united states

Securities
and Exchange Commission

Washington,
D.C. 20549



FORM 20-F



| |  ̈ | REGISTRATION
                                         STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
| | - | ---------------------------------------------------------------------------------------------------------------------------------------

or

| | x | ANNUAL
                                         REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
| | - | -----------------------------------------------------------------------------------------------------------------------------

For the fiscal year ended: December 31, 2016

or

| |  ̈ | TRANSITION
                                         REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
| | - | ---------------------------------------------------------------------------------------------------------------------------------

or

| |  ̈ | SHELL
                                         COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
| | - | ------------------------------------------------------------------------------------------------------------------------------------



Commission file number: 001-31995



MEDICURE INC.

_________________________________________________________________________________

(Exact name of registrant as specified in its
charter)



Canada

_________________________________________________________________________________

(Jurisdiction of incorporation
or organization)



2 - 1250 Waverley Street, Winnipeg, Manitoba,
Canada R3T 6C6

_________________________________________________________________________________

(Address of principal executive
offices)



Dr. Albert D. Friesen, Tel: (204) 487-7412,
Fax: (204) 488-9823

2 - 1250 Waverley Street, Winnipeg, Manitoba,
Canada R3T 6C6

_________________________________________________________________________________

(Name, Telephone, E-mail
and/or Facsimile number and Address of Company Contact Person)



Securities registered or to be registered pursuant to Section 12(b)
of the Act:	None



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



Common Shares, without par value

_________________________________________________________________________________

(Title of Class)

Securities for which there is a reporting obligation pursuant to
Section 15(d) of the Act:	None



Indicate the number of outstanding shares
of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report:



At December 31, 2016 the registrant
had 15,532,408 common shares issued and outstanding



Indicate by check mark if the registrant is
a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.



|Yes |  ̈ | No | þ
|--- | - | -- | -



If this report is an annual or transition
report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934.



|Yes |  ̈ | No | þ
|--- | - | -- | -



Indicate by check mark whether the registrant
(1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.



|Yes | þ | No |  ̈
|--- | - | -- | -



Indicate by check mark whether the registrant
has submitted electronically and posted on its Web site, if any, every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required
to submit and post such files).



|Yes |  ̈ | No |  ̈
|--- | - | -- | -



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



Large Accelerated Filer   ̈    Accelerated Filer   ̈	     Non-Accelerated
Filer   þ



Indicate by check mark which basis of accounting
the registrant has used to prepare the financial statements included in this filing:



|US GAAP |  ̈ | International Financial Reporting        | Other |  ̈
|------- | - | ---------------------------------------- | ----- | -
|        |   | Standards as issued by the International |       |  
|        |   | Accounting Standards Board þ             |       |  



If “Other” has been checked in
response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow:



|Item 17 |  ̈ | Item 18 |  ̈
|------- | - | ------- | -



If this is an annual report, indicate by check
mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).



|Yes |  ̈ | No | þ
|--- | - | -- | -












TABLE OF CONTENTS



|GENERAL                                                       | 4 
|------------------------------------------------------------- | --
|                                                              |   
|GLOSSARY OF TERMS                                             | 4 
|                                                              |   
|FORWARD LOOKING STATEMENTS                                    | 5 
|                                                              |   
|PART I                                                        | 7 
|                                                              |   
|ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS | 7 
|A. Directors and Senior Management                            | 7 
|B. Advisers                                                   | 7 
|C. Auditors                                                   | 7 
|                                                              |   
|ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE               | 7 
|                                                              |   
|ITEM 3. KEY INFORMATION                                       | 7 
|A. Selected Financial Data                                    | 7 
|B. Capitalization and Indebtedness                            | 10
|C. Reasons for the Offer and Use of Proceeds                  | 11
|D. Risk Factors                                               | 11
|                                                              |   
|ITEM 4. INFORMATION ON THE COMPANY                            | 29
|A. History and Development of the Company                     | 29
|B. Business Overview                                          | 31
|C. Organizational Structure                                   | 42
|D. Property, Plant and Equipment                              | 43
|                                                              |   
|ITEM 4A. UNRESOLVED STAFF COMMENTS                            | 43
|                                                              |   
|ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS          | 43
|A. Operating Results                                          | 49
|B. Liquidity and Capital Resources                            | 55
|C. Research and Development, Patents and Licenses, Etc.       | 57
|D. Trend Information                                          | 61
|E. Off-balance Sheet Arrangements                             | 61
|F. Contractual Obligations                                    | 62
|G. Safe Harbor                                                | 66
|                                                              |   
|ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES            | 66
|A. Directors and Senior Management                            | 66
|B. Compensation                                               | 69
|C. Board Practices                                            | 70
|D. Employees                                                  | 81
|E. Share Ownership                                            | 81
|                                                              |   
|ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS     | 83
|A. Major Shareholders                                         | 83
|B. Related Party Transactions                                 | 85
|C. Interests of Experts and Counsel                           | 88
|ITEM 8. FINANCIAL INFORMATION                                 | 88
|A. Consolidated Statements or Other Financial Information     | 88
|B. Significant Changes                                        | 88
|ITEM 9. THE OFFERING AND LISTING                              | 89
|A. Listing Details                                            | 89
|B. Plan of Distribution                                       | 90





2









|C. Markets                                                                            | 90 
|------------------------------------------------------------------------------------- | ---
|D. Selling Shareholders                                                               | 90 
|E. Dilution                                                                           | 90 
|F. Expenses of the Issue                                                              | 90 
|ITEM 10. ADDITIONAL INFORMATION                                                       | 90 
|A. Share Capital                                                                      | 90 
|B. Memorandum and Articles of Association                                             | 90 
|C. Material Contracts                                                                 | 95 
|D. Exchange Controls                                                                  | 95 
|E. Taxation                                                                           | 95 
|F. Dividends and Paying Agents                                                        | 103
|G. Statement by Experts                                                               | 103
|H. Documents on Display                                                               | 103
|I. Subsidiary Information                                                             | 103
|                                                                                      |    
|ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                   | 103
|                                                                                      |    
|ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES                       | 104
|                                                                                      |    
|ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES                              | 104
|                                                                                      |    
|ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS | 104
|                                                                                      |    
|ITEM 15. CONTROLS AND PROCEDURES                                                      | 104
|                                                                                      |    
|ITEM 16. RESERVED                                                                     | 106
|                                                                                      |    
|ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT                                            | 106
|                                                                                      |    
|ITEM 16B. CODE OF ETHICS                                                              | 106
|                                                                                      |    
|ITEM 16C.  PRINCIPAL ACCOUNTANT FEES AND SERVICES                                     | 106
|                                                                                      |    
|ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES                  | 107
|                                                                                      |    
|ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS      | 107
|                                                                                      |    
|ITEM 16F. CHANGE IN REGISTRANT'S CERTIFYING ACCOUNTANT                                | 107
|                                                                                      |    
|ITEM 16G. CORPORATE GOVERNANCE                                                        | 107
|                                                                                      |    
|ITEM 16H.MINE SAFETY DISCLOSURE                                                       | 107
|                                                                                      |    
|PART III                                                                              | 107
|                                                                                      |    
|ITEM 17. FINANCIAL STATEMENTS                                                         | 107
|                                                                                      |    
|ITEM 18. FINANCIAL STATEMENTS                                                         | 107
|                                                                                      |    
|ITEM 19. EXHIBITS                                                                     | 162



3







GENERAL



As used in this Annual Report, the “Corporation”
or “Company” refers to “Medicure Inc.”, the company resulting from the amalgamation of Medicure Inc. and
Lariat Capital Inc., and “Medicure” refers to “Medicure Inc.” prior to its amalgamation with Lariat Capital
Inc. on December 22, 1999 pursuant to the Business Corporations Act (Alberta).



The Company uses the Canadian dollar as its
reporting currency. Unless otherwise indicated, all references to dollar amounts in this Annual Report are to Canadian dollars.
As of December 31, 2016, the rate for Canadian dollars was US $1.00 for CND $1.3427. See
also Item 3 – Key Information for more detailed currency and conversion information.



Except as noted, the information set forth
in this Annual Report is as of April 25, 2017 and all information included in this document should only be considered correct
as of such date.



GLOSSARY OF TERMS



The following words and phrases shall have
the meanings set forth below:



“2014 Apicore Transaction”
means the transaction occurring on July 3, 2014 whereby the Company acquired a minority interest in Apicore.



“2016 Apicore Transaction”
means the transaction occurring on December 1, 2016 whereby the Company acquired a majority interest in Apicore.



“angioplasty”means a surgical
procedure to repair a damaged blood vessel or unblock an artery;



“aNDA” means abbreviated new drug application,
which is submitted to the FDA;



“Apicore”means any one or more of Apicore LLC, Apicore US LLC, Apicore Inc., Apigen Investments
Limited, and Apicore Pharmaceuticals PVT Ltd., including any of their affiliates and subsidiaries, and if the context requires,
the pharmaceutical manufacturing business carried on by this group of companies;



“DMF” means drug master file, which is submitted
to the FDA;



“FDA”means the United
States Food and Drug Administration;



“GPIs” means glycoprotein GP IIb/IIIa inhibitors,
which are injectable platelet inhibitors used to treat

acute coronary syndromes
and related conditions and procedures;



“myocardial infarction”
means destruction of heart tissue resulting from obstruction of the blood supply to the heart muscle;



“sNDA” means supplemental new drug application,
which is submitted to the FDA;



“STEMI”
means ST Segment Elevation Myocardial Infarction, a type of heart attack



“TSX-V”means the TSX Venture
Exchange.



4







FORWARD LOOKING STATEMENTS



Medicure Inc. cautions readers that certain
important factors (including without limitation those set forth in this Form 20-F) may affect the Company’s actual results
in the future and could cause such results to differ materially from any forward-looking statements that may be deemed to have
been made in this Form 20-F annual report, or that are otherwise made by or on behalf of the Company. This Annual Report contains
forward-looking statements and information which may not be based on historical fact, which may be identified by the words “believes,”
“may,” “plan,” “will,” “estimate,” “continue,” “anticipates,”
“intends,” “expects,” and similar expressions and the negative of such expressions.  Such forward-looking
statements include, without limitation, statements regarding:



| | (a) | intention to sell and market its
                                         acute care cardiovascular drug, AGGRASTAT® (tirofiban hydrochloride) in the United
                                         States and its territories through the Company's U.S. subsidiary, Medicure Pharma, Inc.;
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (b) | intention to develop and implement
                                         clinical, regulatory and other plans to generate an increase in the value of AGGRASTAT®;
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (c) | intention to expand or otherwise
                                         improve the approved indications and/or dosing information contained within AGGRASTAT®’s
                                         approved prescribing information;
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (d) | intention to increase sales of AGGRASTAT®;
| | --- | ------------------------------------------



| | (e) | intention to develop TARDOXALTM(pyridoxal 5 phosphate), formerly MC-1, for neurological disorders;
| | --- | --------------------------------------------------------------------------------------------------



| | (f) | intention to investigate and advance
                                         certain other product opportunities;
| | --- | ------------------------------------------------------------------------------------------------------------------



| | (g) | intention to develop and commercialize
                                         additional cardiovascular generic drug products;
| | --- | --------------------------------------------------------------------------------------------------------------------------------



| | (h) | intention to obtain regulatory approval
                                         for the Company's products;
| | --- | ------------------------------------------------------------------------------------------------------------



| | (i) | expectations with respect to the
                                         cost of the testing and commercialization of the Company's products;
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------



| | (j) | sales and marketing strategy;
| | --- | -----------------------------



| | (k) | anticipated sources of revenue;
| | --- | -------------------------------



| | (l) | intentions regarding the protection
                                         of the Company's intellectual property;
| | --- | --------------------------------------------------------------------------------------------------------------------



| | (m) | intention to identify, negotiate
                                         and complete business development transactions (eg. the sale, purchase, or license of
                                         pharmaceutical products or services);
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (n) | intentions with respect to the growth
                                         of Apicore, and/or deriving any material benefits from the Company’s ownership
                                         of Apicore;
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (o) | expectations with respect to acquiring
                                         additional ownership of Apicore;
| | --- | ----------------------------------------------------------------------------------------------------------------



| | (p) | business strategy; and
| | --- | ----------------------



| | (q) | intention with respect to dividends.
| | --- | ------------------------------------



Such forward-looking statements and information
involve a number of assumptions as well as known and unknown risks, uncertainties and other factors that may cause the actual
results, events or developments to be materially different from any future results, events or developments expressed or implied
by such forward-looking statements and information including, without limitation:



| | (a) | general business and economic conditions;
| | --- | -----------------------------------------



5







| | (b) | the impact of changes in Canadian-US
                                         dollar and other foreign exchange rates on the Company's revenues, costs and results;
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (c) | the timing of the receipt of regulatory
                                         and governmental approvals for the Company's research and development projects;
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (d) | the ability of the Company to continue
                                         as a going concern;
| | --- | ---------------------------------------------------------------------------------------------------



| | (e) | the availability of financing for
                                         the Company's commercial operations and/or research and development projects, or the
                                         availability of financing on reasonable terms;
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (f) | results of current and future clinical
                                         trials;
| | --- | ---------------------------------------------------------------------------------------



| | (g) | the uncertainties associated with
                                         the acceptance and demand for new products;
| | --- | ----------------------------------------------------------------------------------------------------------------------



| | (h) | clinical trials not being unreasonably
                                         delayed and expenses not increasing substantially;
| | --- | ----------------------------------------------------------------------------------------------------------------------------------



| | (i) | government regulation not imposing
                                         requirements that significantly increase expenses or that delay or impede the Company's
                                         ability to bring new products to market;
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (j) | the Company's ability to attract
                                         and retain skilled management and staff;
| | --- | ------------------------------------------------------------------------------------------------------------------



| | (k) | the
                                         Company’s ability, amid circumstances and decisions that are out of the Company’s
                                         control, to maintain adequate supply of product for commercial sale;
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (l) | inaccuracies and deficiencies in
                                         the scientific understanding of the interaction and effects of pharmaceutical treatments
                                         when administered to humans;
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (m) | market competition;
| | --- | -------------------



| | (n) | the ability of Apicore to successfully
                                         operate its business plan;
| | --- | ----------------------------------------------------------------------------------------------------------



| | (o) | the ability of the Company and Apicore
                                         to increase the value of Apicore;
| | --- | -----------------------------------------------------------------------------------------------------------------



| | (p) | tax benefits and tax rates; and
| | --- | -------------------------------



| | (q) | the Company's ongoing relations with
                                         its employees and with its business partners.
| | --- | ---------------------------------------------------------------------------------------------------------------------------



These factors should be considered carefully
and readers are cautioned not to place undue reliance on such forward-looking statements and information.  The Company disclaims
any obligation to update any such factors or to publicly announce the result of any revisions to any of the forward-looking statements
and information contained herein to reflect future results, events or developments, except as otherwise required by applicable
law. Additional risks and uncertainties relating to the Company and its business can be found in the “Risk Factors”
section of this Annual Report.



