
    <td style="font-size: 10pt; text-align: center">2.41%</td><td style="font-size: 10pt; text-align: center"></td></tr>
<tr style="vertical-align: bottom; background-color: White">
    <td style="font-size: 10pt; text-align: left">Expected life (in years)</td><td style="font-size: 10pt">&nbsp;</td>
    <td style="font-size: 10pt; text-align: center">6.0</td>
    <td style="font-size: 10pt; text-align: center">-</td>
    <td style="font-size: 10pt; text-align: center">10</td><td style="font-size: 10pt; text-align: center">&nbsp;</td>
    <td style="font-size: 10pt; text-align: center">6.25</td>
    <td style="font-size: 10pt; text-align: center">-</td>
    <td style="font-size: 10pt; text-align: center">10</td><td style="font-size: 10pt; text-align: center">&nbsp;</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font-size: 10pt">Weighted-average grant date fair value per share</td><td style="font-size: 10pt">&nbsp;</td>
    <td style="font-size: 10pt; text-align: center">&nbsp;</td>
    <td style="font-size: 10pt; text-align: center">$3.02</td>
    <td style="font-size: 10pt; text-align: center">&nbsp;</td><td style="font-size: 10pt; text-align: center">&nbsp;</td>
    <td style="font-size: 10pt; text-align: center">&nbsp;</td>
    <td style="font-size: 10pt; text-align: center">$8.24</td>
    <td style="font-size: 10pt; text-align: center">&nbsp;</td><td style="font-size: 10pt; text-align: center">&nbsp;</td></tr>
</table></div>

<p style="font-size: 10pt; margin: 0pt 0">&nbsp;</p>

<p style="font-size: 10pt; margin: 0pt 0"><b>Cash and Cash Equivalents </b></p>

<p style="font-size: 10pt; margin: 0pt 0">&nbsp;</p>

<p style="font-size: 10pt; text-indent: 0.5in; margin: 0pt 0">The Company considers highly liquid investments with a maturity
of three months or less when purchased to be cash equivalents. Cash and cash equivalents consisted primarily of cash on deposit
in U.S., German, Swiss, Japanese and Canadian banks. Cash and cash equivalents are stated at cost which approximates fair value.</P>

<P STYLE="font-size: 10pt; text-indent: 0.5in; margin: 0pt 0">&nbsp;</p>

<p style="font-size: 10pt; margin: 0pt 0"><b>Concentrations of Credit Risk </b></p>

<p style="font-size: 10pt; margin: 0pt 0">&nbsp;</p>

<p style="font-size: 10pt; text-indent: 0.5in; margin: 0pt 0">Financial instruments that potentially subject the Company to credit
risk consist primarily of cash and cash equivalents. The Company holds these investments in highly-rated financial institutions,
and limits the amounts of credit exposure to any one financial institution. These amounts at times may exceed federally insured
limits. The Company has not experienced any credit losses in such accounts and does not believe it is exposed to any significant
credit risk on these funds. The Company has no off-balance sheet concentrations of credit risk, such as foreign currency exchange
contracts, option contracts or other hedging arrangements.</p>

<p style="font-size: 10pt; text-indent: 0.5in; margin: 0pt 0">&nbsp;</p>

<p style="font-size: 10pt; margin: 0pt 0"><b>Fair Value Measurements </b></p>

<p style="font-size: 10pt; margin: 0pt 0">&nbsp;</p>

<p style="font-size: 10pt; text-indent: 30.6pt; margin: 0pt 0">The Company follows ASC Topic 820, <i>Fair Value Measurements and
Disclosures</i>, which establishes a fair value hierarchy for those instruments measured at fair value that distinguishes between
assumptions based on market date (observable inputs) and the Company&#8217;s own assumptions (unobservable inputs). The hierarchy
consists of three levels:</p>

<p style="font-size: 10pt; text-indent: 30.6pt; margin: 0pt 0">&nbsp;</p>

<table cellpadding="0" cellspacing="0" width="100%" style="font-size: 10pt; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 30.6pt"></td><td style="width: 18.35pt">&#8226;</td><td>Level 1&#8212;Unadjusted quoted prices in active markets for identical assets or liabilities.</td></tr></table>

<p style="margin-top: 0pt; margin-bottom: 0pt; font-size: 10pt">&nbsp;</p>

<table cellpadding="0" cellspacing="0" width="100%" style="font-size: 10pt; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 30.6pt"></td><td style="width: 18.35pt">&#8226;</td><td>Level 2&#8212;Quoted prices for similar assets and liabilities in active markets, quoted prices in markets that are not active,
or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability.</td></tr></table>

<p style="margin-top: 0pt; margin-bottom: 0pt; font-size: 10pt">&nbsp;</p>

<table cellpadding="0" cellspacing="0" width="100%" style="font-size: 10pt; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 30.6pt"></td><td style="width: 18.35pt">&#8226;</td><td>Level 3&#8212;Unobservable inputs that reflect the Company&#8217;s own assumptions about the assumptions market participants
would use in pricing the asset or liability in which there is little, if any, market activity for the asset or liability at the
measurement date.</td></tr></table>

<p style="margin-top: 0pt; margin-bottom: 0pt; font-size: 10pt">&nbsp;</P>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font-size: 10pt"></P></DIV>

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<DIV><P STYLE="margin-top: 0pt; margin-bottom: 0pt; font-size: 10pt">&nbsp;</p>

<p style="font-size: 10pt; text-indent: 30.6pt; margin: 0pt 0">At March 31, 2018 and December 31, 2017, the Company did not have
any assets or liabilities that are measured at fair value on a recurring basis. The carrying amounts reflected in the balance sheets
for cash and cash equivalents, prepaid expenses and other current assets, accounts payable, and accrued expenses approximate their
fair values at March 31, 2018 and December 31, 2017, due to their short-term nature.</p>

<p style="font-size: 10pt; text-indent: 30.6pt; margin: 0pt 0">&nbsp;</p>

<p style="font-size: 10pt; margin: 0pt 0"><b>Property and Equipment </b></p>

<p style="font-size: 10pt; margin: 0pt 0">&nbsp;</p>

<p style="font-size: 10pt; text-indent: 0.5in; margin: 0pt 0">Property and equipment, which consists of land, construction in process,
furniture and fixtures, computers and office equipment, scientific equipment, leasehold improvements, vehicles and building are
stated at cost and depreciated over the estimated useful lives of the assets, with the exception of land and construction in process
which are not depreciated, using the straight line method. The useful lives are as follows:</p>

<p style="font-size: 10pt; text-indent: 0.5in; margin: 0pt 0">&nbsp;</p>

<table cellspacing="0" cellpadding="0" style="font-size: 10pt; width: 100%; border-collapse: collapse">
<tr>
    <td style="vertical-align: top; padding-left: 30pt; font-size: 10pt; text-indent: -20pt; width: 28%"><font style="font-size: 10pt">&#8226;
    Furniture and fixtures</font></td>
    <td style="vertical-align: bottom; font-size: 10pt; width: 72%"><font style="font-size: 10pt">7 years</font></td></tr>
<tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td></tr>
<tr>
    <td style="vertical-align: top; padding-left: 30pt; font-size: 10pt; text-indent: -20pt"><font style="font-size: 10pt">&#8226;
    Office equipment</font></td>
    <td style="vertical-align: bottom; font-size: 10pt"><font style="font-size: 10pt">5 years</font></td></tr>
<tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td></tr>
<tr>
    <td style="vertical-align: top; padding-left: 30pt; font-size: 10pt; text-indent: -20pt"><font style="font-size: 10pt">&#8226;
    Leasehold improvements</font></td>
    <td style="vertical-align: bottom; font-size: 10pt"><font style="font-size: 10pt">Shorter of asset&#8217;s useful life or remaining lease term</font></td></tr>
<tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td></tr>
<tr>
    <td style="vertical-align: top; padding-left: 30pt; font-size: 10pt; text-indent: -20pt"><font style="font-size: 10pt">&#8226;
    Scientific equipment</font></td>
    <td style="vertical-align: bottom; font-size: 10pt"><font style="font-size: 10pt">5 years</font></td></tr>
<tr>
    <td style="font-size: 10pt">&nbsp;</td>
    <td style="font-size: 10pt">&nbsp;</td></tr>
<tr>
    <td style="vertical-align: top; font-size: 10pt; padding-left: 10pt">&#8226; Vehicles</td>
    <td style="vertical-align: bottom; font-size: 10pt"><font style="font-size: 10pt">5 years</font></td></tr>
<tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td></tr>
<tr>
    <td style="vertical-align: top; padding-left: 30pt; font-size: 10pt; text-indent: -20pt"><font style="font-size: 10pt">&#8226;
    Building</font></td>
    <td style="vertical-align: bottom; font-size: 10pt"><font style="font-size: 10pt">39 years</font></td></tr>
</table>
<p style="font-size: 10pt; text-indent: 0.5in; margin: 0pt 0">&nbsp;</p>

<p style="font-size: 10pt; text-indent: 0.5in; margin: 0pt 0">Costs of major additions and betterments are capitalized; maintenance
and repairs, which do not improve or extend the life of the respective assets, are charged to expense as incurred. Upon retirement
or sale, the cost of the disposed asset and the related accumulated depreciation are removed from the accounts and the resulting
gain or loss is recognized.</p>

<p style="font-size: 10pt; text-indent: 0.5in; margin: 0pt 0">&nbsp;</p>

<p style="font-size: 10pt; margin: 0pt 0"><b>Impairment of Long-Lived Assets </b></p>

<p style="font-size: 10pt; margin: 0pt 0">&nbsp;</p>

<p style="font-size: 10pt; text-indent: 0.5in; margin: 0pt 0">The Company periodically evaluates its long-lived assets for potential
impairment in accordance with ASC Topic 360, <i>Property, Plant and Equipment</i>. Potential impairment is assessed when there
is evidence that events or changes in circumstances indicate that the carrying amount of an asset may not be recovered. Recoverability
of these assets is assessed based on undiscounted expected future cash flows from the assets, considering a number of factors,
including past operating results, budgets and economic projections, market trends and product development cycles. If impairments
are identified, assets are written down to their estimated fair value. The Company has not recognized any impairment through March
31, 2018.</p>

<p style="font-size: 10pt; text-indent: 0.5in; margin: 0pt 0">&nbsp;</p>

<p style="font-size: 10pt; margin: 0pt 0"><b>Income Taxes</b></p>

<p style="font-size: 10pt; margin: 0pt 0">&nbsp;</p>

<p style="font-size: 10pt; text-indent: 0.5in; margin: 0pt 0">The Company makes estimates and judgments in determining the need
for a provision for income taxes, including the estimation of its taxable income or loss for the full fiscal year. The Company
has accumulated significant deferred tax assets that reflect the tax effects of net operating losses and tax credit carryovers
and temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts
used for income tax purposes. Realization of certain deferred tax assets is dependent upon future earnings. The Company is uncertain
about the timing and amount of any future earnings. Accordingly, the Company offsets these deferred tax assets with a valuation
allowance. The Company may in the future determine that certain deferred tax assets will likely be realized, in which case the
Company will reduce its valuation allowance in the period in which such determination is made. If the valuation allowance is reduced,
the Company may recognize a benefit from income taxes in its statement of operations in that period.</p>

<p style="font-size: 10pt; text-indent: 0.5in; margin: 0pt 0">&nbsp;</p>

<p style="font-size: 10pt; text-indent: 0.5in; margin: 0pt 0">The GAAP guidance requires recognition of the impact of a tax position
in our financial statements only if that position is more likely than not to be sustained upon examination by taxing authorities,
based on the technical merits of the position. Any interest and penalties related to uncertain tax positions will be reflected
in income tax expense. Determining the consolidated provision for income taxes involves judgments, estimates and the application
of complex tax regulations. We are required to provide for income taxes in each of the jurisdictions where we operate, including
estimated liabilities for uncertain tax positions. Although we believe that we have provided adequate liabilities for uncertain
tax positions, the actual liability resulting from examinations by taxing authorities could differ from the recorded income tax
liabilities and could result in additional income tax expense having a material impact on our consolidated results of operations.
Changes of estimates in our income tax liabilities are reflected in our income tax provision in the period in which the factors
resulting in the change to our estimate become known to us. &nbsp;We benefit from the tax credit incentives under the U.S. research
and experimentation tax credit extended to taxpayers engaged in qualified research and experimental activities while carrying on
a trade or business.</p>

<p style="font-size: 10pt; text-indent: 0.5in; margin: 0pt 0">&nbsp;</P>

<P STYLE="font-size: 10pt; text-indent: 0.5in; margin: 0pt 0"></P></DIV>

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<DIV><P STYLE="font-size: 10pt; text-indent: 0.5in; margin: 0pt 0">&nbsp;</p>

<p style="font-size: 10pt; text-indent: 0.5in; margin: 0pt 0">On December 22, 2017, the President of the United States signed into
law the Tax Cuts and Jobs Act, or TCJA, tax reform legislation. The TCJA makes significant changes in U.S. tax law including a
reduction in the corporate tax rates, changes to net operating loss carryforwards and carrybacks, and a repeal of the corporate
alternative minimum tax. The TCJA reduced the U.S. corporate tax rate from the current rate of 34 percent down to 21 percent starting
on January 1, 2018. As a result of the TCJA, the Company was required to revalue deferred tax assets and liabilities at 21 percent.
As of and for the year ended December 31, 2017, this revaluation resulted in a provision of $4.5 million to income tax expense
in continuing operations and a corresponding reduction in the valuation allowance.&nbsp; As a result, there was no impact to the
Company&#8217;s consolidated statements of comprehensive loss as a result of the reduction in tax rates.</p>

<p style="font-size: 10pt; text-indent: 0.5in; margin: 0pt 0">&nbsp;</p>

<p style="font-size: 10pt; text-indent: 0.5in; margin: 0pt 0">As the Company does not have all of the necessary information to
analyze all income tax effects of the TCJA, the Company will continue to make and refine calculations and estimates as additional
information is obtained, which could potentially affect the provisional amounts relating to the deferred income taxes, including
but not limited to deferred tax assets related to share-based compensation expenses. Where the Company has not yet been able to
make reasonable estimates of the impact of certain elements, the Company has not recorded any amounts related to those elements
and has continued accounting for them in accordance with ASC 740 on the basis of the tax laws in effect immediately prior to the
enactment of the TCJA.&nbsp; The Company expects to complete a detailed analysis no later than the fourth quarter of 2018.</p>

<p style="font-size: 10pt; text-indent: 0.5in; margin: 0pt 0">&nbsp;</p>

<p style="font-size: 10pt; margin: 0pt 0"><b>Foreign Currency Transactions </b></p>

<p style="font-size: 10pt; margin: 0pt 0">&nbsp;</p>

<p style="font-size: 10pt; text-indent: 0.5in; margin: 0pt 0"></P>

<P STYLE="font-size: 10pt; text-indent: 0.5in; margin: 0pt 0">Certain transactions are denominated in a currency other than the
Company&rsquo;s functional currency of the U.S. dollar, and the Company generates assets and liabilities that are fixed in terms
of the amount of foreign currency that will be received or paid. At each balance sheet date, the Company adjusts the assets and
liabilities to reflect the current exchange rate, resulting in a translation gain or loss. Transaction gains and losses are also
realized upon a settlement of a foreign currency transaction in determining net loss for the period in which the transaction is
settled.</p>