6







PART I



ITEM 1. IDENTITY OF DIRECTORS, SENIOR
MANAGEMENT AND ADVISERS



A. Directors and Senior Management



Not applicable



B. Advisers



Not applicable



C. Auditors



Not applicable



ITEM 2. OFFER STATISTICS AND EXPECTED
TIMETABLE



Not applicable



ITEM 3. KEY INFORMATION



A. Selected Financial Data



The selected financial data of the Company
as at December 31, 2016, 2015 and 2014, and May 31, 2014 and for the fiscal years ended December 31, 2016, 2015, seven months
ended December 31, 2014, and year ended May 31, 2014 was extracted from the audited consolidated financial statements of the Company
included in this Annual Report on Form 20-F. The information contained in the selected financial data is qualified in its entirety
by reference to the more detailed consolidated financial statements and related notes included in Item 18 - Financial Statements,
and should be read in conjunction with such financial statements and with the information appearing in Item 5 - Operating and
Financial Review and Prospects. The selected financial data as at May 31, 2013 and for the fiscal year ended May 31, 2013
was extracted from the audited financial statements of the Company not included in this Annual Report.



The information
provided in the audited consolidated financial statements included in this Annual Report on Form 20-F is prepared in accordance
with International Financial Reporting Standards (IFRS) issued by the International Accounting
Standards Board (IASB).



During the preparation of the Company’s
consolidated financial statements for the seven months ended December 31, 2014, the Company determined that the accounting for
stock-based compensation pertaining to a consulting agreement signed during the year ended May 31, 2014 was interpreted incorrectly
in accordance with IFRS 2 Share-Based Payments for the year ended May 31, 2014. As a result, the May 31, 2014 information provided
has been restated to include stock-based compensation expense relating to this consulting agreement.



On November 1, 2012, the Company completed
a consolidation of its outstanding share capital on the basis of one post-consolidation share for every fifteen pre-consolidation
shares. All comparative figures have been adjusted retrospectively.



7







Under International Financial Reporting Standards (in Canadian
dollars):



|Statement of Financial Position  Data                         |  | December 31, 2016 |             |   | December 31, 2015 |  |              | December 31, 2014 |  |  | May 31, 2014 Restated |   |  | May 31, 2013 |             
|------------------------------------------------------------- |  | ----------------- | ----------- | - | ----------------- |  | ------------ | ----------------- |  |  | --------------------- | - |  | ------------ | ------------
|                                                              |  |                   |             |   |                   |  |              |                   |  |  |                       |   |  |              |             
|(as at period end)                                            |  |                   | $           |   |                   |  | $            |                   |  |  | $                     |   |  |              | $           
|Current Assets                                                |  |                   | 55,211,748  |   |                   |  | 17,448,554   |                   |  |  | 3,874,097             |   |  |              | 2,153,740   
|Property and Equipment                                        |  |                   | 10,300,639  |   |                   |  | 230,162      |                   |  |  | 33,161                |   |  |              | 20,681      
|Intangible Assets                                             |  |                   | 100,864,817 |   |                   |  | 1,411,992    |                   |  |  | 1,096,946             |   |  |              | 1,433,158   
|Goodwill                                                      |  |                   | 47,485,572  |   |                   |  | -            |                   |  |  | -                     |   |  |              | -           
|Other Assets                                                  |  |                   | 862,891     |   |                   |  | 2,166,170    |                   |  |  | 1,556,315             |   |  |              | -           
|Total Assets                                                  |  |                   | 214,725,667 |   |                   |  | 21,256,878   |                   |  |  | 6,560,519             |   |  |              | 3,607,579   
|Current Liabilities                                           |  |                   | 60,885,767  |   |                   |  | 10,352,462   |                   |  |  | 4,377,498             |   |  |              | 3,022,904   
|Non-current Liabilities                                       |  |                   | 113,125,633 |   |                   |  | 6,442,865    |                   |  |  | 6,094,037             |   |  |              | 6,461,629   
|Total Liabilities                                             |  |                   | 175,766,930 |   |                   |  | 16,795,327   |                   |  |  | 10,471,535            |   |  |              | 9,484,533   
|Net Assets / (Deficiency)                                     |  |                   | 39,192,127  |   |                   |  | 4,461,551    |                   |  |  | (3,911,016            | ) |  |              | (5,876,954  
|Capital Stock, Warrants and Contributed Surplus               |  |                   | 133,176,698 |   |                   |  | 128,304,590  |                   |  |  | 122,406,511           |   |  |              | 121,779,707 
|Accumulated Other Comprehensive Income (Loss)                 |  |                   | 681,992     |   |                   |  | 1,071,735    |                   |  |  | 298,329               |   |  |              | 154,791     
|Deficit                                                       |  |                   | (97,289,953 | ) |                   |  | (124,947,427 | )                 |  |  | (126,615,856          | ) |  |              | (127,811,452
|Non-controlling Interest                                      |  |                   | 2,090,000   |   |                   |  | -            |                   |  |  | -                     |   |  |              | -           
|Statement of Net Income (Loss) (for the fiscal year ended on) |  |                   |             |   |                   |  |              |                   |  |  |                       |   |  |              |             
|Product Sales                                                 |  |                   | 37,778,471  |   |                   |  | 22,083,128   |                   |  |  | 5,264,395             |   |  |              | 5,050,761   
|(Loss) Gain on Settlement of Debt                             |  |                   | -           |   |                   |  | (60,595      | )                 |  |  | -                     |   |  |              | -           
|Revaluation of long-term derivative                           |  |                   | (20,560,440 | ) |                   |  | -            |                   |  |  | -                     |   |  |              | -           
|Gain on step acquisition                                      |  |                   | (4,895,573  | ) |                   |  | -            |                   |  |  | -                     |   |  |              | -           
|Net Income (Loss) for the Period                              |  |                   | 27,657,474  |   |                   |  | 1,668,429    |                   |  |  | 1,195,596             |   |  |              | (1,934,096  
|Comprehensive Income (Loss) for the Period                    |  |                   | 27,235,078  |   |                   |  | 2,474,488    |                   |  |  | 1,339,134             |   |  |              | (1,647,417  
|Income (Loss) Per Share                                       |  |                   |             |   |                   |  |              |                   |  |  |                       |   |  |              |             
|Basic                                                         |  |                   | 1.84        |   |                   |  | 0.12         |                   |  |  | 0.10                  |   |  |              | (0.16       
|Diluted                                                       |  |                   | 1.60        |   |                   |  | 0.11         |                   |  |  | 0.09                  |   |  |              | (0.16       
|Weighted-Average Number of Common Shares Outstanding          |  |                   |             |   |                   |  |              |                   |  |  |                       |   |  |              |             
|Basic                                                         |  |                   | 15,002,005  |   |                   |  | 13,461,609   |                   |  |  | 12,204,827            |   |  |              | 12,196,745  
|Diluted                                                       |  |                   | 17,316,401  |   |                   |  | 15,765,570   |                   |  |  | 13,843,126            |   |  |              | 12,196,745  



8







Dividends



No cash dividends have been declared nor are
any intended to be declared. The Company is not subject to legal restrictions respecting the payment of dividends except that
they may not be paid if the Company is, or would after the payment be, insolvent. Dividend policy will be based on the Company's
cash resources and needs and it is anticipated that all available cash will be required to further the Company’s research
and development activities for the foreseeable future.



Exchange Rates



Unless otherwise indicated, all reference
to dollar amounts are to Canadian dollars. On April 25, 2017, the rate of exchange of the Canadian dollar, based on the daily
noon rate in Canada as published by the Bank of Canada, was US$1.00 = Canadian $1.3615 The exchange rates published by the Bank
of Canada and made available on its website, www.bankofcanada.ca, are nominal quotations — not buying or selling
rates — and are intended for statistical or analytical purposes.



The following tables set out the exchange
rates, based on the daily noon rates in Canada as published by the Bank of Canada for the conversion of Canadian Dollars into
U.S. Dollars.



|                        |  | December 31, 2016 |        |  | December 31, 2015 |  |        | December 31, 2014 |  |  | May 31, 2014 |  |  | May 31, 2013 |       
|----------------------- |  | ----------------- | ------ |  | ----------------- |  | ------ | ----------------- |  |  | ------------ |  |  | ------------ | ------
|                        |  |                   |        |  |                   |  |        |                   |  |  |              |  |  |              |       
|Period End              |  |                   | 1.3427 |  |                   |  | 1.3840 |                   |  |  | 1.1601       |  |  |              | 1.0842
|Average for the Period* |  |                   | 1.3248 |  |                   |  | 1.2787 |                   |  |  | 1.1083       |  |  |              | 1.0638
|High for the Period     |  |                   | 1.4590 |  |                   |  | 1.4004 |                   |  |  | 1.1536       |  |  |              | 1.1279
|Low for the Period      |  |                   | 1.2544 |  |                   |  | 1.1680 |                   |  |  | 1.0740       |  |  |              | 1.0137



| | * | The average rate for each period is the average of the daily closing
                                         rates on the last day of each month during the period.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------



9







|Monthly High and Low Exchange Rate (Canadian  Dollar per U.S. Dollar)
|---------------------------------------------------------------------
|                                                                     
|April 2017                                                           
|March 2017                                                           
|February 2017                                                        
|January 2017                                                         
|December 2016                                                        
|November 2016                                                        
|October 2016                                                         
|September 2016                                                       
|August 2016                                                          
|July 2016                                                            
|June 2016                                                            
|May 2016                                                             
|April 2016                                                           
|March 2016                                                           
|February 2016                                                        
|January 2016                                                         



B. Capitalization and Indebtedness



Not applicable



10







C. Reasons for the Offer and Use of Proceeds



Not applicable



D. Risk Factors



An investment in
the Company's common shares is highly speculative and subject to a number of risks. Only those persons who can bear the risk of
the entire loss of their investment should participate. An investor should carefully consider the risks described below and the
other information that the Company furnishes to, or files with, the Securities and Exchange Commission and with Canadian securities
regulators before investing in the Company's common shares. The risks described below are not the only ones faced by the Company.
Additional risks that management is unaware of or that the Company currently believes are immaterial may indeed become important
factors that affect the Company's business. If any of the following risks occur, or if others occur, the Company's business, operating
results and financial condition could be seriously harmed and the investor may lose all of his or her investment. The trading
price of the Company’s common shares could decline due to, or independent of, any of the negative results discussed herein.



Uncertainties and risks include, but are not
limited to, the risk that the Company may face with respect to importing raw materials, increased competition, acquisitions, contract
manufacturing arrangements, delays or failure in obtaining product approvals from the U.S. Food and Drug Administration ("FDA"),
general business and economic conditions, market trends, product development, regulatory, and other approvals and marketing.



The following are significant factors known
to us that could materially harm our business, financial position, or operating results or could cause our actual results to differ
materially from our anticipated results or other expectations, including those expressed in any forward-looking statement made
in this report. The risks described are not the only risks facing us. Additional risks and uncertainties not currently known to
us, or that we currently deem to be immaterial, also may adversely affect our business, financial position, and operating results.
If any of these risks actually occur, our business, financial position, and operating results could suffer significantly. As a
result, the market price of our common stock could decline and investors could lose all or part of their investment.



The fact that the Company only derives
a significant portion of its revenue from a single product creates additional risks and uncertainties to shareholders.



Prior to the acquisition of AGGRASTAT®,
during fiscal 2007, the Company had no products in commercial production or use. As such, the Company was considered to be a development-stage
enterprise for accounting purposes prior to the acquisition. Although the Company’s commercial operation has improved including
the acquisitions completed through the 2016 Apicore Transaction, and the Company is working to further improve, profitability,
the Company may incur losses and may never achieve sustained profitability, which in turn may harm its future operating performance
and may cause the market price of its stock to decline.



With the exception of AGGRASTAT®, the
Company’s commercial products are in the development stage and accordingly, its business operations are subject to all of
the risks inherent in the establishment and maintenance of a developing business enterprise, such as those related to competition
and viable operations management.



The long-term profitability of the Company’s
operations is uncertain, and any profitability may not be sustained. The Company’s long-term profitability will be directly
related to its ability to maintain or expand sales of AGGRASTAT® and to acquire and/or develop other commercially viable drug
products. This in turn depends on numerous factors, including the following:



| | (a) | the success of the Company’s
                                         research and development activities;
| | --- | ----------------------------------------------------------------------------------------------------------

| | (b) | obtaining regulatory approvals
                                         to market any of its development products;
| | --- | ------------------------------------------------------------------------------------------------------------------



11







| | (c) | the ability to contract for the
                                         manufacture of the Company’s products according to schedule and within budget,
                                         given the Company’s limited experience and lack of internal capabilities for manufacturing;
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (d) | the ability to develop, implement
                                         and maintain appropriate systems and structures to market and operate within applicable
                                         regulatory, industry and legal guidelines;
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (e) | the ability to identify, negotiate
                                         and complete business development transactions (eg. the sale, purchase, or license of
                                         pharmaceutical products or services) with third parties;
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (f) | the ability to maintain current
                                         or higher pricing and margins for the Company’s products;
| | --- | ----------------------------------------------------------------------------------------------------------------------------------

| | (g) | deriving material value from the
                                         Company’s majority interest in Apicore;
| | --- | -----------------------------------------------------------------------------------------------------------------

| | (h) | the ability to successfully prosecute
                                         and defend its patents and other intellectual property; and
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------

| | (i) | the ability to successfully market
                                         the Company’s products, including AGGRASTAT®, given that it has limited resources.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------



If the Company does achieve sustained profitability,
it may not be able to increase profitability in the future.



The Company may be exposed to short-term
liquidity risk.



To a certain extent the Company relies on
trade credit, as well as cash from operations, term debt and equity issues to provide the necessary short-term financing to conduct
the Company’s research and development activities, to complete business development transactions as desired, and to maintain
or expand its commercial operations as desired. Should suppliers and other creditors decline to extend short-term credit to the
Company in the future, it may have a material adverse effect on the Company’s business prospects, financial results and
financial condition.



Under current indebtedness levels the Company
must meet its debt repayment obligations. Additionally, the Company may still be able to incur substantially more debt. This could
further exacerbate the risks associated with the Company’s substantial leverage.



On July 18, 2011, the Company borrowed
$5,000,000 from the Government of Manitoba, under the Manitoba Industrial Opportunities Program, to assist with settling the
Company’s long-term debt at that time. The loan bears interest annually at the crown corporation borrowing rate plus
two percent. The loan was renegotiated effective August 1, 2013 to remain subject to interest-only monthly payments until
August 1, 2015, at which time the monthly payments became blended as to principal and interest, and the maturity date of the
loan was extended from July 1, 2016 to July 1, 2018. The loan is secured by the Company’s assets and guaranteed by the
Chief Executive Officer of the Company and entities controlled by the Chief Executive Officer. The Company must meet its debt
repayment obligations and failure to do so could cause the lender to realize upon its security interest in the
Company’s assets, and to call on the guarantee provided by the Chief Executive Officer and entities controlled by him.
The Company has made all payments to date in relation to this indebtedness, however, there is no certainty that the Company
will be able to continue servicing the debt.



On November 17,
2016, in connection with the exercise of the Company’s acquisition of the controlling ownership in Apicore, the Company
received a term loan (the “Term Loan”) from Crown Capital Fund IV LP, an investment fund managed by Crown Capital
Partners Inc. (“Crown”) (TSX: CRN), in which Crown holds a 40% interest for $60,000,000 of which $30,000,000 was syndicated
to the Ontario Pension Board (“OPB”) a limited partner in Crown’s funds. Under the terms of the loan agreement
with Crown, the loan bears interest at a fixed rate of 9.5% per annum, compounded monthly and payable on an interest only basis,
maturing in 48 months, and is repayable in full upon maturity.The loan is secured by the Company’s assets including
its ownership interests in Apicore. The Company must meet its debt repayment obligations and on-going financial covenants and
failure to do so could cause the lender to realize upon its security interest in the Company’s assets. The Company has made
all payments to date in relation to this indebtedness, however, there is no certainty that the Company will be able to continue
servicing the debt.