<p style="font-size: 10pt; text-indent: 0.5in; margin: 0pt 0">&nbsp;</p>

<p style="font-size: 10pt; margin: 0pt 0"><b>Comprehensive Income (Loss)</b></p>

<p style="font-size: 10pt; margin: 0pt 0">&nbsp;</p>

<p style="font-size: 10pt; text-indent: 0.5in; margin: 0pt 0">ASC Topic 220, <i>Comprehensive Income</i>, requires that all components
of comprehensive income (loss), including net income (loss), be reported in the financial statements in the period in which they
are recognized. Comprehensive income (loss) is defined as the change in equity during a period from transactions and other events
and circumstances from non-owner sources, including unrealized gains and losses on investments and foreign currency translation
adjustments.</p>

<p style="font-size: 10pt; text-indent: 0.5in; margin: 0pt 0">&nbsp;</p>

<p style="font-size: 10pt; margin: 0pt 0"><b>Segment and Geographic Information </b></p>

<p style="font-size: 10pt; margin: 0pt 0">&nbsp;</p>

<p style="font-size: 10pt; text-indent: 0.5in; margin: 0pt 0">Operating segments are identified as components of an enterprise
about which separate discrete financial information is available for evaluation by the chief operating decision maker, or decision
making group, in making decisions on how to allocate resources and assess performance. The Company&#8217;s chief operating decision
maker is the Chief Executive Officer. The Company and the chief operating decision maker view the Company&#8217;s operations and
manage its business as one operating segment. Substantially all of the Company&#8217;s operations are in the U.S. geographic segment.</p>

<p style="font-size: 10pt; text-indent: 0.5in; margin: 0pt 0">&nbsp;</p>

<p style="font-size: 10pt; margin: 0pt 0"><b>Net Loss Per Share </b></p>

<p style="font-size: 10pt; margin: 0pt 0">&nbsp;</p>

<p style="font-size: 10pt; text-indent: 0.5in; margin: 0pt 0">Net loss per share (&#8220;EPS&#8221;) is computed by dividing net
loss by the weighted average number of common shares outstanding during each period. Diluted EPS is computed by dividing net loss
by the weighted average number of common shares and common share equivalents outstanding (if dilutive) during each period. The
number of common share equivalents, which include stock options, is computed using the treasury stock method.</p>

<p style="font-size: 10pt; text-indent: 0.5in; margin: 0pt 0">&nbsp;</p>

<p style="font-size: 10pt; margin: 0pt 0"><b>Subsequent Events </b></p>

<p style="font-size: 10pt; margin: 0pt 0">&nbsp;</p>

<p style="font-size: 10pt; text-indent: 0.5in; margin: 0pt 0">The Company considered events or transactions occurring after the
balance sheet date but prior to the date the consolidated financial statements are available to be issued for potential recognition
or disclosure in its consolidated financial statements. We have evaluated subsequent events through the date of filing this Form
10-Q.</p>

<p style="font-size: 10pt; text-indent: 0.5in; margin: 0pt 0">&nbsp;</P>

<P STYLE="font-size: 10pt; text-indent: 0.5in; margin: 0pt 0"></P></DIV>

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<DIV><P STYLE="font-size: 10pt; text-indent: 0.5in; margin: 0pt 0">&nbsp;</p>

<p style="font-size: 10pt; margin: 0pt 0"><b>Recent Accounting Pronouncements </b></p>

<p style="font-size: 10pt; margin: 0pt 0">&nbsp;</P>

<P STYLE="font-size: 10pt; margin: 0pt 0"></P>

<P STYLE="font-size: 10pt; margin: 0pt 0"><I><U>Recently Issued Accounting Pronouncements</U></I></P>

<P STYLE="font-size: 10pt; margin: 0pt 0">&nbsp;</P>

<P STYLE="font-size: 10pt; text-indent: 0.5in; margin: 0pt 0">In February 2016, the FASB issued final guidance that will change
the accounting for leases, Accounting Standards Update (ASU) No. 2016-02, &ldquo;Leases.&rdquo; The FASB issued final guidance
that requires lessees to put most leases on their balance sheets but recognize expenses on their income statements in a manner
similar to today&rsquo;s accounting. The guidance also eliminates today&rsquo;s real estate-specific provisions for all entities.
The pronouncement will also require additional disclosures about the amount, timing and uncertainty of cash flows arising from
leases. For calendar-year public business entities and certain calendar-year not-for-profit entities and employee benefit plans,
the guidance is effective in 2019, and interim periods within that year, and early adoption is permitted. The adoption of this
standard will require the Company to record its operating leases on the balance sheet. The Company is currently evaluating the
impact of this pronouncement on the Company's consolidated financial statements.</p>

<p style="font-size: 10pt; text-indent: 0.5in; margin: 0pt 0">&nbsp;</p>



<p style="font-size: 10pt; text-indent: 0.5in; margin: 0pt 0"></p></div><p style="font-size: 10pt; text-indent: 0.5in; margin: 0pt 0"></p><div data-td-statement-type="note"><p style="font-size: 10pt; margin: 0pt 0"><font style="font-size: 10pt"><b>3.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Common
Stock </b></font></p>

<p style="font-size: 10pt; margin: 0pt 0">&nbsp;</p>

<p style="font-size: 10pt; text-align: justify; text-indent: 0.5in; margin: 0pt 0">Pursuant to its Articles, the Company has an
unlimited number of shares available for issuance with no par value.</p>

<p style="font-size: 10pt; text-align: justify; text-indent: 0.5in; margin: 0pt 0">&nbsp;</p>

<p style="font-size: 10pt; text-align: justify; text-indent: 0.5in; margin: 0pt 0">From January through December 2016, 204 thousand
shares of common stock were issued upon the exercise of stock options at a price of $0.74 to $19.09 per share for total proceeds
of $1.1 million.</p>

<p style="font-size: 10pt; text-align: justify; text-indent: 0.5in; margin: 0pt 0">&nbsp;</p>

<p style="font-size: 10pt; text-align: justify; text-indent: 0.5in; margin: 0pt 0">From November through December 2016, under the
Common Stock Sales Agreement with H.C. Wainwright &amp; Co. LLC, the Company sold 145 thousand shares of common stock at a price
between $13.60 to $14.17 per share for total proceeds of $1.8 million.</p>

<p style="font-size: 10pt; text-align: justify; text-indent: 0.5in; margin: 0pt 0">&nbsp;</p>

<p style="font-size: 10pt; text-align: justify; text-indent: 0.5in; margin: 0pt 0">In February 2017, under the Common Stock Sales
Agreement with H.C. Wainwright &amp; Co. LLC, the Company sold 87 thousand shares of common stock at a price between $12.09 to
$12.37 per share for total proceeds of $1.0 million.</p>

<p style="font-size: 10pt; text-align: justify; text-indent: 0.5in; margin: 0pt 0">&nbsp;</p>

<p style="font-size: 10pt; text-align: justify; text-indent: 0.5in; margin: 0pt 0">In March 2017, the Company sold 2.4 million
shares of common stock at a net price of $13.00 for total proceeds of approximately $31.6 million from investors.</p>

<p style="font-size: 10pt; text-align: justify; text-indent: 0.5in; margin: 0pt 0">&nbsp;</p>

<p style="font-size: 10pt; text-align: justify; text-indent: 0.5in; margin: 0pt 0">From January through December 2017, 290 thousand
shares of common stock were issued upon the exercise of stock options at a price of $2.50 to $14.71 per share for a total of $703
thousand.</p>

<p style="font-size: 10pt; text-align: justify; text-indent: 0.5in; margin: 0pt 0">&nbsp;</p>

<p style="font-size: 10pt; text-align: justify; text-indent: 0.5in; margin: 0pt 0"></P>

<P STYLE="font-size: 10pt; text-align: justify; text-indent: 0.5in; margin: 0pt 0">From January through March 2018, 81 thousand
shares of common stock were issued upon the exercise of stock options at a price of $2.50 per share for total proceeds of $201
thousand.</p>

<p style="font-size: 10pt; text-align: justify; text-indent: 0.5in; margin: 0pt 0">&nbsp;</p></div><p style="font-size: 10pt; text-align: justify; text-indent: 0.5in; margin: 0pt 0"></p>

<p style="font-size: 10pt; margin: 0pt 0"><b></b></p><div data-td-statement-type="note"><p style="font-size: 10pt; margin: 0pt 0"><b>4.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Common Stock Options </b></p>

<p style="font-size: 10pt; margin: 0pt 0">&nbsp;</p>

<p style="font-size: 10pt; text-indent: 0.5in; margin: 0pt 0">On November&nbsp;11, 2005 and April 1, 2015, the board of directors
of the Company adopted stock option plans (&#8220;the Plans&#8221;) pursuant to which the Company may grant incentive stock options
to directors, officers, employees or consultants of the Company or an affiliate or other persons as the Compensation Committee
may approve.</p>

<p style="font-size: 10pt; text-indent: 0.5in; margin: 0pt 0">&nbsp;</p>

<p style="font-size: 10pt; text-indent: 0.5in; margin: 0pt 0">All options will be non-transferable and may be exercised only by
the participant, or in the event of the death of the participant, a legal representative until the earlier of the options&#8217;
expiry date or the first anniversary of the participant&#8217;s death, or such other date as may be specified by the Compensation
Committee.</p>

<p style="font-size: 10pt; text-indent: 0.5in; margin: 0pt 0">&nbsp;</p>

<p style="font-size: 10pt; text-indent: 0.5in; margin: 0pt 0">The term of the options is at the discretion of the Compensation
Committee, but may not exceed 10 years from the grant date. The options expire on the earlier of the expiration date or the date
three months following the day on which the participant ceases to be an officer or employee of or consultant to the Company, or
in the event of the termination of the participant with cause, the date of such termination. Options held by non-employee Directors
have an exercise period coterminous with the term of the options.</p>

<p style="font-size: 10pt; text-indent: 0.5in; margin: 0pt 0">&nbsp;</p>

<p style="font-size: 10pt; text-indent: 0.5in; margin: 0pt 0">The number of common shares reserved for issuance to any one person
pursuant to the Plans shall not, in aggregate, exceed 5% of the total number of outstanding common shares. The exercise price per
common share under each option will be the fair market value of such shares at the time of the grant. Upon stock option exercise,
the Company issues new shares of common stock.</p>

<p style="font-size: 10pt; text-indent: 0.5in; margin: 0pt 0">&nbsp;</P>

<P STYLE="font-size: 10pt; text-indent: 0.5in; margin: 0pt 0"></P></DIV>

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<DIV><P STYLE="font-size: 10pt; text-indent: 0.5in; margin: 0pt 0">&nbsp;</p>

<p style="font-size: 10pt; text-indent: 0.5in; margin: 0pt 0">A summary of changes in common stock options issued under the Plans
is as follows:</p>

<p style="font-size: 10pt; text-indent: 0.5in; margin: 0pt 0">&nbsp;</p>

<div data-td-taggable-table=""><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%">
<tr style="vertical-align: bottom">
    <td style="font-size: 10pt">&nbsp;</td><td style="font-size: 10pt; font-weight: bold; border-bottom: Black 1pt solid">&nbsp;</td>
    <td colspan="3" style="font-size: 10pt; font-weight: bold; border-bottom: Black 1pt solid">Options</td><td style="font-size: 10pt; font-weight: bold; border-bottom: Black 1pt solid">&nbsp;</td>
    <td colspan="5" style="font-size: 10pt; font-weight: bold; border-bottom: Black 1pt solid; text-align: center">Exercise Price</td><td style="font-size: 10pt; font-weight: bold; border-bottom: Black 1pt solid">&nbsp;</td>
    <td colspan="3" style="font-size: 10pt; font-weight: bold; border-bottom: Black 1pt solid">Weighted-Average<br> Exercise Price</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="width: 43%; font-size: 10pt">Options outstanding at December 31, 2017</td><td style="width: 1%; font-size: 10pt">&nbsp;</td>
    <td style="width: 1%; font-size: 10pt; text-align: left">&nbsp;</td><td style="width: 12%; font-size: 10pt; text-align: right">5,303,624</td><td style="width: 1%; font-size: 10pt; text-align: left">&nbsp;</td><td style="width: 1%; font-size: 10pt">&nbsp;</td>
    <td style="width: 1%; font-size: 10pt; text-align: center">&nbsp;</td><td style="width: 8%; font-size: 10pt; text-align: center">$2.5</td>
    <td style="width: 8%; font-size: 10pt; text-align: center">-</td>
    <td style="width: 8%; font-size: 10pt; text-align: center">$21.99</td><td style="width: 1%; font-size: 10pt; text-align: center">&nbsp;</td><td style="width: 1%; font-size: 10pt">&nbsp;</td>
    <td style="width: 1%; font-size: 10pt; text-align: left">&nbsp;</td><td style="width: 12%; font-size: 10pt; text-align: right">7.69</td><td style="width: 1%; font-size: 10pt; text-align: left">&nbsp;</td></tr>
<tr style="vertical-align: bottom; background-color: White">
    <td style="font-size: 10pt; padding-left: 10pt">Granted</td><td style="font-size: 10pt">&nbsp;</td>
    <td style="font-size: 10pt; text-align: left">&nbsp;</td><td style="font-size: 10pt; text-align: right">208,500</td><td style="font-size: 10pt; text-align: left">&nbsp;</td><td style="font-size: 10pt">&nbsp;</td>
    <td style="font-size: 10pt; text-align: center">&nbsp;</td><td style="font-size: 10pt; text-align: center">4.01</td>
    <td style="font-size: 10pt; text-align: center">-</td>
    <td style="font-size: 10pt; text-align: center">4.92</td><td style="font-size: 10pt; text-align: center">&nbsp;</td><td style="font-size: 10pt">&nbsp;</td>
    <td style="font-size: 10pt; text-align: left">&nbsp;</td><td style="font-size: 10pt; text-align: right">4.19</td><td style="font-size: 10pt; text-align: left">&nbsp;</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font-size: 10pt; padding-left: 10pt">Exercised</td><td style="font-size: 10pt">&nbsp;</td>
    <td style="font-size: 10pt; text-align: left">&nbsp;</td><td style="font-size: 10pt; text-align: right">(80,500</td><td style="font-size: 10pt; text-align: left">)</td><td style="font-size: 10pt">&nbsp;</td>
    <td style="font-size: 10pt; text-align: center">&nbsp;</td><td style="font-size: 10pt; text-align: center">&nbsp;</td>
    <td style="font-size: 10pt; text-align: center">2.5</td>
    <td style="font-size: 10pt; text-align: center">&nbsp;</td><td style="font-size: 10pt; text-align: center">&nbsp;</td><td style="font-size: 10pt">&nbsp;</td>
    <td style="font-size: 10pt; text-align: left">&nbsp;</td><td style="font-size: 10pt; text-align: right">2.50</td><td style="font-size: 10pt; text-align: left">&nbsp;</td></tr>
<tr style="vertical-align: bottom; background-color: White">
    <td style="font-size: 10pt; padding-bottom: 1pt; padding-left: 10pt">Forfeitures</td><td style="font-size: 10pt; border-bottom: Black 1pt solid">&nbsp;</td>
    <td style="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</td><td style="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">(532,475</td><td style="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">)</td><td style="font-size: 10pt; border-bottom: Black 1pt solid">&nbsp;</td>
    <td style="border-bottom: Black 1pt solid; font-size: 10pt; text-align: center">&nbsp;</td><td style="border-bottom: Black 1pt solid; font-size: 10pt; text-align: center">2.50</td>
    <td style="border-bottom: Black 1pt solid; font-size: 10pt; text-align: center">-</td>
    <td style="border-bottom: Black 1pt solid; font-size: 10pt; text-align: center">19.09</td><td style="border-bottom: Black 1pt solid; font-size: 10pt; text-align: center">&nbsp;</td><td style="font-size: 10pt; border-bottom: Black 1pt solid">&nbsp;</td>
    <td style="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</td><td style="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">5.56</td><td style="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font-size: 10pt; padding-bottom: 2.25pt">Options outstanding at March 31, 2018</td><td style="font-size: 10pt; border-bottom: Black 2.25pt double">&nbsp;</td>
    <td style="border-bottom: Black 2.25pt double; font-size: 10pt; text-align: left">&nbsp;</td><td style="border-bottom: Black 2.25pt double; font-size: 10pt; text-align: right">4,899,149</td><td style="border-bottom: Black 2.25pt double; font-size: 10pt; text-align: left">&nbsp;</td><td style="font-size: 10pt; border-bottom: Black 2.25pt double">&nbsp;</td>
    <td style="border-bottom: Black 2.25pt double; font-size: 10pt; text-align: center">&nbsp;</td><td style="border-bottom: Black 2.25pt double; font-size: 10pt; text-align: center">$2.5</td>
    <td style="border-bottom: Black 2.25pt double; font-size: 10pt; text-align: center">-</td>
    <td style="border-bottom: Black 2.25pt double; font-size: 10pt; text-align: center">$21.99</td><td style="border-bottom: Black 2.25pt double; font-size: 10pt; text-align: center">&nbsp;</td><td style="font-size: 10pt; border-bottom: Black 2.25pt double">&nbsp;</td>
    <td style="border-bottom: Black 2.25pt double; font-size: 10pt; text-align: left">&nbsp;</td><td style="border-bottom: Black 2.25pt double; font-size: 10pt; text-align: right">7.80</td><td style="border-bottom: Black 2.25pt double; font-size: 10pt; text-align: left">&nbsp;</td></tr>
</table></div>