12







Additionally, through the acquisition completed
in the 2016 Apicore Transaction, the Company, through Apicore, has an additional debt agreement with Knight
Therapeutics Inc. The Knight Loan bears interest at 12% per annum, with interest paid quarterly at the end of each quarter with
unpaid interest and principal due June 30, 2018. The Knight Loan is secured by a security interest in substantially all of the
Apicore Inc’s, as well as the assets of another subsidiary acquired. The subsidiary is required to maintain certain financial
covenants, based on results of the subsidiary, under the terms of the Knight Loan. Subsequent to December 31, 2016, on January
6, 2017, the interest and principal remaining were paid in full in regards to the Knight Loan.



Finally, through the acquisition completed
in the 2016 Apicore Transaction, the Company, through Apicore, has an additional debt agreement with Dena Bank. The loan bears
interest at LIBOR plus 4%, with equal monthly payments of principal and interest, maturing June 30, 2020. The loan is secured
by land, building, and machinery of the Company, a pledge of 778,440 equity shares of Apicore LLC with a value each of $0.15 USD,
and a guarantee by directors of Apicore.



Despite current indebtedness levels, the Company
may still incur substantial additional indebtedness in the future.



The Company may
never receive regulatory approval in Canada, the United States or abroad for any of its products in development. Therefore, the
Company may not be able to sell any therapeutic products currently under development.



The Company’s failure to maintain or
obtain necessary regulatory approvals to fully market its current and future development stage products in one or more significant
markets may adversely affect its business, financial condition and results of operations. The process involved in obtaining regulatory
approval from the competent authorities to market therapeutic products is long and costly and may delay product development. The
approval to market a product may be applicable to a limited extent only or it may be refused entirely.



Excluding Apicore’s product suite, with
the exception of AGGRASTAT®, all of the Company’s products are currently in the research and development stages. The
Company may never have another commercially viable drug product approved for marketing. To obtain regulatory approvals for its
products and to achieve commercial success, human clinical trials must demonstrate that the products are safe for human use and
that they show efficacy. Unsatisfactory results obtained from a particular study or clinical trial relating to one or more of
the Company’s products may cause the Company to reduce or abandon its commitment to that program.



If the Company fails to successfully complete
its clinical trials, it will not obtain approval from the U.S. Food and Drug Administration (“FDA”) and other international
regulatory agencies, to market its leading products. Regulatory approvals also may be subject to conditions that could limit the
market its products can be sold in or make either products more difficult or expensive to sell than anticipated. Also, regulatory
approvals may be revoked at any time for various reasons, including for failure to comply with regulatory requirements or poor
performance of its products in terms of safety and effectiveness.




The Company’s business, financial condition
and results of operations are likely to be adversely affected if it fails to maintain or obtain regulatory approvals in Canada,
the United States and abroad to market and sell its current or future drug products, including any limitations imposed on the
marketing of such products.





13







If the Company fails to acquire and develop
additional product candidates or approved products, it will impair the Company’s ability to grow its business and to increase
value for shareholders.





The Company generates
its commercial product revenue only from AGGRASTAT®.  A component of the Company’s plan to generate additional
revenue is its intention to develop and/or to acquire or license, and then develop and/or market, additional product candidates
or approved products. The success of this growth strategy depends upon the Company’s ability to identify, select and then
to develop, acquire or license pharmaceutical products that meet the criteria it has established.  Due to the fact the Company
has limited financial capacity, significant indebtedness, and limited value in its equity, relative to other companies in the
industry, it has a limited number of product opportunities to choose from.  Moreover, the Company’s ability to research
and develop its own, or other acquired/licensed products, is limited by the extent of its internal scientific research capabilities.
In addition, proposing, negotiating and implementing an economically viable acquisition or license is a lengthy and complex process.
Other companies, including those with substantially greater financial, marketing and sales resources, may compete with the Company
for the acquisition or license of product candidates and approved products. The Company may not be able to acquire or license
the rights to additional product candidates and approved products on terms that it finds acceptable, or at all. Moreover, the
Company may not have the human, technical, financial, manufacturing and/or clinical resources to successfully develop additional
products.



The Company may not receive regulatory
approval in the United States to further expand or otherwise improve the approved indications and/or dosing information contained
within AGGRASTAT®’s prescribing information. Therefore, the Company may not be able to materially increase the sales
of AGGRASTAT®.



In fiscal 2014 the Company was able to obtain
revisions to AGGRASTAT®’s prescribing information and these revisions have had a positive, material impact on sales
of AGGRASTAT®. The Company believes that further revisions to AGGRASTAT®’s prescribing information will put the
Company in a better position to maximize the revenue potential for AGGRASTAT®. To make such changes, the Company may need
to conduct appropriate clinical trials, obtain positive results from those trials, or otherwise provide support in order to obtain
regulatory approval for the proposed indications and dosing regimens. The Company’s failure to obtain additional regulatory
approvals from the FDA to expand or otherwise improve the approved indications and/or dosing information contained within AGGRASTAT®’s
prescribing information may adversely affect the Company’s ability to materially increase sales. The process involved in
obtaining such regulatory approval is long and costly and may require additional investments that may not be reasonably achievable
by the Company. The regulatory authorities have substantial discretion in the approval process and may refuse to accept any application.
Varying interpretations of the data obtained from pre-clinical and clinical testing could delay, limit or prevent regulatory approval
of a new indication for a product. Furthermore, the approval to modify the prescribing information may be applicable to a limited
extent only or it may be refused entirely.



The current approved
prescribing information for AGGRASTAT® does not include all of the dosing information and therapeutic indications for which
a physician may wish to use the product. Although health care professionals may utilize a product at doses and for indications
outside of the approved prescribing information, the Company is prohibited from promoting such uses.



To obtain regulatory approvals to modify the
prescribing information, the Company must supply sufficient information supporting the safety and efficacy of such uses to the
FDA, which in turn must review and deem this information to be sufficient to modify the label in the agreed upon fashion. Unsatisfactory
or insufficient results obtained from any particular study or clinical trial relating to the Company’s products may cause
the Company to reduce or abandon its efforts to expand or otherwise improve the approved indications and/or dosing information
contained within AGGRASTAT®’s prescribing information.



If the Company does not comply with federal,
state and foreign laws and regulations relating to the health care business, it could face substantial penalties.



The Company and its customers are subject
to extensive regulation by the United States federal government, and the governments of the states in which the business is conducted.
In the United States, the laws that directly or indirectly affect the Company’s ability to operate its business include
the following:



| | · | the Federal Anti-Kickback Law, which prohibits persons
from knowingly and willfully soliciting, offering, receiving or providing remuneration, directly or indirectly, in cash or in
kind, to induce either the referral of an individual or furnishing or arranging for a good or service for which payment may be
made under federal health care programs such as Medicare and Medicaid;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | other Medicare laws and regulations that prescribe the
requirements for coverage and payment for services performed by the Company’s customers, including the amount of such payment;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



14







| | · | the Federal False Claims Act, which imposes civil and criminal
liability on individuals and entities who submit, or cause to be submitted, false or fraudulent claims for payment to the government;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | the Federal False Statements Act, which prohibits knowingly
and willfully falsifying, concealing or covering up a material fact or making any materially false statement in connection with
delivery of or payment for health care benefits, items or services; and
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | various state laws that impose similar requirements and
liability with respect to state healthcare reimbursement and other programs.
| | - | ------------------------------------------------------------------------------------------------------------------------------------



If the Company’s operations are found
to be in violation of any of the laws and regulations described above or any other law or governmental regulation to which the
Company or its customers are or will be subject, the Company may be subject to civil and criminal penalties, damages, fines, exclusion
from the Medicare and Medicaid programs and the curtailment or restructuring of its operations. Similarly, if the Company’s
customers are found to be non-compliant with applicable laws, they may be subject to sanctions, which could also have a negative
impact on the Company. Any penalties, damages, fines, curtailment or restructuring of the Company’s operations would adversely
affect its ability to operate its business and financial results. Any action against the Company for violation of these laws,
even if the Company is able to successfully defend against it, could cause it to incur significant legal expenses, divert management’s
attention from the operation of the business and damage the Company’s reputation.



Due to the fact that a material amount of
the use of AGGRASTAT® is outside of the FDA approved indications contained within AGGRASTAT®’s prescribing information,
the Company may be at a greater risk than would be the case if the product was almost exclusively used within the approved prescribing
information.



AGGRASTAST® competes with a variety
of existing drugs and may compete against other new drugs, which may limit the use of AGGRASTAT® and adversely affect the
Company’s revenue.



Due to the incidence and severity of cardiovascular
diseases, the market for anticoagulant and antiplatelet therapies is large and competition is intense. There are a number of anticoagulant
and antiplatelet drugs recently approved, currently on the market, awaiting regulatory approval or in development. AGGRASTAT®
competes with, or may compete with in the future, these drugs to the extent AGGRASTAT® and any of these drugs are approved
for the same or similar indications.



AGGRASTAT® competes primarily with other
platelet inhibitors, in particular the other GP IIb/IIIa inhibitors, ReoPro (abciximab) (sold by Eli Lilly and Company) and Integrilin
(eptifibatide) (branded drug sold by Merck & Co., Inc., in addition to generic eptifibatide sold by other companies).
It also competes with a number of oral platelet inhibitors, which can be used alone or in conjunction with anticoagulants, most
notably with heparin (sold generically by a number of companies), and with a recently approved injectable platelet inhibitor,
Kengreal (cangrelor) (sold by Chiesi Farmaceutics S.p.A. Inc.). In addition, some alternative methods of treatment, such as the
use of Angiomax (bivalirudin) (sold by The Medicines Company, Inc.), also compete with AGGRASTAT®. These competitors are all
marketed by large pharmaceutical companies with significantly more resources and experience than the Company.



There remains a material amount of hospitals
in the United States where AGGRASTAT® is not available on the hospital formulary and it can be very difficult and time consuming
to have AGGRASTAT® added to formulary for use by health care professionals. In many cases, competing treatment approaches
may have FDA approval for dosing regimens and/or therapeutic indications that are outside of AGGRASTAT®’s approved prescribing
information. The risk of bleeding associated with AGGRASTAT® may cause physicians to choose an alternative therapy. In some
circumstances, AGGRASTAT® competes with other drugs for the use of hospital financial resources. Although AGGRASTAT® is
positioned as a relatively low cost therapy, in certain circumstances, other treatment approaches are lower cost and may for this
reason be preferred by health care professionals, in particular where oral antiplatelet agents are deemed suitable.



15







The availability of generic treatment options may affect cost
advantage of AGGRASTAT® relative to the generic products.



AGGRASTAT® is a branded pharmaceutical
product for which there is currently no generic alternative available in the Company’s market.  AGGRASTAT®’s
reduced cost relative to other products is one of the advantages being used by the Company to promote and increase sales of AGGRASTAT®.
 Distributors of generic products typically price products significantly below the branded alternative, and these distributors
are always seeking to introduce these generic alternatives of pharmaceuticals.  There is a risk that new generic products
will be introduced that compete with AGGRASTAT® and that their low pricing would reduce AGGRASTAT®’s relative cost
advantage, and therefore negatively impact the maintenance and growth of sales by the Company. As at December 31, 2016, three
generic versions of a competing product, eptifibatide, are commercially available and are now competing directly against AGGRASTAT®.
Additional generic competitors are expected to enter the market in the months and years ahead, and it is anticipated that these
will result in further reductions to the price of eptifibatide.



Moreover, due to the recent growth in sales
of AGGRASTAT®, there is increased probability that generic companies will attempt to enter the U.S. market before the last
AGGRASTAT® patent expires. If this occurs, the Company will have to defend its patent position and market exclusivity for
AGGRASTAT® against larger, better funded and more experienced generic companies. The entry of a generic version of AGGRASTAT®
into the market would have a major negative effect on both the volume and profitability of the Company’s AGGRASTAT®
sales.



The Company may not be able to hire or
retain the qualified scientific, technical and management personnel it requires.



The Company’s business prospects and
operations depend on the continued contributions of certain of the Company’s executive officers and other key management
and technical personnel, certain of whom would be difficult to replace.



The Company’s subsidiary, Medicure International,
Inc., contracts with third parties to perform a significant amount of its research and development activities. Because of the
specialized scientific nature of the Company’s business, the loss of services of any one or more of these parties may require
the Company to attract and retain replacement qualified scientific, technical and management personnel. Competition in the biotechnology
industry for such personnel is intense and the Company may not be able to hire or retain a sufficient number of qualified personnel,
which may compromise the viability, pace and success of its research and development activities.



Also, certain of the Company’s management
personnel are officers and/or directors of other companies and organizations, some publicly-traded, and will only devote part
of their time to the Company. Although the Company has key person insurance for Dr. Albert Friesen, Chief Executive Officer, the
Company does not have key person insurance in effect in the event of a loss of any other management, scientific or other key personnel.
The loss of the services of one or more of the Company’s current executive officers or key personnel or the inability to
continue to attract qualified personnel could have a material adverse effect on the Company’s business prospects, financial
results and financial condition.



The Company faces substantial technological
competition from many biotechnology and pharmaceutical companies with much greater resources, and it may not be able to effectively
compete.



Technological and scientific competition in
the pharmaceutical and biotechnology industry is intense. The Company competes with other companies in Canada, the United States
and abroad to develop products designed to treat similar conditions. Most of these other companies have substantially greater
financial, technical and scientific research and development resources, manufacturing and production and sales and marketing capabilities
than the Company. Smaller companies may also prove to be significant competitors, whether acting independently or through collaborative
arrangements with large pharmaceutical and biotechnology companies. Developments by other companies may adversely affect the competitiveness
of the Company’s products or technologies or the commitment of its research and marketing collaborators to its programs
or even render its products obsolete.



16







The pharmaceutical
and biotechnology industry is characterized by extensive drug discovery and drug research efforts and rapid technological and
scientific change. Competition can be expected to increase as technological advances are made and commercial applications for
biopharmaceutical products increase. The Company’s competitors may use different technologies or approaches to develop products
similar to the products which it is developing, or may develop new or enhanced products or processes that may be more effective,
less expensive, safer or more readily available before or after the Company obtains approval of its products. The Company may
not be able to successfully compete with its competitors or their products and, if it is unable to do so, the Company’s
business, financial condition and results of operations may suffer.



The Company may be unable to establish collaborative and commercial
relationships with third parties.



The Company’s success may depend to
some extent on its ability to enter into and to maintain various arrangements with corporate partners, licensors, licensees and
others for the research, development, clinical trials, manufacturing, marketing, sales and commercialization of its products.
These relationships are crucial to the Company’s intention to license to or contract with other pharmaceutical companies
for the manufacturing, marketing, sales and/or distribution of any its current or future products. There can be no assurance that
any licensing or other agreements will be established on favourable terms, if at all. The failure to establish successful collaborative
arrangements may negatively impact the Company’s ability to develop and commercialize its products, and may adversely affect
its business, financial condition and results of operations.



The Company is currently dependent on third
party manufacturers for the commercial manufacturing of AGGRASTAT®.