<p style="font-size: 10pt; text-indent: 0.5in; margin: 0pt 0">&nbsp;</p>

<p style="font-size: 10pt; text-indent: 0.5in; margin: 0pt 0">As of March 31, 2018, there was approximately $2.0 millions of unrecognized
compensation cost, related to stock options granted under the Plans which will be amortized to stock compensation expense over
the next 2.16 years.</p>

<p style="font-size: 10pt; text-indent: 0.5in; margin: 0pt 0">&nbsp;</p></div><p style="font-size: 10pt; text-indent: 0.5in; margin: 0pt 0"></p>

<p style="font-size: 10pt; margin: 0pt 0"><b></b></p><div data-td-statement-type="note"></div><p style="font-size: 10pt; margin: 0pt 0"><b>5. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Commitments and Contingencies</b></p>

<p style="font-size: 10pt; margin: 0pt 0">&nbsp;</p>

<p style="font-size: 10pt; text-indent: 0.5in; margin: 0pt 0">On January&nbsp;12, 2008, the Company entered a lease agreement to
lease its facility in Austin, Texas, U.S. On September&nbsp;15, 2010, the Company entered into a second lease agreement to lease
additional space in Austin, Texas, U.S. On March&nbsp;20, 2013, the company extended the lease for another 21 months with the same
terms and rental rates as the current leases. On February 28, 2015, the Company extended the leases for another four years with
two years early termination right. The future minimum lease payments are as follows as of March 31, 2018 (in thousands):</p>

<p style="font-size: 10pt; text-indent: 0.5in; margin: 0pt 0">&nbsp;</p>

<div data-td-taggable-table=""><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%">
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="width: 82%; font-size: 10pt; text-align: left; text-indent: -12pt; padding-left: 12pt">2018</td><td style="width: 1%; font-size: 10pt">&nbsp;</td>
    <td style="width: 1%; font-size: 10pt; text-align: left">$</td><td style="width: 15%; font-size: 10pt; text-align: right">354</td><td style="width: 1%; font-size: 10pt; text-align: left">&nbsp;</td></tr>
<tr style="vertical-align: bottom; background-color: White">
    <td style="font-size: 10pt; text-align: left; text-indent: -12pt; padding-left: 12pt">2019</td><td style="font-size: 10pt">&nbsp;</td>
    <td style="font-size: 10pt; text-align: left">$</td><td style="font-size: 10pt; text-align: right">79</td><td style="font-size: 10pt; text-align: left">&nbsp;</td></tr>
</table></div>

<p style="font-size: 10pt; text-indent: 0.5in; margin: 0pt 0">&nbsp;</p>

<p style="font-size: 10pt; text-indent: 0.5in; margin: 0pt 0">Rent expense was approximately $200 thousand and $186 thousand for
the three months ended March&nbsp;31, 2018 and 2017, respectively.</p>

<p style="font-size: 10pt; text-indent: 0.5in; margin: 0pt 0">&nbsp;</p>

<p style="font-size: 10pt; text-indent: 0.5in; margin: 0pt 0"></p>

<p style="font-size: 10pt; text-indent: 0.5in; margin: 0pt 0"></P>

<P STYLE="font-size: 10pt; text-indent: 0.5in; margin: 0pt 0">On December 1, 2015, a purported securities class action complaint
captioned Yogina Rezko v. XBiotech Inc., John Simard, Queena Han and WR Hambrecht &amp; Co., LLC was filed against the Company,
certain of its officers and directors and the underwriter for its initial public offering in the Superior Court for the State
of California, Los Angeles County.&nbsp; On December 2, 2015, a purported securities class action complaint captioned Linh Tran
v. XBiotech Inc., John Simard and Queena Han was filed against the Company and certain of its officers and directors in U.S. District
Court for the Western District of Texas. The lawsuits are based on substantially similar factual allegations and purport to be
class actions brought on behalf of purchasers of the Company's securities during the period from April 15, 2015 through November
23, 2015. The complaint filed in California state court alleges that the defendants violated the Securities Act of 1933, as amended
(the &quot;Securities Act&quot;), and the complaint filed in federal court alleges that the defendants violated the Securities
Exchange Act of 1934, as amended (the &quot;Exchange Act&quot;), in each case by making materially false and misleading statements
concerning the Company's Phase III clinical trial conducted in Europe to assess Xilonix&trade; as a treatment for colorectal cancer.
The California complaint purports to assert claims for violations of Sections 11, 12(a)(2) and 15 of the Securities Act, and the
federal complaint purports to assert claims for violation of Sections 10(b) and 20(a) of the Exchange Act and Rule 10b-5 promulgated
thereunder.&nbsp; Both complaints seek, on behalf of the purported class, an unspecified amount of monetary damages, interest,
fees and expenses of attorneys and experts, and other relief.</P>