During fiscal 2012, the Company’s subsidiary,
Medicure International, Inc., acquired a significant quantity of the raw material (active pharmaceutical ingredient) used in the
manufacture of AGGRASTAT®and terminated
its supply contract with its sole supplier of the raw material for AGGRASTAT®. In addition, Medicure International, Inc. sold
drug substance from inventory on hand to a third party. Also during fiscal 2012, Medicure International engaged and initiated
work with a contract manufacturing organization to establish a new source of the raw material for AGGRASTAT®. In 2016, this
contract manufacturing organization was approved by the FDA as the new, approved source of the raw material for AGGRASTAT®.



The Company’s subsidiary, Medicure Pharma,
Inc., has a third-party manufacturer of the final product AGGRASTAT®and that supply arrangement will expire on October 31, 2017. The Company has transitioned to a new manufacturer
of final product, and FDA approval for commercial sale was obtained during 2016.



If either the supply of raw material or the
final product manufacturing agreement for AGGRASTAT® is terminated or interrupted, or if the Company and its subsidiaries
are unable to establish new or maintain existing third party manufacturers, or to obtain regulatory approval for commercial use
of product made by the new raw material manufacturer or the new finished product manufacturer, or if the inventories of AGGRASTAT®
currently held are contaminated, exhausted due to stock-out, or otherwise lost, and the Company is unable to obtain a replacement
supplier or manufacturer, it could have a material adverse effect on the Company’s business prospects, financial results
and financial condition. It is important to note that the establishment of new manufacturing sources of pharmaceutical raw material
or finished product takes a prolonged period of time.



The Company acquired a majority interest
in Apicore, under the 2016 Apicore Transaction closed on December 1, 2016, which may never bring material benefit to the Company.



The business of Apicore is that of a manufacturer
of pharmaceutical raw material (active pharmaceutical ingredients) and the development of aNDA’s. Although it is part of
the same, overall pharmaceutical industry in which the Company, prior to the 2016 Apicore Transaction was engaged in, Apicore’s
specific sector and field of business faces its own unique set of risks and uncertainties, which include, but are not limited
to, an intensely competitive environment, strict and changing government and FDA regulations on drug manufacturers, litigation
risks associated with the manufacture of drugs for human use, high fixed costs of operations, and many of the other risks outlined
in more detail herein.



17







Pharmaceutical product quality standards
are steadily increasing and all products, including those already approved, may need to meet current standards. If the Company’s
products are not able to meet these standards, its aNDA partners may be required to discontinue marketing and/or recall such products
from the market.



Steadily increasing quality standards are
applicable to pharmaceutical products still under development and those already approved and on the market. These standards result
from product quality initiatives implemented by the FDA, such as criteria for residual solvents, and updated U.S. Pharmacopeial
Convention (“USP”) Reference Standards. The USP is a scientific nonprofit organization that sets standards for the
identity, strength, quality, and purity of medicines, food ingredients, and dietary supplements manufactured, distributed, and
consumed worldwide. Pharmaceutical products approved prior to the implementation of new quality standards, including those produced
by the Company, may not meet these standards, which could require the Company or its aNDA partners to discontinue marketing and/or
recall such products from the market, either of which could adversely affect the Company’s business, financial position,
and operating results.



Consolidation and the formation of strategic
partnerships among and between wholesale distributors, chain drug stores, and group purchasing organizations has resulted in a
smaller number of companies, each controlling a larger share of pharmaceutical distribution channels.



Drug wholesalers and retail pharmacy chains,
which represent an essential part of the distribution chain for generic pharmaceutical products, have undergone, and are continuing
to undergo, significant consolidation. This consolidation may result in declines in the Company’s sales volumes if a customer
is consolidated into another company that purchases products from a competitor. In addition, the consolidation of drug wholesalers
and retail pharmacy chains could result in these groups gaining additional purchasing leverage and consequently increasing the
product pricing pressures facing the Company’s business and enabling those groups to charge the Company increased fees.
Additionally, the emergence of large buying groups representing independent retail pharmacies and the prevalence and influence
of managed care organizations and similar institutions potentially enable those groups to extract price discounts on the Company’s
products. The result of these developments may have a material adverse effect on the Company’s business, financial position,
and operating results.



The use of legal, regulatory, and legislative
strategies by competitors, both branded and generic, including "authorized generics," citizen's petitions, and legislative
proposals, may increase the costs to develop and market the Company’s generic products, could delay or prevent new product
introductions, and could reduce significantly the Company’s profit potential. These factors could have a material adverse
effect on the Company’s business, financial position, and operating results.



The Company’s competitors, both branded
and generic, often pursue legal, regulatory, and/or legislative strategies to prevent or delay competition from generic alternatives
to branded products. These strategies include, but are not limited to:



| | · | entering
                                         into agreements whereby other generic companies will begin to market an authorized generic,
                                         a generic equivalent of a branded product, at the same time generic competition initially
                                         enters the market;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | launching
                                         a generic version of their own branded product at the same time generic competition initially
                                         enters the market;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | filing
                                         citizen petitions with the FDA or other regulatory bodies, including timing the filings
                                         so as to thwart generic competition by causing delays of generic product approvals;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



18







| | · | seeking
                                         to establish regulatory and legal obstacles that would make it more difficult to demonstrate
                                         bioequivalence or meet other approval requirements;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | initiating
                                         legislative and regulatory efforts to limit the substitution of generic versions of branded
                                         pharmaceuticals;
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | filing
                                         suits for patent infringement that may delay regulatory approval of generic products;
| | - | -------------------------------------------------------------------------------------------------------------------------------------

| | · | introducing
                                         "next-generation" products prior to the expiration of market exclusivity for
                                         the reference product, which often materially reduces the demand for the first generic
                                         product;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | obtaining
                                         extensions of market exclusivity by conducting clinical trials of branded drugs in pediatric
                                         populations or by other potential methods;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | persuading
                                         regulatory bodies to withdraw the approval of branded name drugs for which the patents
                                         are about to expire, thus allowing the branded company to obtain new patented products
                                         serving as substitutes for the products withdrawn; and
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | seeking
                                         to obtain new patents on drugs for which patent protection is about to expire.
| | - | -------------------------------------------------------------------------------------------------------------------------------



If the Company cannot compete with such strategies, its business,
financial position, and operating results could be adversely impacted.



The pharmaceutical industry is subject
to regulation by various federal authorities, including the FDA, the DEA, and state governmental authorities.



Federal and state statutes and regulations
govern or influence the testing, manufacturing, packing, labeling, storing, record keeping, safety, approval, advertising, promotion,
sale, and distribution of the Company’s products. Noncompliance with applicable legal and regulatory requirements can have
a broad range of consequences, including warning letters, fines, seizure of products, product recalls, total or partial suspension
of production and distribution, refusal to approve NDAs/aNDAs or other applications or revocation of approvals previously granted,
withdrawal of product from marketing, injunctions, withdrawal of licenses or registrations necessary to conduct business, disqualification
from supply contracts with the government, civil penalties, debarment, and criminal prosecution.



Apicore relies on Contract Manufacturing
Organizations for manufacture of the Drug Product.



All U.S. facilities where prescription drugs
are manufactured, tested, packaged, stored, or distributed must comply with FDA current good manufacturing practices (“cGMPs”).
All of the Company’s products are manufactured, tested, packaged, stored, and distributed in partnership with our aNDA marketing
partners according to cGMP regulations. The FDA performs periodic audits to ensure that the facilities remain in compliance
with all applicable regulations. If it finds violations of cGMP, the FDA could make its concerns public and could impose sanctions
including, among others, fines, product recalls, total or partial suspension of production and/or distribution, suspension of
the FDA's review of product applications, injunctions, and civil or criminal prosecution. If imposed, enforcement actions could
have a material adverse effect on the Company’s business, financial position, and operating results. Under certain circumstances,
the FDA also has the authority to revoke previously granted drug approvals. Although the Company has internal compliance programs
in place that it believes are adequate, the FDA may conclude that these programs do not meet regulatory standards. If compliance
is deemed deficient in any significant way, it could have a material adverse effect on the Company’s business.



The Company’s research, product development,
and manufacturing activities involve the controlled use of hazardous materials, and it may incur significant costs in complying
with numerous laws and regulations.



The Company is subject to laws and regulations
enforced by the FDA, the DEA, and other regulatory statutes including the Occupational Safety and Health Act (“OSHA”),
the Environmental Protection Act, the Toxic Substances Control Act, the Resource Conservation and Recovery Act, and other current
and potential federal, state, local, and foreign laws and regulations governing the use, manufacture, storage, handling, and disposal
of its products, materials used to develop and manufacture such products, and resulting waste products.



19







The Company cannot completely eliminate the
risk of contamination or injury, by accident or as the result of intentional acts, from these materials. In the event of an accident,
the Company could be held liable for any damages that result, and any resulting liability could exceed its resources. The Company
may also incur significant costs in complying with environmental laws and regulations in the future. The Company is also subject
to laws generally applicable to businesses, including but not limited to, federal, state, and local regulations relating to wage
and hour matters, employee classification, mandatory healthcare benefits, unlawful workplace discrimination, and whistle-blowing.
Any actual or alleged failure to comply with any regulation applicable to our business or any whistle-blowing claim, even if without
merit, could result in costly litigation, regulatory action or otherwise harm our business, financial position, and operating
results.



Apicore own’s two manufacturing facilities
(one in New Jersey, and one in India) that manufactures its products. Production at either or both of these facilities could be
interrupted, which could cause it to fail to deliver sufficient product to customers on a timely basis and have a material adverse
effect on the Company’s business, financial position, and operating results.



Apicore’s manufacturing operations are
based in two facilities. While these facilities are sufficient for its current needs, the facilities are highly specialized and
any damage to or need for replacement of all or any significant function of its facilities could be very costly and time-consuming
and could impair or prohibit production and shipping. A significant disruption at either of the facilities, even on a short-term
basis, whether due to a labor strike, adverse quality or compliance observation, vandalism, natural disaster, storm or other environmental
damage, or other events could impair Apicore’s ability to produce and ship products on a timely basis and, among other consequences,
could subject us to “failure to supply” claims from its customers, as discussed below. Although the Company believe’s
it carries commercially reasonable business interruption and liability insurance, it might suffer losses because of business interruptions
that exceed the coverage available under its insurance policies or for which it does not have coverage. Any of these events could
have a material adverse effect on the Company’s business, financial position, and operating results.



Virtually all Apicore’s contracts
for the supply of products to its customers contain "failure to supply" clauses.



Under these clauses, if Apicore is unable
to supply the requested quantity of product within a certain period after receipt of a customer's purchase order, the customer
is entitled to procure a substitute product elsewhere and it must reimburse the customer for the difference between the contract
price and the price the customer was forced to pay to procure the substitute product. This difference can be substantial because
of the much higher spot price at which the customer must cover its requirements, and can be far in excess of the revenue that
Apicore would otherwise have received on the sale of its own product. Therefore, Apicore’s ability to produce and ship a
sufficient quantity of product on a consistent basis is critical. Failure to deliver products could have a material adverse effect
on the Company’s business, financial position, and operating results.



The Company relies on third parties to
assist with its clinical studies.



If these third parties do not perform as required
or expected, or if they are not in compliance with FDA rules and regulations, our clinical studies may be extended, delayed or
terminated, or may need to be repeated, and we may not be able to obtain regulatory approval for or commercialize the products
being tested in such studies. Further, we may be required to audit or redo previously completed trials or recall already-approved
commercial products.





20









The Company may fail to obtain acceptable
prices or appropriate reimbursement for its products and its ability to successfully commercialize its products may be impaired
as a result.





Government and insurance reimbursements for
healthcare expenditures play an important role for all healthcare providers, including physicians, medical device companies, pharmaceutical
companies, medical supply companies, and companies, such as the Company, that offer or plan to offer various products in the United
States and other countries. The Company’s ability to earn sufficient returns on its products will depend in part on the
extent to which reimbursement for the costs of such products, related therapies and related treatments will be available from
government health administration authorities, private health coverage insurers, managed care organizations, and other organizations.
In the United States, the Company’s ability to have its products and related treatments and therapies eligible for Medicare
or private insurance reimbursement is and will remain an important factor in determining the ultimate success of its products.
If, for any reason, Medicare or the insurance companies decline to provide reimbursement for the Company’s products and
related treatments, the Company’s ability to commercialize its products would be adversely affected. There can be no assurance
that the Company’s products and related treatments will be eligible for reimbursement.



There has been a trend toward declining
government and private insurance expenditures for many healthcare items. Third-party payers are increasingly challenging the price
of medical products and services.



If purchasers or users of the Company’s
products and related treatments are not able to obtain appropriate reimbursement for the cost of using such products and related
treatments, they may forgo or reduce such use. Even if the Company’s products and related treatments are approved for reimbursement
by Medicare and private insurers, as is the case with AGGRASTAT®, the amount of reimbursement may be reduced at times, or
even eliminated. This would have a material adverse effect on the Company’s business, financial condition, and results of
operations.



Significant uncertainty exists as to the reimbursement
status of newly approved healthcare products, and there can be no assurance that adequate third-party coverage will be available
for new products developed or acquired by the Company.



The Company does
not have significant manufacturing experience and has limited marketing resources and may never be able to successfully manufacture
or market certain of its products.



The Company has limited experience in commercial
manufacturing and has limited resources for marketing or selling its products. The Company may never be able to successfully manufacture
and market certain of its development products. If any other of its development products are approved for sale, the Company intends
to contract with and rely on third parties to manufacture, and possibly also to market and sell its products. Accordingly, the
quality, timing and commercial success of such products may be outside of the Company’s control. Failure of, or delays by,
a third party manufacturer to comply with good manufacturing practices or similar quality control regulations or satisfy regulatory
inspections may have a material adverse effect on the Company and its products. Failure of, or delays by, a third party in the
marketing or selling of the Company’s products or failure of the Company to successfully market and sell such products likewise
may have a material adverse effect on the Company and its products.



The Company has limited product liability
insurance and may not be able to obtain adequate product liability insurance in the future.



The sale and use of the Company’s commercial
and development products, and the conduct of clinical studies involving human subjects, entails product and professional liability
risks that are inherent in the testing, production, marketing and sale of pharmaceuticals to humans. While the Company has taken,
and intends to continue to take, what it believes are appropriate precautions, there can be no assurance that it will avoid significant
liability exposure. Although the Company currently carries product liability insurance, there can be no assurance that it has
sufficient coverage, or can in the future obtain sufficient coverage at a reasonable cost. An inability to obtain insurance on
economically feasible terms or to otherwise protect against potential product liability claims could inhibit or prevent the commercialization
of products developed by the Company. The obligation to pay any product liability claim or recall for a product may have a material
adverse effect on its business, financial condition and future prospects. In addition, even if a product liability claim is not
successful, adverse publicity and the time and expense of defending such a claim may significantly impact the Company’s
business.



21







If the Company
is unable to successfully protect its intellectual proprietary rights, its competitive position will be adversely affected.



The patent positions of pharmaceutical companies
are generally uncertain and involve complex legal, scientific and factual issues. The Company’s success depends significantly
on its ability to:



| | a) | obtain and maintain U.S. and
                                         foreign patents, including defending those patents against adverse claims;
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------

| | b) | secure patent term extensions
                                         for the patents covering its approved products;
| | -- | ----------------------------------------------------------------------------------------------------------------------

| | c) | protect trade secrets;
| | -- | ----------------------

| | d) | operate without infringing the
                                         proprietary rights of others; and
| | -- | ---------------------------------------------------------------------------------------------------------

| | e) | prevent others from infringing
                                         its proprietary rights.
| | -- | -----------------------------------------------------------------------------------------------



The Company’s success will depend to
a significant degree on its ability to obtain and protect its patents and protect its proprietary rights in unpatented trade secrets.