<P STYLE="font-size: 10pt; text-indent: 0.5in; margin: 0pt 0">&nbsp;</P>

<div data-td-statement-type="note"><P STYLE="font-size: 10pt; text-indent: 0.5in; margin: 0pt 0">In September 2016, a stay was granted at the Superior Court for the
State of California, Los Angeles County, in Yogina Rezko v. XBiotech Inc., John Simard, Queena Han and WR Hambrecht &amp; Co.,
LLC, in light of the ongoing case, Linh Tran v. XBiotech Inc., John Simard and Queena Han, in the U.S. District Court for the Western
District of Texas, leaving plaintiffs with an opportunity re-file a complaint in Texas. In October 2016, the Texas securities class
action lawsuit was dismissed with prejudice. At the June 7, 2017, hearing at the Superior Court for the State of California, Los
Angeles County, the Company was granted a motion on the grounds of forum non conveniens. The judge ruled that the case belonged
in Texas, not in California. The case is nevertheless stayed, due to California procedural rules, and not dismissed.</P>

<P STYLE="font-size: 10pt; text-indent: 0.5in; margin: 0pt 0">&nbsp;</P>

<P STYLE="font-size: 10pt; text-indent: 0.5in; margin: 0pt 0">The plaintiffs re-filed their suit in Travis County district court,
located in Austin, Texas, on July 6, 2017. The Company subsequently removed the case to the U.S. District Court for the Western
District of Texas.&nbsp; Following a recent Supreme Court decision holding that the types of claims asserted in this action are
non-removable, the suit was remanded back to Travis County district court, where it remains pending.&nbsp; The Company believes
the claims asserted in the case are without merit and intends to mount a vigorous defense.</P></DIV>


<p style="font-size: 10pt; text-indent: 0.5in; margin: 0pt 0">&nbsp;</p>

<p style="font-size: 10pt; text-indent: 0.5in; margin: 0pt 0"></p>

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<p style="font-size: 10pt; text-indent: 0.5in; margin: 0pt 0">&nbsp;</p>

<p style="font-size: 10pt; text-indent: 0.5in; margin: 0pt 0"></p>

<table cellspacing="0" cellpadding="0" style="width: 100%; border-collapse: collapse; font-size: 10pt">
<tr style="vertical-align: top">
    <td style="width: 8%; text-align: justify"><b><a name="a_008"></a>Item 4.</b></td>
    <td style="width: 92%"><b>Controls and Procedures</b></td></tr>
</table>

<p style="font-size: 10pt; text-indent: 0.5in; margin: 0pt 0">&nbsp;</p>

<p style="font-size: 10pt; text-indent: 0.5in; margin: 0pt 0"></p>

<p style="font-size: 10pt; margin: 0pt 0"><b>Management's Evaluation of our Disclosure Controls and Procedures</b></p>

<p style="font-size: 10pt; margin: 0pt 0">&nbsp;</p>

<p style="font-size: 10pt; text-indent: 0.5in; margin: 0pt 0">As of the end of the period covered by this Quarterly Report on Form
10-Q, an evaluation was carried out by the Company&#8217;s management, with the participation of the Chief Executive Officer and
Principal Financial Officer, of the effectiveness of the Company&#8217;s disclosure controls and procedures, as defined in Rule
13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934. Based on such evaluation, the Chief Executive Officer and Principal
Financial Officer concluded that the Company&#8217;s disclosure controls and procedures are effective to ensure that information
required to be disclosed in the reports the Company files or furnishes under the Securities Exchange Act of 1934 is recorded, processed,
summarized and reported within the time periods specified in the SEC&#8217;s rules and regulations, and are operating in an effective
manner.</p>

<p style="font-size: 10pt; text-indent: 0.5in; margin: 0pt 0">&nbsp;</p>

<p style="font-size: 10pt; margin: 0pt 0"><b>Changes in Internal Control Over Financial Reporting </b></p>

<p style="font-size: 10pt; margin: 0pt 0">&nbsp;</p>

<p style="font-size: 10pt; text-indent: 0.5in; margin: 0pt 0">There was no change in our internal control over financial reporting
that occurred during the first quarter of the year ended December 31, 2018 that has materially affected, or is reasonably likely
to materially affect, our internal control over financial reporting.</p>

<p style="font-size: 10pt; text-indent: 0.5in; margin: 0pt 0">&nbsp;</p>

<p style="font-size: 10pt; margin: 0pt 0"><b>Limitations on Effectiveness of Controls and Procedures </b></p>

<p style="font-size: 10pt; margin: 0pt 0">&nbsp;</p>

<p style="font-size: 10pt; text-indent: 0.5in; margin: 0pt 0">In designing and evaluating the disclosure controls and procedures,
management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable
assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect
the fact that there are resource constraints and that management is required to apply judgment in evaluating the benefits of possible
controls and procedures relative to their costs.</p>

<p style="font-size: 10pt; text-indent: 27pt; margin: 0pt 0">&nbsp;</p>

<p style="font-size: 10pt; text-indent: 0.5in; margin: 0pt 0">&nbsp;</P>

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<P STYLE="font-size: 10pt; margin: 0pt 0"></p>

<p style="font-size: 10pt; margin: 0pt 0"><B>&nbsp;</B></p>

<p style="font-size: 10pt; margin: 0pt 0"><b><a name="a_015"></a>Item 6. Exhibits.</b></p>

<p style="font-size: 10pt; text-indent: 27pt; margin: 0pt 0">&nbsp;</p>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font-size: 10pt; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: center; font-size: 10pt; width: 12%"><A HREF="exh_311.htm"><FONT STYLE="font-size: 10pt">31.1</FONT></A></TD>
    <TD STYLE="text-indent: 27pt; font-size: 10pt; width: 88%"><A HREF="exh_311.htm"><FONT STYLE="font-size: 10pt">Certification
    of Principal Executive Officer Required Under Rule&nbsp;13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934, as
    amended.</FONT></A></TD></TR>
<TR>
    <TD COLSPAN="2" STYLE="text-indent: 27pt; font-size: 10pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: center; font-size: 10pt"><A HREF="exh_312.htm"><FONT STYLE="font-size: 10pt">31.2</FONT></A></TD>
    <TD STYLE="text-indent: 27pt; font-size: 10pt"><A HREF="exh_312.htm"><FONT STYLE="font-size: 10pt">Certification of Principal
    Financial Officer Required Under Rule&nbsp;13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934, as amended.</FONT></A></TD></TR>
</TABLE>

<p style="font-size: 10pt; margin: 0pt 0">&nbsp;</p>

<p style="font-size: 10pt; margin: 0pt 0">&nbsp;</P>

<P STYLE="font-size: 10pt; margin: 0pt 0">&nbsp;</P>

<P STYLE="font-size: 10pt; margin: 0pt 0">&nbsp;</P>

<P STYLE="font-size: 10pt; margin: 0pt 0">&nbsp;</P>

<P STYLE="font-size: 10pt; margin: 0pt 0"></P>

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<P STYLE="font-size: 10pt; margin: 0pt 0">&nbsp;</p>

<p style="font-size: 10pt; margin: 0pt 0"><b>SIGNATURES</b></p>

<p style="font-size: 10pt; margin: 0pt 0">&nbsp;</p>

<p style="font-size: 10pt; margin: 0pt 0">Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.</p>

<p style="font-size: 10pt; margin: 0pt 0">&nbsp;</p>

<table cellpadding="0" cellspacing="0" style="border-collapse: collapse; font: 10pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: top; text-align: left">
    <td style="text-indent: 20pt; width: 33%">Date: September 4, 2018</td>
    <td style="width: 34%">&nbsp;</td>
    <td style="width: 33%"><b>XBIOTECH INC.</b></td></tr>
<tr style="vertical-align: top; text-align: left">
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td></tr>
<tr style="vertical-align: top; text-align: left">
    <td>&nbsp;</td>
    <td style="text-align: right">By:&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</td>
    <td style="border-bottom: Black 1pt solid">/S/ John Simard</td></tr>
<tr style="vertical-align: top; text-align: left">
    <td style="text-indent: 20pt">&nbsp;</td>
    <td>&nbsp;</td>
    <td style="text-indent: 10pt">John Simard</td></tr>
<tr style="vertical-align: top; text-align: left">
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td style="text-indent: 10pt">President, Chief Executive Officer and Director <br>
(<i>Principal Executive
        Officer</i>)</td></tr>
<tr style="vertical-align: top; text-align: left">
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td nowrap>&nbsp;</td></tr>
<tr style="vertical-align: top; text-align: left">
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td nowrap>&nbsp;</td></tr>
<tr style="vertical-align: top; text-align: left">
    <td style="text-indent: 20pt">Date: September 4, 2018</td>
    <td style="text-align: right">By:&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</td>
    <td style="border-bottom: Black 1pt solid">/S/ Queena Han</td></tr>
<tr style="vertical-align: top; text-align: left">
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td style="text-indent: 10pt">Queena Han</td></tr>
<tr style="vertical-align: top; text-align: left">
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td nowrap style="text-indent: 10pt">Vice President, Finance and Human Resources, and Secretary <br>
(<i>Principal Financial Officer and Principal Accounting Officer</i>)</td></tr>
<tr style="vertical-align: top; text-align: left">
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td nowrap>&nbsp;</td></tr>
<tr style="vertical-align: top; text-align: left">
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td nowrap>&nbsp;</td></tr>
</table>

<p style="margin-top: 0; margin-bottom: 0">&nbsp;</p>

<p style="margin-top: 0; margin-bottom: 0">&nbsp;</p>

<p style="margin-top: 0; margin-bottom: 0">&nbsp;</p>



<p style="font-size: 10pt; margin: 0pt 0">&nbsp;</p>

<p style="font-size: 10pt; margin-top: 0pt; text-align: center; margin-bottom: 0pt">17</p>

<p style="font-size: 10pt; margin: 0pt 0"></p>

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<p style="font-size: 10pt; margin: 0pt 0"></p>


</body></html>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31.1
<SEQUENCE>2
<FILENAME>exh_311.htm
<DESCRIPTION>EXHIBIT 31.1
<TEXT>
<HTML>
<HEAD>
     <TITLE></TITLE>
</HEAD>
<BODY STYLE="font: 10pt Times New Roman, Times, Serif">

<P STYLE="margin: 0; text-align: right"><B>Exhibit 31.1</B></P>

<P STYLE="margin: 0; text-align: right"><B>&nbsp;</B></P>

<P STYLE="margin-top: 0; margin-bottom: 0; text-align: center"><B>CERTIFICATIONS</B></P>

<P STYLE="margin-top: 0; margin-bottom: 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="margin-top: 0; margin-bottom: 0; text-align: left"></P>

<P STYLE="font-size: 10pt; line-height: 120%; text-align: justify; margin: 0pt 0">I, John Simard, certify that:</P>

<P STYLE="font-size: 10pt; line-height: 120%; text-align: justify; margin: 0pt 0">&nbsp;</P>

<P STYLE="font-size: 10pt; line-height: 120%; text-align: justify; margin: 0pt 0">I have reviewed this quarterly Report on Form
10-Q of XBiotech Inc.;</P>

<P STYLE="font-size: 10pt; line-height: 120%; text-align: justify; margin: 0pt 0">&nbsp;</P>

<P STYLE="font-size: 10pt; line-height: 120%; text-align: justify; margin: 0pt 0">Based on my knowledge, this report does not contain
any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading with respect to the period covered by this report;</P>

<P STYLE="font-size: 10pt; line-height: 120%; text-align: justify; margin: 0pt 0">&nbsp;</P>

<P STYLE="font-size: 10pt; line-height: 120%; text-align: justify; margin: 0pt 0">Based on my knowledge, the financial statements,
and other financial information included in this report, fairly present in all material respects the financial condition, results
of operations and cash flows of the registrant as of, and for, the periods presented in this report;</P>

<P STYLE="font-size: 10pt; line-height: 120%; text-align: justify; margin: 0pt 0">&nbsp;</P>

<P STYLE="font-size: 10pt; line-height: 120%; text-align: justify; margin: 0pt 0">The registrant's other certifying officer and
I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e)
and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the
registrant and have:</P>

<P STYLE="font-size: 10pt; line-height: 120%; text-align: justify; margin: 0pt 0">&nbsp;</P>

<P STYLE="font-size: 10pt; line-height: 120%; text-align: justify; margin: 0pt 0">Designed such disclosure controls and procedures,
or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating
to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during
the period in which this report is being prepared;</P>

<P STYLE="font-size: 10pt; line-height: 120%; text-align: justify; margin: 0pt 0">&nbsp;</P>

<P STYLE="font-size: 10pt; line-height: 120%; text-align: justify; margin: 0pt 0">Designed such internal control over financial
reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles;</P>

<P STYLE="font-size: 10pt; line-height: 120%; text-align: justify; margin: 0pt 0">&nbsp;</P>

<P STYLE="font-size: 10pt; line-height: 120%; text-align: justify; margin: 0pt 0">Evaluated the effectiveness of the registrant's
disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls
and procedures, as of the end of the period covered by this report based on such evaluation; and</P>

<P STYLE="font-size: 10pt; line-height: 120%; text-align: justify; margin: 0pt 0">&nbsp;</P>

<P STYLE="font-size: 10pt; line-height: 120%; text-align: justify; margin: 0pt 0">Disclosed in this report any change in the registrant&rsquo;s
internal control over financial reporting that occurred during the registrant&rsquo;s most recent fiscal quarter (the registrant&rsquo;s
fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect,
the registrant&rsquo;s internal control over financial reporting; and</P>

<P STYLE="font-size: 10pt; line-height: 120%; text-align: justify; margin: 0pt 0">&nbsp;</P>

<P STYLE="font-size: 10pt; line-height: 120%; text-align: justify; margin: 0pt 0">The registrant's other certifying officer and
I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors
and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):</P>

<P STYLE="font-size: 10pt; line-height: 120%; text-align: justify; margin: 0pt 0">&nbsp;</P>

<P STYLE="font-size: 10pt; line-height: 120%; text-align: justify; margin: 0pt 0">All significant deficiencies and material weaknesses
in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's
ability to record, process, summarize and report financial information; and</P>

<P STYLE="font-size: 10pt; line-height: 120%; text-align: justify; margin: 0pt 0">&nbsp;</P>

<P STYLE="font-size: 10pt; line-height: 120%; text-align: justify; margin: 0pt 0">Any fraud, whether or not material, that involves
management or other employees who have a significant role in the registrant's internal control over financial reporting.</P>

<P STYLE="font-size: 10pt; line-height: 120%; text-align: justify; margin: 0pt 0">&nbsp;</P>

<P STYLE="font-size: 10pt; line-height: 120%; text-align: justify; margin: 0pt 0">Date: September 4, 2018</P>