The Company owns or jointly owns numerous
patents from the United States Patent Office and other jurisdictions. The Company has additional pending United States patent
applications along with applications pending in other jurisdictions. The Company’s pending and any future patent applications
may not be accepted by the United States Patent and Trademark Office or any other jurisdiction in which applications may be filed.
Also, processes or products that may be developed by the Company in the future may not be patentable. Errors or ill-advised decisions
by Company staff and/or contracted patent agents may also affect the Company’s ability to obtain or maintain valid patent
protection.



The patent protection
afforded to biotechnology and pharmaceutical companies is uncertain and involves many complex legal, scientific and factual questions.
There is no clear law or policy involving the degree of protection afforded under patents. As a result, the scope of patents issued
to the Company may not successfully prevent third parties from developing similar or competitive products. Competitors may develop
similar or competitive products that do not conflict with the Company’s patents. Litigation may be commenced by the Company
to prevent infringement of its patents. Litigation may also commence against the Company to challenge its patents that, if successful,
may result in the narrowing or invalidating of such patents. It is not possible to predict how any patent litigation will affect
the Company’s efforts to develop, manufacture or market its products. However, the cost of litigation to prevent infringement
or uphold the validity of any patents issued to the Company may be significant, in which case its business, financial condition
and results of operations may suffer. Patents provide protection for only a limited period of time, and much of such time can
occur well before commercialization commences.



The U.S. Congress is considering patent
reform legislation. In addition, the U.S. Supreme Court has ruled on several patent cases in recent years, either narrowing
the scope of patent protection available in certain circumstances or weakening the rights of patent owners in certain situations.
This combination of events has created uncertainty with respect to the value of patents, once obtained, and the Company’s
ability to obtain patents in the future. Depending on decisions by the U.S. Congress, the federal courts, and the United
States Patent and Trademark Office, the laws and regulations governing patents could change in unpredictable ways that would weaken
the Company’s ability to obtain new patents or to enforce its existing patents and patents that it might obtain in the future.



Disclosure and use of the Company’s
proprietary rights in unpatented trade secrets not otherwise protected by patents are generally controlled by written agreements.
However, such agreements will not provide the Company with adequate protection if they are not honoured, others independently
develop an equivalent technology, disputes arise concerning the ownership of intellectual property, or its trade secrets are disclosed
improperly. To the extent that consultants or other research collaborators use intellectual property owned by others in their
work with the Company, disputes may also arise as to the rights to related or resulting know-how or inventions.



22







Others could claim that the Company infringes
on their proprietary rights, which may result in costly, complex and time consuming litigation.



The Company’s success will depend partly
on its ability to operate without infringing upon the patents and other proprietary rights of third parties. The Company is not
currently aware that any of its products or processes infringes the proprietary rights of third parties. However, despite its
best efforts, the Company may be sued for infringing on the patent or other proprietary rights of third parties at any time in
the future.



Such litigation,
with or without merit, is time-consuming and costly and may significantly impact the Company’s financial condition and results
of operations, even if it prevails. If the Company does not prevail, it may be required to stop the infringing activity or enter
into a royalty or licensing agreement, in addition to any damages it may have to pay. The Company may not be able to obtain such
a license or the terms of the royalty or license may be burdensome for it, which may significantly impair the Company’s
ability to market its products and adversely affect its business, financial condition and results of operations.



The Company is subject to stringent governmental
regulation, in the future may become subject to additional regulations and if it is unable to comply, its business may be materially
harmed.



Pharmaceutical companies operate in a high-risk
regulatory environment. The FDA and other national health agencies can be very slow to approve a product and can also withhold
product approvals. In addition, these health agencies also oversee many other aspects of the Company’s operations, such
as research and development, manufacturing, and testing and safety regulation of products. As a result, regulatory risk is normally
higher than in other industry sectors.



The Company is or may become subject to various
federal, provincial, state and local laws, regulations and recommendations. The Company and third parties providing manufacturing,
research and/or development services to the Company is subject to various laws and regulations, relating to product emissions,
use and disposal of hazardous or toxic chemicals or potentially hazardous substances, infectious disease agents and other materials,
and laboratory and manufacturing practices used in connection with the activities. If the Company, or its contracted third party,
fails to comply with these regulations, the Company may be fined or suffer other consequences that could materially affect the
Company’s business, financial condition or results of operations.



The pharmaceutical sales and marketing industry
within which the Company operates is a complex legal and regulatory environment. The failure to comply with applicable laws, rules
and regulations may result in civil and criminal legal proceedings. As those rules and regulations change or as governmental interpretation
of those rules and regulations evolve, prior conduct may be called into question. The Company may become subject of federal and/or
state governmental investigations into pricing, marketing, and reimbursement of its prescription drug product. Any such investigation
could result in related restitution or civil litigation on behalf of the federal or state governments, as well as related proceedings
initiated against the Company by or on behalf of consumers and private payers. Such proceedings may result in trebling of damages
awarded or fines in respect of each violation of law. Criminal proceedings may also be initiated against the Company. Any of these
consequences could materially and adversely affect the Company’s financial results.



The Company is unable to predict the extent
of future government regulations or industry standards, however, it should be assumed that government regulations or standards
will increase in the future. New regulations or standards may result in increased costs, including costs for obtaining permits,
delays or fines resulting from loss of permits or failure to comply with regulations.





23









The Company’s products may not gain
market acceptance, and as a result it may be unable to generate significant revenues.





Excluding Apicore’s suite of products,
and except with respect to AGGRASTAT®, none of the Company’s products have the required manufacturing approvals or capabilities,
clinical data and regulatory approvals necessary to be marketed in any jurisdiction; future clinical or preclinical results may
be negative or insufficient to allow the Company to successfully market any of its products under development; and obtaining needed
data and results may take longer than planned, and may not be obtained at all.



Even if the Company’s products under
development are approved for sale, they may not be successful in the marketplace. Market acceptance of any of the Company’s
products will depend on a number of factors, including demonstration of clinical effectiveness and safety; the potential advantages
of its products over alternative treatments; the availability of acceptable pricing and adequate third-party reimbursement; and
the effectiveness of marketing and distribution methods for the products. Providers, payors or patients may not accept the Company’s
products, even if they prove to be safe and effective and are approved for marketing by the FDA and other national regulatory
authorities. The Company anticipates that its initial development product will not be sold commercially during 2017. If the Company’s
products do not gain market acceptance among physicians, patients, and others in the medical community, its ability to generate
significant revenues from its products would be limited.



The Company may not achieve its projected
development and commercial goals in the time frames it announces and expects.



The Company sets goals for and may from time
to time make public statements regarding timing of the accomplishment of objectives related to AGGRASTAT®, Apicore and/or
its products under development, that are material to the Company’s success, such as the commencement and completion of clinical
trials, anticipated regulatory approval dates, and timing of product launches. The actual timing of these events can vary dramatically
due to factors such as delays or failures in the Company’s clinical trials, the uncertainties inherent in the regulatory
approval process, and delays in achieving product development, manufacturing or marketing milestones. There can be no assurance
that the Company’s clinical trials will be completed, that it will make regulatory submissions or receive regulatory approvals
as planned, or that it will be able to adhere to its current schedule for the scale-up of manufacturing and launch of any of its
products. If the Company fails to achieve one or more of these milestones as planned, that could materially affect its business,
financial condition or results of operations.



The Company’s business involves the
use of hazardous material, which requires it to comply with environmental regulations.



The Company’s research and development
processes and commercial activities may involve the controlled storage, use, and disposal of hazardous materials and hazardous
biological materials. The Company and the third-party service providers conducting manufacturing, research and development for
the Company, are subject to laws and regulations governing the use, manufacture, storage, handling, and disposal of such materials
and certain waste products. Although the Company believes that its safety procedures for handling and disposing of such materials
comply with the standards prescribed by such laws and regulations, the risk of accidental contamination or injury from these materials
cannot be completely eliminated. In the event of such an accident, the Company could be held liable for any damages that result,
and any such liability could exceed its resources. There can be no assurance that the Company will not be required to incur significant
costs to comply with current or future environmental laws and regulations, or that its business, financial condition, and results
of operations will not be materially or adversely affected by current or future environmental laws or regulations.



The Company’s insurance may not provide
adequate coverage with respect to environmental matters.



Environmental regulations could have a
material adverse effect on the results of the Company’s operations and its financial position.



The Company is subject to a broad range of
environmental regulations imposed by federal, state, provincial, and local governmental authorities. Such environmental regulation
relates to, among other things, the handling and storage of hazardous materials, the disposal of waste, and the discharge of contaminants
into the environment. Although the Company believes that it is in material compliance with applicable environmental regulation,
as a result of the potential existence of unknown environmental issues and frequent changes to environmental regulation and the
interpretation and enforcement thereof, there can be no assurance that compliance with environmental regulation or obligations
imposed thereunder will not have a material adverse effect on the Company in the future.



24







The Company operates in an industry that
is more susceptible to legal proceedings. The Company may become involved in litigation.



The Company operates in an industry consisting
of firms that are more susceptible to legal proceedings than firms in other industries. This susceptibility is due to several
factors, including but not limited to, the fact that the Company’s shares and those of its competitors are publicly traded,
and the uncertainty and complex regulatory environment involved in the development and sale of pharmaceuticals. The Company intends
to vigorously defend such actions if and when they arise. Defense and prosecution of legal claims can be expensive and time consuming,
may adversely affect the Company regardless of the outcome due to the diversion of financial, management and other resources away
from the Company’s primary operations, and could impact the Company’s ability to continue as a going concern in the
longer term. In addition, a negative judgment against the Company, even if the Company is planning to appeal such a decision,
or even a settlement in a case, could negatively affect the cash reserves of the Company, and could have a material negative effect
on the development and sale of its products.



Indemnification obligations to the Company’s
directors and senior management may adversely affect its financial condition.



The Company has entered into agreements pursuant
to which it will indemnify the directors and senior management in respect of certain claims made against them while acting in
their capacity as such. If the Company is called upon to perform its indemnity obligations, the Company’s financial condition
will be adversely affected. The Company is not currently aware of any matters pending or under consideration that may result in
indemnification payments to any of its present or former directors or senior management.



The Company is exposed to foreign exchange
movements since the majority of its sales are denominated in U.S. currency.



The majority of the Company’s sales
revenues and a substantial portion of its selling, general and administrative expenses are denominated in U.S. dollars. The Company
does not utilize derivatives, such as foreign currency forward contracts and futures contracts, to manage its exposure to currency
risk and as a result a change in the value of the Canadian dollar against the U.S. dollar could have a negative impact on the
Company’s business prospects, financial results and financial condition. In the future, the Company may begin to utilize
foreign exchange rate mitigation and management strategies, however any such efforts, if they are not based on accurate predictions
of future fluctuations in foreign exchange rates, may actually have a negative impact on the Company.



The Company may need to raise additional
capital through the sale of its securities, resulting in dilution to its existing shareholders. Such funds may not be available,
or may not be available on reasonable terms, adversely affecting the Company’s operations.



The Company has limited financial resources
and has historically financed much of its operations through the sale of securities, primarily common shares. The Company has
significant on-going cash expenses and limited ability to generate cash from operations. To meet its on-going cash needs the Company
may need to rely on the taking on of additional debt and/or the sale of such securities for future financing, resulting in dilution
to its existing shareholders. The Company’s long-term capital requirements may be significant and will depend on many factors,
including continued scientific progress in its product discovery and development program, revenue, progress in the maintenance
and expansion of its sales and marketing capabilities, progress in its pre-clinical and clinical evaluation of products and product
candidates, time and expense associated with filing, prosecuting and enforcing its patent claims and costs associated with obtaining
regulatory approvals. In order to meet such capital requirements, the Company will consider contract fees, collaborative research
and development arrangements, debt financing, public financing or additional private financing (including the issuance of additional
equity securities) to fund all or a part of particular programs.

The Company’s business, financial condition
and results of operations will depend on its ability to obtain additional financing which may not be available under favourable
terms, if at all. The Company’s ability to arrange such financing in the future will depend in part upon the prevailing
capital market conditions as well as its business performance. Where additional financing is available, the Company may be required
to obtain approval from the Company’s shareholders. Such approval may not be provided.



25







For the sake of clarity, any decision to conduct
a major transaction, such as the possible acquisition of additional ownership interests in Apicore or the possible acquisition
of one or more commercial pharmaceutical products, is likely to necessitate the raising of additional capital through the sale
of its securities (resulting in dilution to its existing shareholders) and/or through additional loans. Such funds may not be
available, or may not be available on reasonable terms, adversely affecting the Company’s operations. The need to raise
capital may also adversely affect the Company subsequent to such a transaction or it may prevent the Company from completing such
a transaction.



The Company is exposed to risks given its
significant dependence on revenue from the sale of its sole commercial product, AGGRASTAT®.



The Company has limited financial resources
and is largely dependent upon revenue from the sale of its sole commercial product, AGGRASTAT®. The Company has significant
on-going cash expenses, including commitments to advance research and development programs; however, the Company has limited ability
to generate cash from other sources.



If revenue from the sale of AGGRASTAT®
is not maintained or increased, the Company may have to reduce substantially or eliminate expenditures for research and development,
testing, production and marketing of its proposed products, or obtain funds through arrangements with corporate partners that
require it to relinquish rights to certain of its technologies, assets or products.



Future issuance of the Company’s
common shares will result in dilution to its existing shareholders. Additionally, future sales of the Company’s common shares
into the public market may lower the market price which may result in losses to its shareholders.



As of December 31, 2016, the Company had 15,532,408
common shares issued and outstanding. A further 1,387,000 common shares are issuable upon exercise of outstanding stock options
and another 941,969 common shares are issuable upon exercise of share purchase warrants, all of which may be exercised in the
future resulting in dilution to the Company’s shareholders. The Company’s stock option plan allows for the issuance
of stock options to purchase up to a maximum of 20% of the outstanding common shares at any time.



By Articles of Amendment filed by the Company
under the Canada Business Corporations Act on November 1, 2012, a consolidation of shares was completed to reduce the total
number of outstanding shares. However, as described above, the Company has limited financial resources and may from time to time
be required to finance its operations through the sale of equity securities. In addition, it may be required to issue equity securities
as consideration for services or asset acquisition transactions. Sales of substantial amounts of the Company’s common shares
into the public market, or even the perception by the market that such sales may occur, may lower the market price of its common
shares.



The Company’s common shares may experience
extreme price and volume volatility which may result in losses to its shareholders.



The Company’s common shares historically
have been subject to extreme price and volume volatility. For example, during the period from January 1, 2016 to December 31,
2016, the high and low closing trading prices of the Company’s common shares were CDN$10.67 and CDN$4.18, respectively,
with a total trading volume of 9,263,476 shares. Daily trading volume on the TSX of the Company’s common shares for the
period from January 1, 2016 to December 31, 2016 has fluctuated, with a high of 494,161 shares and a low of 620shares
traded, averaging approximately 36,908 shares per trading day.