<P STYLE="font-size: 10pt; margin: 0pt 0 0pt 5pt">&nbsp;</P>

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    <TD STYLE="width: 49%">&nbsp;</TD>
    <TD STYLE="width: 51%">&nbsp;</TD>
    </TR>
<TR STYLE="vertical-align: top; text-align: left">
    <TD>&nbsp;</TD>
    <TD><U>/S/ John Simard</U></TD>
    </TR>
<TR STYLE="vertical-align: top; text-align: left">
    <TD>&nbsp;</TD>
    <TD>John Simard </TD>
    </TR>
<TR STYLE="vertical-align: top; text-align: left">
    <TD>&nbsp;</TD>
    <TD>Chief Executive Officer and </TD></TR>
<TR STYLE="vertical-align: top; text-align: left">
    <TD>&nbsp;</TD>
    <TD>President (Principal Executive Officer)</TD>
    </TR>
</TABLE>

<P STYLE="font-size: 10pt; margin: 0pt 0"></P>

<P STYLE="font-size: 10pt; margin: 0pt 0">&nbsp;</P>

<P STYLE="font-size: 10pt; text-indent: 7.9pt; margin: 0pt 0 0pt 216.7pt"></P>

<P STYLE="font-size: 10pt; text-indent: 7.9pt; margin: 0pt 0 0pt 216.7pt">&nbsp;</P>

<P STYLE="font-size: 10pt; line-height: 102%; margin: 0pt 122.75pt 0pt 224.6pt">&nbsp;</P>



<P STYLE="margin-top: 0; margin-bottom: 0; text-align: left"><B>&nbsp;</B></P>

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<DOCUMENT>
<TYPE>EX-31.2
<SEQUENCE>3
<FILENAME>exh_312.htm
<DESCRIPTION>EXHIBIT 31.2
<TEXT>
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<P STYLE="margin: 0; text-align: right"><B>Exhibit 31.2</B></P>

<P STYLE="margin: 0; text-align: right"><B>&nbsp;</B></P>

<P STYLE="margin-top: 0; margin-bottom: 0; text-align: center"><B>CERTIFICATIONS</B></P>

<P STYLE="margin-top: 0; margin-bottom: 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="margin-top: 0; margin-bottom: 0; text-align: left"></P>

<P STYLE="font-size: 10pt; line-height: 120%; text-align: justify; margin: 0pt 0">I, Queena Han, certify that:</P>

<P STYLE="font-size: 10pt; line-height: 120%; text-align: justify; margin: 0pt 0">&nbsp;</P>

<P STYLE="font-size: 10pt; line-height: 120%; text-align: justify; margin: 0pt 0">I have reviewed this quarterly Report on Form
10-Q of XBiotech Inc.;</P>

<P STYLE="font-size: 10pt; line-height: 120%; text-align: justify; margin: 0pt 0">&nbsp;</P>

<P STYLE="font-size: 10pt; line-height: 120%; text-align: justify; margin: 0pt 0">Based on my knowledge, this report does not contain
any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading with respect to the period covered by this report;</P>

<P STYLE="font-size: 10pt; line-height: 120%; text-align: justify; margin: 0pt 0">&nbsp;</P>

<P STYLE="font-size: 10pt; line-height: 120%; text-align: justify; margin: 0pt 0">Based on my knowledge, the financial statements,
and other financial information included in this report, fairly present in all material respects the financial condition, results
of operations and cash flows of the registrant as of, and for, the periods presented in this report;</P>

<P STYLE="font-size: 10pt; line-height: 120%; text-align: justify; margin: 0pt 0">&nbsp;</P>

<P STYLE="font-size: 10pt; line-height: 120%; text-align: justify; margin: 0pt 0">The registrant's other certifying officer and
I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e)
and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the
registrant and have:</P>

<P STYLE="font-size: 10pt; line-height: 120%; text-align: justify; margin: 0pt 0">&nbsp;</P>

<P STYLE="font-size: 10pt; line-height: 120%; text-align: justify; margin: 0pt 0">Designed such disclosure controls and procedures,
or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating
to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during
the period in which this report is being prepared;</P>

<P STYLE="font-size: 10pt; line-height: 120%; text-align: justify; margin: 0pt 0">&nbsp;</P>

<P STYLE="font-size: 10pt; line-height: 120%; text-align: justify; margin: 0pt 0">Designed such internal control over financial
reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles;</P>

<P STYLE="font-size: 10pt; line-height: 120%; text-align: justify; margin: 0pt 0">&nbsp;</P>

<P STYLE="font-size: 10pt; line-height: 120%; text-align: justify; margin: 0pt 0">Evaluated the effectiveness of the registrant's
disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls
and procedures, as of the end of the period covered by this report based on such evaluation; and</P>

<P STYLE="font-size: 10pt; line-height: 120%; text-align: justify; margin: 0pt 0">&nbsp;</P>

<P STYLE="font-size: 10pt; line-height: 120%; text-align: justify; margin: 0pt 0">Disclosed in this report any change in the registrant&rsquo;s
internal control over financial reporting that occurred during the registrant&rsquo;s most recent fiscal quarter (the registrant&rsquo;s
fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect,
the registrant&rsquo;s internal control over financial reporting; and</P>

<P STYLE="font-size: 10pt; line-height: 120%; text-align: justify; margin: 0pt 0">&nbsp;</P>

<P STYLE="font-size: 10pt; line-height: 120%; text-align: justify; margin: 0pt 0">The registrant's other certifying officer and
I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors
and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):</P>

<P STYLE="font-size: 10pt; line-height: 120%; text-align: justify; margin: 0pt 0">&nbsp;</P>

<P STYLE="font-size: 10pt; line-height: 120%; text-align: justify; margin: 0pt 0">All significant deficiencies and material weaknesses
in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's
ability to record, process, summarize and report financial information; and</P>

<P STYLE="font-size: 10pt; line-height: 120%; text-align: justify; margin: 0pt 0">&nbsp;</P>

<P STYLE="font-size: 10pt; line-height: 120%; text-align: justify; margin: 0pt 0">Any fraud, whether or not material, that involves
management or other employees who have a significant role in the registrant's internal control over financial reporting.</P>

<P STYLE="font-size: 10pt; line-height: 120%; text-align: justify; margin: 0pt 0">&nbsp;</P>

<P STYLE="font-size: 10pt; line-height: 120%; text-align: justify; margin: 0pt 0">Date: September 4, 2018</P>

<P STYLE="font-size: 10pt; line-height: 120%; text-align: justify; margin: 0pt 0">&nbsp;</P>

<P STYLE="font-size: 10pt; margin: 0pt 0 0pt 5pt"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top; text-align: left">
    <TD STYLE="width: 49%">&nbsp;</TD>
    <TD STYLE="width: 51%">&nbsp;</TD>
    </TR>
<TR STYLE="vertical-align: top; text-align: left">
    <TD>&nbsp;</TD>
    <TD><U>/S/Queena Han</U></TD>
    </TR>
<TR STYLE="vertical-align: top; text-align: left">
    <TD>&nbsp;</TD>
    <TD>Queena Han</TD>
    </TR>
<TR STYLE="vertical-align: top; text-align: left">
    <TD>&nbsp;</TD>
    <TD>Vice President, Finance and Human Resources and </TD></TR>
<TR STYLE="vertical-align: top; text-align: left">
    <TD>&nbsp;</TD>
    <TD>Secretary
(Principal Financial Officer)</TD></TR>
</TABLE>

<P STYLE="font-size: 10pt; margin: 0pt 0"></P>

<P STYLE="font-size: 10pt; margin: 0pt 0">&nbsp;</P>

<P STYLE="font-size: 10pt; margin: 0pt 0">&nbsp;</P>

<P STYLE="font-size: 10pt; margin: 0pt 0">&nbsp;</P>

<P STYLE="font-size: 10pt; margin: 0pt 0">&nbsp;</P>

<P STYLE="font-size: 10pt; margin: 0pt 0"></P>

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<P STYLE="font-size: 10pt; margin: 0pt 0"><B></B></P>




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