26







The Company expects that the trading price
of its common shares will continue to be subject to wide fluctuations in response to a variety of factors including announcement
of material events by the Company, such as the dependence of revenue on a single product, the status of required regulatory approvals
for its products, competition by new products or new innovations, fluctuations in its operating results, general and industry-specific
economic conditions and developments pertaining to patent and proprietary rights. The trading price of the Company’s common
shares may be subject to wide fluctuations in response to a variety of factors and/or announcements concerning such factors, including:



| | · | actual
                                         or anticipated period-to-period fluctuations in financial results;
| | - | ------------------------------------------------------------------------------------------------------------------



| | · | litigation
                                         or threat of litigation;
| | - | ----------------------------------------------------------------------------



| | · | failure
                                         to achieve, or changes in, financial estimates of individual investors and/or by securities
                                         analysts;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | new
                                         or existing products or generic equivalents to products or services or technological
                                         innovations by the Company or its competitors;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | comments
                                         or opinions by securities analysts or major shareholders;
| | - | -----------------------------------------------------------------------------------------------------------



| | · | conditions
                                         or trends in the pharmaceutical, biotechnology and life science industries;
| | - | -------------------------------------------------------------------------------------------------------------------------------



| | · | significant
                                         acquisitions, strategic partnerships, joint ventures or capital commitments;
| | - | ---------------------------------------------------------------------------------------------------------------------------------



| | · | results
                                         of, and developments in, the Company’s manufacturing, research and development
                                         efforts, including results and adequacy of, and developments in, its manufacturing activities,
                                         development activities, clinical trials and applications for regulatory approval;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | additions
                                         or departures of key personnel;
| | - | ----------------------------------------------------------------------------------



| | · | sales
                                         of the Company’s common shares, including by holders of the notes on conversion
                                         or repayment by the Company in common shares;
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | economic
                                         and other external factors or disasters or crises;
| | - | ----------------------------------------------------------------------------------------------------



| | · | limited
                                         daily trading volume; and
| | - | --------------------------------------------------------------------------



| | · | developments
                                         regarding the Company’s patents or other intellectual property or that of its competitors.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------



In addition, the securities markets in the
United States and Canada have recently experienced a high level of price and volume volatility, and the market price of securities
of pharmaceutical companies have experienced wide fluctuations in price which have not necessarily been related to the operating
performance, underlying asset values or prospects of such companies.



There may not be an active, liquid market
for the Company’s common shares.



On October 21, 2011, the Company’s shares
were transferred from the NEX board of the TSX-V to the TSX-V and began trading under the symbol “MPH”.



27







There is no guarantee that an active trading
market for the Company’s common shares will be maintained on the TSX-V. Investors may not be able to sell their shares quickly
or at the latest market price if trading in its common shares is not active.



If there are substantial sales of the Company’s
common shares, the market price of its common shares could decline.



Sales of substantial numbers of the Company’s
common shares could cause a decline in the market price of its common shares. Any sales by existing shareholders or holders of
options or warrants may have an adverse effect on the Company’s ability to raise capital and may adversely affect the market
price of its common shares.



The Company has no history of paying dividends,
does not intend to pay dividends in the foreseeable future and may never pay dividends.



Since incorporation, the Company has not paid
any cash or other dividends on its common shares and does not expect to pay such dividends in the foreseeable future as all available
funds will be invested to finance the growth of its business. The Company will need to achieve significant and prolonged profitability
prior to any dividends being declared, which may never happen.



If the Company is classified as a “passive
foreign investment Company” for United States income tax purposes, it could have significant and adverse tax consequences
to United States holders of its common shares.



Company does not believe that it was a “passive
foreign investment Company” for the taxable year ended December 31, 2016, and does not expect that it will be a “passive
foreign investment Company” (PFIC) for the taxable year ending December 31, 2017. (See more detailed discussion in Item
10E – Taxation). However, there can be no assurance that the United States Internal Revenue Service (“IRS”)
will not challenge the determination made by the Company concerning its “passive foreign investment Company” status
or that the Company will not be a “passive foreign investment Company” for the current taxable year or any subsequent
taxable year. Accordingly, although the Company expects that it may be a “Qualified Foreign Corporation” (QFC) for
the taxable year ending December 31, 2015, there can be no assurances that the IRS will not challenge the determination made by
the Company concerning its QFC status, that the Company will be a QFC for the taxable year ending December 31, 2016 or any subsequent
taxable year, or that the Company will be able to certify that it is a QFC in accordance with the certification procedures issued
by the Treasury and the IRS.



The Company’s classification as a PFIC
could have significant and adverse tax consequences for United States holders of its common shares.



The Company no longer has a shareholder
rights plan



During fiscal 2012, the Company allowed its
shareholder rights plan to expire. The provisions of such plan were intended to strengthen the ability of the Board of Directors
to protect the Company's shareholders, and help ensure that the shareholders were treated fairly by limiting the ability of any
person or group to seize control of the Company without appropriately compensating all of the Company’s shareholders.



Risks associated with material weaknesses
within the Company’s financial reporting and review process



In connection with its review of the Company’s
Internal Control over Financial Reporting, the Company has identified material weaknesses with the Company’s financial reporting
and review process, involving the accounting and reporting for complex transactions, due to limited staff not allowing for appropriate
reviews of such transactions. Any failure to remediate the material weaknesses, to implement the required new or improved control,
or difficulties encountered in the implementation, could cause the Company to fail to meet its reporting obligations on a timely
basis or result in material misstatements in the annual or interim financial statements. Inadequate internal control over financial
reporting could also cause investors to lose confidence in the Company’s reported financial information, which could cause
the Company’s stock price to decline.



28







New risks emerge from time to time. It is
not possible for the Company’s management to predict all risks. The forward-looking statements contained in this document
are made only as of the date of this document. The Company undertakes no obligation to update or revise any forward-looking statement,
whether as a result of new information, future events, or otherwise.



ITEM 4. INFORMATION ON THE COMPANY



A. History and Development of the Company



On December 22, 1999, the Company was formed
by the amalgamation of Medicure Inc. with Lariat Capital Inc. pursuant to the provisions of the Business Corporations Act
(Alberta). The Company was continued from Alberta to the federal jurisdiction by Certificate of Continuance issued pursuant to
the provisions of the Canada Business Corporations Acton February 23, 2000.



The Company’s current legal and commercial
name is Medicure Inc. and its current registered office and head office is 2-1250 Waverley Street, Winnipeg, Manitoba, Canada,
R3T 6C6.



In August 2006, the Company acquired the U.S.
rights to its first commercial product, AGGRASTAT®Injection (tirofiban hydrochloride) in the United States and
its territories (Puerto Rico, Virgin Islands and Guam) for US$19,000,000.



In September 2007, the Company monetized a
percentage of its current and potential future commercial revenues by entering into a debt financing agreement with Birmingham
Associates Ltd. (Birmingham), an affiliate of Elliott Associates, L.P. (Elliott) for proceeds of US$25 million. This debt was
subsequently settled in July 2011 for consideration that included a royalty payable by the Company to Birmingham based on future
commercial AGGRASTAT® sales until 2023. The royalty is based on four percent of the first $2,000,000 of quarterly AGGRASTAT®
sales, six percent on the portion of quarterly sales between $2,000,000 and $4,000,000 and eight percent on the portion of quarterly
sales exceeding $4,000,000 payable within 60 days of the end of the preceding quarter.



In February 2008, the Company announced that
its pivotal Phase III MEND-CABG II clinical trials with MC-1 did not meet the primary endpoint and as a result was not sufficient
to support the filings. As a result, the Company announced a restructuring plan that resulted in the organization reducing its
head count by approximately 50 employees and full-time consultants. The restructuring and downsizing in March 2008 conserved capital
for ongoing operations.



Since March 2008, the Company has continued
to focus on the sale and marketing of AGGRASTAT®. The Company has also explored and implemented a number of cost savings measures
and has further downsized its operations. All these initiatives were initiated due to the restructuring plan announced towards
the end of fiscal 2008. These activities assisted in further reducing the Company’s use of capital, in particular its investment
in research and development programs, but have moved forward certain programs on a limited and focused fashion such as the development
and implementation of a new clinical, product and regulatory strategy for AGGRASTAT® and the development of additional generic
cardiovascular products.



During calendar years 2014, 2015 and 2016,
as a part of its effort to expand sales of AGGRASTAT®, the Company began to significantly increase the number of employees
and otherwise increase expenses related to sales and marketing of AGGRASTAT®, and related to General and Administrative costs
of the Company. In 2017, the Company plans to further maintain selling, general and administrative expenditure levels as it continues
to focus on the growth of AGGRASTAT®, the development of additional generic cardiovascular products and its recent acquisition
of Apicore.




29







The Company’s
future operations are dependent upon its ability to maintain sales of AGGRASTAT®, to develop and/or acquire new products,
to obtain value from its investment in Apicore and/or secure additional capital, which may not be available under favourable terms
or at all, and/or renegotiate the terms of its contractual commitments and long-term debt.



If the Company is unable to maintain sales
of AGGRASTAT®, develop and/or acquire new products, obtain value from its investment in Apicore, and/or raise additional capital
and/or renegotiate the terms of its contractual commitments, management will consider other strategies including cost curtailments,
delays of research and development activities, asset divestures and/or monetization of certain intangible assets.



During fiscal 2012, the Company’s subsidiary,
Medicure International, Inc., acquired a significant quantity of the raw material (active pharmaceutical ingredient) used in the
manufacture of AGGRASTAT®and terminated
its supply contract with its sole supplier of the raw material for AGGRASTAT®. In addition, Medicure International, Inc. sold
drug substance from inventory on hand to a third party. Also during fiscal 2012, Medicure International engaged and initiated
work with a contract manufacturing organization to establish a new source of the raw material for AGGRASTAT®. In 2016, the
contract manufacturing organization was approved by the FDA as the new, approved source of the raw material for AGGRASTAT®.



The Company’s subsidiary, Medicure Pharma,
Inc., has a third-party manufacturer of the final product AGGRASTAT®and that supply arrangement will expire on October 31, 2017. The Company has transitioned to a new manufacturer
of final product and FDA approval for commercial sale was obtained during 2016, including the new bolus vial product format for
AGGRASTAT®.



On July 18, 2011, the Company borrowed $5,000,000
from the Government of Manitoba, under the Manitoba Industrial Opportunities Program, to assist with settling the Company’s
debt to Birmingham. Effective August 1, 2013, the Company renegotiated this debt and received an additional two year deferral
of principal repayments. Under the renegotiated terms, the loan continued to be interest only until August 1, 2015 when blended
payments of principal and interest commenced, and the loan maturity date was extended to July 1, 2018.



On July 3, 2014, the Company and its newly
formed and wholly owned subsidiary, Medicure U.S.A. Inc. ("Medicure USA"), entered into an arrangement whereby they
have acquired a minority interest in a pharmaceutical manufacturing business known as Apicore, along with an option to acquire
all of the remaining issued shares within the next three years. Specifically, Medicure and Medicure USA acquired a 6.09% equity
interest (5.33% on a fully-diluted basis) in two newly formed holding companies of which Apicore LLC and Apicore US LLC will be
wholly owned operating subsidiaries. The Company's equity interest and certain other rights, including the option rights were
obtained by the Company for services provided in its lead role in structuring a US$22.5 million majority interest purchase and
financing of Apicore. There was no cash outflow in connection with the acquisition of the minority interest in Apicore. The business
and operations of Apicore are distinct from the Company, and the Company’s primary operating focus remains on the sale and
marketing of AGGRASTAT®.



On November 17, 2016, in connection with the
exercise of the Company’s acquisition of the controlling ownership in Apicore, the Company received a term loan (the “Term
Loan”) from Crown Capital Fund IV LP, an investment fund managed by Crown Capital Partners Inc. (“Crown”) (TSX:
CRN), in which Crown holds a 40% interest for $60,000,000 of which $30,000,000 was syndicated to the Ontario Pension Board (“OPB”)
a limited partner in Crown’s funds. Under the terms of the loan agreement with Crown, the loan bears interest at a fixed
rate of 9.5% per annum, compounded monthly and payable on an interest only basis, maturing in 48 months, and is repayable in full
upon maturity.



30







On November 17, 2016, the Company and its
wholly owned subsidiary, Medicure Mauritius Limited, exercised its option rights to purchase interests in Apicore, Inc. and Apicore
LLC. The 2016 Apicore Transaction was closed on December 1, 2016. Apicore, Inc. and Apicore LLC are affiliated entities that together
operate the Apicore pharmaceutical business and are referred to together as “Apicore”. Apicore is a leading process
research and development and Active Pharmaceutical Ingredients (“APIs”) manufacturing service provider for the worldwide
pharmaceutical industry. The acquisition brings the Company and its subsidiary’s ownership interests in Apicore, Inc. to
64% (or approximately 59% on a fully diluted basis) and the Company and its subsidiary’s ownership in Apicore LLC. to 64%
(basic and fully-diluted). Five percent of Medicure’s ownership in Apicore LLC is held by Apigen Investments Limited (“Apigen”),
a Company which owned 100 percent of Apicore LLC, before the Acquisition.



The Company acquired 4,717,000 Series A Preferred
Shares and 1,250,000 Warrants to purchase Class D Common Shares in Apicore, Inc. from certain investors in Apicore, Inc. Medicure
Mauritius Limited acquired 4,717,000 Series A Preferred Interests and 1,250,000 Warrants to purchase Class D Common Interests
in Apicore LLC, from Apigen Investments Limited. Apicore LLC is the holding company of Apicore Pharmaceuticals Private Limited
which conducts the business of Apicore in India and Apigen is a Mauritius holding Company, who has minimal business activities
outside of those of its subsidiary. The Warrants are exercisable into Class D Common Shares of Apicore, Inc. and Class D Common
Interests of Apicore LLC, in each case at $0.01 each and are effectively ownership interests in Apicore.



Prior to the 2016 Apicore Transaction, Medicure
held, directly or indirectly, approximately 5% ownership in Apicore. This initial ownership interest and the option rights were
obtained for the Company’s lead role in structuring and participating in a majority interest purchase and financing of Apicore
that occurred on July 3, 2014.



Medicure continues to have additional option
rights until July 3, 2017 to acquire additional shares in Apicore, Inc. and Apicore LLC at predetermined prices consistent with
the value reflected in the 2016 Apicore Transaction.



B. Business Overview



Plan of Operation



Medicure is a specialty pharmaceutical company
engaged in the research, clinical development and commercialization of human therapeutics. The Company’s primary operating
focus is on the sale and marketing of its acute care cardiovascular drug, AGGRASTAT® owned by its subsidiary, Medicure
International, Inc. and distributed in the United States and its territories through the Company’s U.S. subsidiary, Medicure
Pharma, Inc. Additional focus areas for the Company relate to the management and growth of Apicore, which the Company acquired
a majority interest in on December 1, 2016. As well, the Company is focused on the development of three additional cardiovascular
generic drugs, which are expected to transform the Company’s commercial suite of products from a single product to four
approved products by the end of 2019.



The Company’s research and development
program is focused on developing and implementing its continued regulatory, brand and life cycle management strategy for AGGRASTAT®.
Medicure is also making selective research and development investments in certain additional acute cardiovascular generic and
reformulation product opportunities, in addition to exploring neurological treatment applications of its legacy product (MC-1,
TardoxalTM). The Company is actively seeking to acquire and/or license additional products.



Strategic changes made over recent years,
coupled with increased sales of AGGRASTAT®, the 2016 Apicore Transaction and debt and equity financings completed
in fiscal 2015 and 2016, have dramatically improved the Company’s financial position compared to previous years. Nevertheless,
the Company's ability to continue in operation for the foreseeable future remains dependent upon the maintenance of AGGRASTAT®,
value generation from the Apicore business, sales and upon the effective execution of its business development and strategic plans.



31







The ongoing focus of the Company includes
AGGRASTAT®, Apicore and the development of additional generic cardiovascular products. In parallel with the Company’s
ongoing commitment to support the product, its valued customers and the continuing efforts of the commercial organization, the
Company is in the process of developing and further implementing its regulatory, brand and life cycle management strategy for
AGGRASTAT®. The objective of this effort is to further expand AGGRASTAT®’s share of the estimated
US $200 million (2015) glycoprotein GP IIb/IIIa (GPI) inhibitor market. GPIs are injectable platelet inhibitors used in the treatment
of patients with acute coronary syndrome.



The Company has financed its operations principally
through the net revenue received from the sale of AGGRASTAT®, sale of its equity securities, including a private
placement in June 2015 for gross proceeds to the Company of $4.0 million, the issue of warrants and stock options, interest on
excess funds held, and the issuance of debt, including the $60,000,000 term loan obtained in November 2016 allowing the Company
to complete the 2016 Apicore Transaction.



Effective August 1, 2013, the Company renegotiated
its long-term debt and received an additional two-year deferral of principal repayments. Under the renegotiated terms, the loan
continued to be interest only until July 31, 2015 with principal repayments having begun on August 1, 2015 and the loan maturing
on July 1, 2018.



On July 3, 2014, the Company acquired a minority
interest in Apicore along with an option to acquire all of the remaining issued shares of Apicore until July 3, 2017 at a predetermined
price.



On November 17, 2016, in connection with the
exercise of the Company’s acquisition of the controlling ownership in Apicore, the Company received a term loan (the “Term
Loan”) from Crown Capital Fund IV LP, an investment fund managed by Crown Capital Partners Inc. (“Crown”) (TSX:
CRN), in which Crown holds a 40% interest for $60,000,000 of which $30,000,000 was syndicated to the Ontario Pension Board (“OPB”)
a limited partner in Crown’s funds. Under the terms of the loan agreement with Crown, the loan bears interest at a fixed
rate of 9.5% per annum, compounded monthly and payable on an interest only basis, maturing in 48 months, and is repayable in full
upon maturity.



On November 17, 2016,
the Company and its wholly owned subsidiary, Medicure Mauritius Limited, exercised its option rights to purchase interests in
Apicore, Inc. and Apicore LLC. The 2016 Apicore Transaction was closed on December 1, 2016. Apicore, Inc. and Apicore LLC are
affiliated entities that together operate the Apicore pharmaceutical business and are referred to together as “Apicore”.
Apicore is a leading process research and development and Active Pharmaceutical Ingredients (“APIs”) manufacturing
service provider for the worldwide pharmaceutical industry. The acquisition brings the Company and its subsidiary’s ownership
interests in Apicore, Inc. to 64% (or approximately 59% on a fully diluted basis) and the Company and its subsidiary’s ownership
in Apicore LLC. to 64% (basic and fully-diluted). Five percent of Medicure’s ownership in Apicore LLC is held by Apigen
Investments Limited (“Apigen”), a Company which owned 100 percent of Apicore LLC, before the Acquisition.



Recent Developments



| | · | Filing of Supplemental
                                         New Drug Application for New AGGRASTAT® Indication
| | - | ------------------------------------------------------------------------------------------------------------------



On
September 10, 2015, the Company announced that it had submitted a sNDA to the FDA to expand the label for AGGRASTAT® to include
the treatment of patients presenting with ST Segment Elevation Myocardial Infarction (“STEMI”), a type of heart attack.AGGRASTAT® is currently approved by the FDA for treatment of patients presenting with non-ST segment elevation
acute coronary syndrome (NSTE ACS). If approved for STEMI, AGGRASTAT® would be the first in its class of glycoprotein
IIb/IIIa inhibitors to receive such a label in the United States.



The Company had a Prescription
Drug User Fee Act (PDUFA) action date for the STEMI sNDA on July 10, 2016. Under PDUFA, the FDA aims to complete its review within
ten months from the receipt of a sNDA submission. The sNDA filing was accompanied by a mandatory US $1.167 million user fee paid
by Medicure International, Inc. to the FDA. In December 2016, the Company received a waiver of the user fee paid in regards to
this sNDA and the Company was refunded the US $1.167 million that it had previously paid during fiscal 2015.



32







On July 7, 2016, the Company announced
that it has received a Complete Response Letter from the FDA for its sNDA requesting an expanded indication for patients presenting
with STEMI. The FDA issued the Complete Response Letter to communicate that its initial review of the application is complete;
however it cannot approve the application in its present form and requested additional information. The Company continues to work
directly with the FDA to address and resolve these comments.



| | · | Collaboration
                                         with Apicore
| | - | -------------------------------------------------------------------



On
January 6, 2016, the Company announced that it had initiated the development of a cardiovascular generic drug. The project was
a collaboration between Medicure International, Inc. and Apicore US LLC (together with its affiliates “Apicore”),
a leading manufacturer of generic active pharmaceutical ingredients ("APIs”). The collaborative project was focused
on the development of an intravenous aNDA drug product for an acute cardiovascular indication. Medicure and Apicore have entered
into an exclusive product supply and development agreement under which Medicure holds all commercial rights. On December 13, 2016,
the Companyannounced that the aNDA was filed with the U.S. Food and Drug Administration.



| | · | Departure of
                                         President and Chief Operating Officer
| | - | -------------------------------------------------------------------------------------------



On May 9, 2016, the Company announced
that the employment agreement with President and Chief Operating Officer, Dawson Reimer, had been terminated, effective immediately.



| | · | FDA Approval
                                         Received for New AGGRASTAT®Product Format
| | - | -----------------------------------------------------------------------------------------------



On September 1, 2016, the Company
announced that it had received approval from the FDA for its new bolus vial product format for AGGRASTAT®. The
newly approved product format is a concentrated, pre-mixed, 15 ml vial designed specifically for convenient delivery of the AGGRASTAT®bolus does (25 mcg/kg). Development of the bolus vial was in response to feedback from interventional cardiologists and
catheterization lab nurses from across the United States. Commercial launch of the bolus vial took place in October of 2016 and
the Company believes this new product format will have a positive impact on hospital utilization of AGGRASTAT®.



| | · | Completion
                                         of the 2016 Apicore Transaction
| | - | -----------------------------------------------------------------------------------



On November 17, 2016, the Company
and its wholly owned subsidiary, Medicure Mauritius Limited, exercised its option rights to purchase interests in Apicore, Inc.
and Apicore LLC. The 2016 Apicore Transaction was closed on December 1, 2016. Apicore, Inc. and Apicore LLC are affiliated entities
that together operate the Apicore pharmaceutical business and are referred to together as “Apicore”. Apicore is a
leading process research and development and Active Pharmaceutical Ingredients (“APIs”) manufacturing service provider
for the worldwide pharmaceutical industry. The acquisition brings the Company and its subsidiary’s ownership interests in
Apicore, Inc. to 64% (or approximately 59% on a fully diluted basis) and the Company and its subsidiary’s ownership in Apicore
LLC. to 64% (basic and fully-diluted). Five percent of Medicure’s ownership in Apicore LLC is held by Apigen Investments
Limited (“Apigen”), a Company which owned 100 percent of Apicore LLC, before the Acquisition.



Also on
November 17, 2016, in connection with the exercise of the Company’s acquisition of the controlling ownership in Apicore,
the Company received a term loan (the “Term Loan”) from Crown Capital Fund IV LP, an investment fund managed by Crown
Capital Partners Inc. (“Crown”) (TSX: CRN), in which Crown holds a 40% interest for $60,000,000 of which $30,000,000
was syndicated to the Ontario Pension Board (“OPB”) a limited partner in Crown’s funds. Under the terms of the
loan agreement with Crown, the loan bears interest at a fixed rate of 9.5% per annum, compounded monthly and payable on an interest
only basis, maturing in 48 months, and is repayable in full upon maturity.



33







| | · | Loan
                                         to Apicore and Additional Equity Acqusition
| | - | -----------------------------------------------------------------------------------------



On January 9, 2017, the Company
announced that it has provided a secured loan in the amount of US$9.8 million to Apicore Inc. (“Apicore”) allowing
for the repayment of Apicore’s existing debt with Knight Therapeutics Inc. (TSX: GUD) and Sanders Morris Harris Inc. The
loan bears interest at 12% per annum, matures on December 30, 2020 and is secured by a charge over the U.S. assets of Apicore.
Funding to provide this loan was previously obtained from Crown Capital Fund IV, LP, an investment fund managed by Crown Capital
Partners Inc. (“Crown”) (TSX:CRN), in which Crown holds a 40% interest, and the Ontario Pension Board, a limited partner
in Crown’s funds, as previously announced on November 18, 2016.



The loan constituted a “related
party transaction” under Multilateral Instrument 61-101 (“MI 61-101”) Protection of Minority Security Holders
in Special Transactions and absent available exemptions would trigger the requirement for a formal valuation and minority
shareholder approval of the transaction. The Company has relied on the exemptions from these requirements contained in Sections
5.5(a) and 5.7(a) of MI 61-101 on the basis that the fair market value pertaining to the transaction does not exceed 25% of the
Company’s market capitalization, calculated in accordance with MI 61-101. A material change report in respect of the loan
will be filed as required, but was not filed 21 days in advance of the closing of the loan due to the Company’s desire to
complete the loan as quickly as possible. The loan was approved by the Board of Directors of the Company.



Additionally, Medicure acquired
an additional 112,500 Class E common shares of Apicore, representing approximately 1% of Apicore, for US$549,000 from a former
employee of Apicore and former members of Apicore’s Board of Directors. These shares were issued as a result of the exercise
of stock options held in Apicore by these individuals and purchased by Medicure at a pre-specified price in accordance with Apicore’s
stock option plan and Medicure’s option rights. Medicure currently owns approximately 61% of Apicore on a fully diluted
basis and continues to hold option rights until July 3, 2017 to acquire additional shares in Apicore.



| | · | FDA
                                         Approval for Apicore’s Generic Tetrabenazine
| | - | -----------------------------------------------------------------------------------------



On March 23, 2017, the Company
announced that its majority-owned subsidiary, Apicore Inc., has received final approval from the FDA for the Company’s aNDA
for tetrabenazine tablets in the 12.5 mg and 25 mg strengths. The newly approved product is a generic equivalent of the branded
product Xenazine® sold in the United States by Valeant Pharmaceuticals. Xenazine is indicated to treat the involuntary movements
(chorea) of Huntington’s disease. Development of tetrabenazine was done in partnership with TAGI Pharma Inc., which recently
launched the product commercially.



Commercial:



In fiscal 2007, the Company’s subsidiary,
Medicure International Inc., acquired the U.S. rights to its first commercial product, AGGRASTAT®, in the United
States and its territories (Puerto Rico, Virgin Islands, and Guam). AGGRASTAT®, a GPI, is used for the treatment
of acute coronary syndrome (“ACS”), including unstable angina (chest pain) (“UA”), which is characterized
by chest pain when one is at rest, and non Q wave myocardial infarction (“MI”). AGGRASTAT® is indicated
to reduce the rate of thrombotic cardiovascular events (combined endpoint of death, myocardial infarction, or refractory ischemia/repeat
cardiac procedure) in patients with non ST elevation acute coronary syndrome (“NSTE ACS”). Under a contract with Medicure
International Inc., the Company’s subsidiary, Medicure Pharma Inc., continues to support, market and distribute the product.
Through a services agreement with Medicure Inc., work related to AGGRASTAT® is primarily conducted by staff based
in Winnipeg, Canada, with support from a small number of third party contractors.



Net revenue from the sale of finished AGGRASTAT®products for the year ended December 31, 2016 increased by 36% over the net revenue for year ended December 31, 2015. All
of the Company’s sales are denominated in U.S. dollars. Hospital demand for AGGRASTAT® increased significantly
compared to the comparable period in the prior year. The increase in revenue is primarily attributable to an increase in the number
of new hospital customers using AGGRASTAT®. The number of new customers reviewing and implementing AGGRASTAT®has increased sharply as a result of FDA approval of the new dosing regimen for AGGRASTAT® as announced on
October 11, 2013 and due to increased marketing and promotional efforts of the Company. Additionally, favourable fluctuations
in the U.S. dollar exchange rate contribute to the increase in revenue.



34







Going forward and contingent on sufficient
finances being available, the Company intends to further expand revenue through marketing and promotional activities, strategic
investments related to AGGRASTAT® and the acquisition and/or development of other niche products that fit the commercial
organization.



Research and Development:



The Company’s research and development
activities are predominantly conducted by its subsidiary, Medicure International, Inc.



One of the primary ongoing research and development
activities is the continued development and further implementation of a new regulatory, brand and life cycle management strategy
for AGGRASTAT®. The extent to which the Company is able to invest in this plan is dependent upon the availability
of sufficient finances.



An important aspect of the AGGRASTAT®strategy is the revision of its approved prescribing information. On October 11, 2013, the Company announced that the FDA
has approved the AGGRASTAT® HDB regimen, as requested under Medicure's sNDA. The AGGRASTAT® HDB
regimen (25 mcg/kg over 3 minutes, followed by 0.15 mcg/kg/min) now becomes the recommended dosing for the reduction of thrombotic
cardiovascular events in patients with NSTE ACS.



The Company believes that further expanded
indications and dosing regimens could provide added value to further maximize the revenue potential for AGGRASTAT®.
The Company is currently exploring the potential to make such changes, and the Company may need to conduct appropriate clinical
trials, obtain positive results from those trials, or otherwise provide support in order to obtain regulatory approval for such
proposed indications and dosing regimens.



On April 23, 2015, the Company announced that
the FDA has approved a revision to the duration of the bolus delivery for the AGGRASTAT® HDB regimen. The dosing
change and label modification was requested by the Company to help health care professionals more efficiently meet patient-specific
administration needs and to optimize the implementation of AGGRASTAT® at new hospitals. The newly approved labeling
supplement now allows the delivery duration of the AGGRASTAT® high-dose bolus (25 mcg/kg) to occur anytime within
5 minutes, instead of the previously specified duration of 3 minutes. This change is part of Medicure’s ongoing regulatory
strategy to expand the applications for AGGRASTAT®.



On September 10, 2015, the Company announced
that it submitted a sNDA to FDA to expand the label for AGGRASTAT® to include the treatment of patients presenting
with STEMI. AGGRASTAT® is currently approved by the FDA for treatment of patients presenting with NSTE ACS. If
approved for STEMI, AGGRASTAT® would be the first in its class of GPIs to receive such a label in the United States.



In previous communication with the Company,
the FDA’s Division of Cardiovascular and Renal Drug Products indicated its willingness to review and evaluate this label
change request based substantially on data from the On-TIME 2 study, with additional support from published studies and other
data pertinent to the use of the AGGRASTAT® HDB regimen in the treatment of STEMI. The efficacy and safety of the
HDB regimen in STEMI has been evaluated in more than 20 clinical studies involving over 11,000 patients and is currently recommended
by the ACCF/AHA Guideline for the Management of STEMI.



On July 7, 2016, the Company announced that
it has received a Complete Response Letter from the FDA for its sNDA requesting an expanded indication for patients presenting
with STEMI. The FDA issued the Complete Response Letter to communicate that its initial review of the application is complete;
however it cannot approve the application in its present form and requested additional information. The Company continues to work
directly with the FDA to address these comments.



The sNDA filing was accompanied by a mandatory
US $1.167 million user fee paid by Medicure International, Inc. to the FDA. In December 2016, the Company received a waiver and
full refund of the user fee which had been paid and expensed during fiscal 2015.



35







The Company is also continuing to explore
other experimental uses and product formats related to AGGRASTAT®. On September 1, 2016, the Company announced
that it has received approval from the FDA for its new bolus vial product format for AGGRASTAT®.



The new product format is a concentrated,
pre-mixed, 15 ml vial containing sufficient drug to administer the FDA approved, high dose bolus (“HDB”) of 25 mcg/kg
at the beginning of treatment. AGGRASTAT is currently only sold in a pre-mixed intravenous bag format that comes in two sizes,
100 ml and 250 ml. The existing, pre-mixed products will continue to be available, providing a convenient concentration for administering
the post-HDB maintenance infusion of 0.15 mcg/kg/min. (Approved Dosing: Administer intravenously 25 mcg/kg within 5 minutes and
then 0.15 mcg/kg/min for up to 18 hours).



Commercial launch of the bolus vial occurred
during the fourth quarter of 2016 and the Company believes this new product format will have a positive impact on hospital utilization
of AGGRASTAT®. Another aspect of the AGGRASTAT® strategy is to advance studies related to the contemporary
use and future regulatory positioning of the product. On May 10, 2012, the Company announced the commencement of enrolment in
a new clinical trial of AGGRASTAT® entitled “Shortened AGGRASTAT® Versus Integrilin in Percutaneous
Coronary Intervention” (SAVI-PCI). SAVI PCI is a randomized, open-label study enrolling patients undergoing percutaneous
coronary intervention (PCI) at sites across the United States. In June 2013, the target number of patients to be enrolled in the
study was increased from 600 to 675. The study is designed to evaluate whether patients receiving the investigational, HDB regimen
of AGGRASTAT® (25 mcg/kg bolus over 3 minutes) followed by an infusion of 0.15 mcg/kg/min for either a shortened duration
of 1 to 2 hours or a lengthened infusion of 12 to 18 hours will have outcomes that are similar, or “non-inferior,”
to patients receiving a 12 to 18 hour infusion of Integrilin® (eptifibatide) (Merck & Co., Inc.) at its FDA approved dosing
regimen. The study arm investigating AGGRASTAT® HDB followed by a 12 to 18 hour infusion was added subsequent to
enrolment commencing.



The primary objective of SAVI-PCI is to demonstrate
AGGRASTAT® is non-inferior to Integrilin with respect to the composite endpoint of death, PCI-related myocardial
infarction, urgent target vessel revascularization, or major bleeding within 48 hours following PCI or hospital discharge. The
secondary objectives of this study include the assessment of safety as measured by the incidence of major bleeding.



The first patient was enrolled in June 2012.
As of April 26, 2017, the study was approximately 80% through to completion of enrolment.



The Company is also continuing to explore
other experimental uses and product formats related to AGGRASTAT®.



Through an ongoing research and development
investment, the Company is also exploring other new product opportunities in the interest of developing future sources of revenue
and growth.



On January 6,
2016, the Company announced that it had initiated the development of a cardiovascular generic drug. The project was a collaboration
between Medicure International, Inc. and Apicore US LLC (together with its affiliates “Apicore”), a leading-edge manufacturer
of generic active pharmaceutical ingredients ("APIs”). The collaborative project was focused on the development of
an intravenous aNDA drug product for an acute cardiovascular indication. Medicure and Apicore have entered into an exclusive product
supply and development agreement under which Medicure holds all commercial rights. On December 13, 2016, the Companyannounced
that the aNDA was filed with the U.S. Food and Drug Administration.



In addition to the collaboration with Apicore,
the Company is focused on the development of two additional cardiovascular generic drugs. When combined with the aNDA described
above, the Company expects to transform its commercial suite of products from a single product to four approved products by the
end of 2019.



The Company is actively working and devoting
a modest amount of resources to its research and development programs, including, but not limited to the development of TARDOXALTM(formerlyknown as MC-1) for neurological conditions such as Tardive Dyskinesia. This work includes, but is not
limited to, working with the FDA to better understand and refine the next steps in development of the product.



36







On August 13, 2014, the Company announced
that the preliminary results of its Phase IIa Clinical Trial, TARDOXALTM for the Treatment of Tardive Dyskinesia (TEND-TD)
showed a non-statistically significant improvement in the primary efficacy endpoint in patients treated with TARDOXALTM.
Medicure views these preliminary results as supportive of continuing the program and developing a modified formulation as a prelude
to a larger, confirmatory Phase II study.



It is the Company’s intention to develop
TARDOXALTM independently and/or in conjunction with a larger pharmaceutical company for commercialization of the product.
Similar partnerships may be required for other products that the Company may from time to time seek to develop. Such a partnership
would provide funding for clinical development, add experience to the product development process and provide market positioning
expertise. No formal agreement for such a commercial partnership has been entered into by the Company as of the date hereof.



The following table summarizes the Company’s
research and development programs, their therapeutic focus and their stage of development.



|Product Candidate |  | Therapeutic focus           |  | Stage of Development                           
|----------------- |  | --------------------------- |  | -----------------------------------------------
|AGGRASTAT®®       |  | Acute Cardiology            |  | Approved/Marketed – Additional studies underway
|Generic aNDA 1    |  | Acute Cardiology            |  | aNDA filed                                     
|Generic aNDA 2    |  | Acute Cardiology            |  | Formulation development underway               
|Generic aNDA 3    |  | Acute Cardiology            |  | Formulation development underway               
|TARDOXALTM        |  | TD/Neurological indications |  | Regulatory and clinical planning underway      



The Company has evaluated and continues to
evaluate the acquisition or license of other approved commercial products with the objective of further broadening its product
portfolio and generating additional revenue.



Potential New Products in Development Stage



Cardiovascular Generic and Reformulation
Products:



On January 6,
2016, the Company announced that it had initiated the development of a cardiovascular generic drug. The project was a collaboration
between Medicure International, Inc. and Apicore US LLC (together with its affiliates “Apicore”), a leading-edge manufacturer
of generic active pharmaceutical ingredients ("APIs”). The collaborative project was focused on the development of
an intravenous aNDA drug product for an acute cardiovascular indication. Medicure and Apicore have entered into an exclusive product
supply and development agreement under which Medicure holds all commercial rights. On December 13, 2016, the Companyannounced
that the aNDA was filed with the FDA. Medicure has also begun the development of two additional
generic versions of acute cardiovascular drugs and is exploring other potential opportunities.



TARDOXALTMfor Neurological
Conditions: One of the Company’s ongoing investments is the clinical development and commercialization of its research
product, TARDOXALTM (pyridoxal 5-phosphate) for TD and other neurological conditions. TD is a serious movement disorder
which results from long term treatment with antipsychotic medications. At present there is no treatment available for TD in the
US. TARDOXALTM's potential for treatment of TD is supported by its biological mechanism of action and by preliminary
clinical studies which indicated efficacy of a related compound in treatment of TD.



On August 13, 2014, the Company announced
that the preliminary results of its Phase IIa Clinical Trial, TARDOXALTM for the Treatment of Tardive Dyskinesia (TEND-TD)
showed a non-statistically significant improvement in the primary efficacy endpoint in patients treated with TARDOXALTM.
Medicure views these preliminary results as supportive of continuing the program and developing a modified formulation as a prelude
to a larger, confirmatory Phase II study.



37







TEND-TD was planned as a 140 patient Phase
II clinical trial to evaluate the efficacy and safety of TARDOXALTM for the treatment of Tardive Dyskinesia, with a
pre-planned interim analysis after approximately 40 patients were enrolled. The primary efficacy endpoint for the study was a
decrease in involuntary movements as measured by the Abnormal Involuntary Movement Scale (AIMS), a standardized test used to detect
and monitor TD and other movement disorders. The results from all 37 patients (17 randomized to TARDOXALTM and 20 to
matching placebo) who completed the 12-week treatment period showed a trend to greater improvement in AIMS score from baseline
to completion of study in the TARDOXALTM group versus placebo. The study was not adequately powered to assess efficacy
and the improvement noted was not statistically significant. No significant differences between the study groups were seen in
safety endpoints, however, there was a trend to increased nausea reported in the treatment group. This side effect was anticipated
and has been seen in the Company’s previous clinical studies with the product. As it was not feasible to complete an adequately
powered study prior to expiry of the product and due to the Company’s limited financial resources at that time, enrolment
was stopped after attainment of the target number for the pre-planned interim analysis.



The Company plans to maintain a modest investment
in the research and development of TARDOXALTM to develop clinical development plans. The Company is also exploring
modified formulations to reduce nausea that may be associated with use of the product. A larger, confirmatory Phase II study will
be required to evaluate and confirm the safety and efficacy of TARDOXALTM in treatment of TD and other neurological
conditions. TARDOXALTM is an experimental drug and has not been approved for commercial use by regulatory bodies such
as the FDA or Health Canada.



TARDOXALTM continues to have Fast
Track designation from the FDA for the treatment of moderate to severe TD. Fast Track designation is designed to facilitate the
development and expedite the review of new drugs that are intended to treat serious or life-threatening conditions and that demonstrate
the potential to address unmet medical needs.



Other Products:TheCompany is investing in the research and development of other new product development opportunities. The Company
is also exploring opportunities to grow the business through acquisition. The Company has evaluated and continues to evaluate
the acquisition or license of other approved commercial products with the objective of further broadening its product portfolio
and generating additional revenue.



As at December 31, 2016, the Company had numerous
issued United States patents (see Item 5 – Operating and Financial Review and Prospects – C. Research and Development,
Patents and Licenses, Etc. below).



Competitors’ Current Products



The Company’s only commercial product
AGGRASTAT®, is owned by the Company’s subsidiary, Medicure International, Inc., and is sold in the United States of
America through the Company’s subsidiary, Medicure Pharma, Inc. AGGRASTAT® is indicated to reduce the rate of thrombotic
cardiovascular events (combined endpoint of death, myocardial infarction, or refractory ischemia/repeat cardiac procedure) in
patients with non-ST elevation acute coronary syndrome (NSTE-ACS).



AGGRASTAT®
competes in a market segment commonly referred to as the anti-thrombotic market (treatments to remove or prevent formation of
blood clots). More specifically, AGGRASTAT® is an antiplatelet drug which affects thrombus (blood clot) formation by preventing
the aggregation of platelets in the blood stream. Of the different classes of antiplatelet drugs, AGGRASTAT®is
a representative of the glycoprotein IIB/IIIA inhibitors drug class. There are three of these agents approved for use, including
abciximab(ReoPro®),eptifibatide(Integrilin®),
and tirofiban (AGGRASTAT®). All three are proprietary drugs and only eptifibatide has generic equivalents, which were introduced
beginning in December 2015. Of the two directly competing agents, AGGRASTAT® is most closely comparable to eptifibatide (Integrilin)
as they are both highly potent, small molecule drugs that have reversible antiplatelet effects.



The launch of the injectable antiplatelet
agent, cangrelor (KengrealTM), by The Medicines Company, occurred in 2015 and is expected to have some impact on the
use and sale of GPIs, including AGGRASTAT®.



38







The initial launch of generic versions of
eptifibatide (Integrilin) occurred in December 2015 and could impact the utilization of AGGRASTAT® in the future.



Competitors’ Products in Development



At present the Company is not aware of any
other glycoprotein IIb/IIIa inhibitors in mid to late stage clinical development. However, the choice and use of AGGRASTAT®
may be affected by the continued advancement of new antithrombotic and antiplatelet agents, including the recently approved oral
antiplatelet agents, ticagrelor (Brilinta®) and prasugrel (Effient®). Any future launch of generic
version of AGGRASTAT® and/or of other competitive drugs may also be expected to impact utilization of the Company’s
drug. Many companies, including large pharmaceutical and biotechnology companies, are conducting development of products that
are intended to address the same or a similar medical need. Many of these companies have much larger financial and other resources
than the Company does, including those related to research and development, manufacturing, and sales and marketing. The Company
also faces competition in recruiting scientific personnel from colleges, universities, agencies, and research organizations who
seek patent protection and licensing agreements for the technologies they develop.



Apicore Operations



On November 17, 2016 the Company and its wholly
owned subsidiary, Medicure Mauritius Limited, exercised its option rights to purchase interests in Apicore, Inc. and Apicore LLC.
The 2016 Apicore Transaction was closed on December 1, 2016. Apicore, Inc. and Apicore LLC are affiliated entities that together
operate the Apicore pharmaceutical business and are referred to together as “Apicore”. Apicore is a leading process
research and development and Active Pharmaceutical Ingredients (“APIs”) manufacturing service provider for the worldwide
pharmaceutical industry. The acquisition brings the Company and its subsidiary’s ownership interests in Apicore, Inc. to
64% (or approximately 59% on a fully diluted basis) and the Company and its subsidiary’s ownership in Apicore LLC. to 64%
(basic and fully-diluted). Five percent of Medicure’s ownership in Apicore LLC is held by Apigen Investments Limited (“Apigen”),
a Company which owned 100 percent of Apicore LLC, before the Acquisition.



The Company acquired 4,717,000 Series A Preferred
Shares and 1,250,000 Warrants to purchase Class D Common Shares in Apicore, Inc. from certain investors in Apicore, Inc. Medicure
Mauritius Limited acquired 4,717,000 Series A Preferred Interests and 1,250,000 Warrants to purchase Class D Common Interests
in Apicore LLC, from Apigen Investments Limited. Apicore LLC is the holding company of Apicore Pharmaceuticals Private Limited
which conducts the business of Apicore in India and Apigen is a Mauritius holding Company, that has minimal business activities
outside of those of its subsidiary. The Warrants are exercisable into Class D Common Shares of Apicore, Inc. and Class D Common
Interests of Apicore LLC, in each case at $0.01 each and are effectively ownership interests in Apicore.



Prior to the 2016 Apicore Transaction, Medicure
held, directly or indirectly, approximately 5% ownership in Apicore. This initial ownership interest and the option rights were
obtained for the Company’s lead role in structuring and participating in a majority interest purchase and financing of Apicore
that occurred on July 3, 2014.



Medicure continues to have additional option
rights until July 3, 2017 to acquire additional shares in Apicore, Inc. and Apicore LLC at predetermined prices consistent with
the value reflected in the 2016 Apicore Transaction.



On January 9, 2017, the Company announced
that it has provided a secured loan in the amount of US$9.8 million to Apicore Inc. (“Apicore”) allowing for the repayment
of Apicore’s existing debt with Knight Therapeutics Inc. (TSX: GUD) and Sanders Morris Harris Inc. The loan bears interest
at 12% per annum, matures on December 30, 2020 and is secured by a charge over the U.S. assets of Apicore. Funding to provide
this loan was previously obtained from Crown Capital Fund IV, LP, an investment fund managed by Crown Capital Partners Inc. (“Crown”)
(TSX:CRN), in which Crown holds a 40% interest, and the Ontario Pension Board, a limited partner in Crown’s funds, as previously
announced on November 18, 2016.





39







Additionally, Medicure acquired an additional
112,500 Class E common shares of Apicore, representing approximately 1% of Apicore, for US$549,000 from a former employee of Apicore
and former members of Apicore’s Board of Directors. These shares were issued as a result of the exercise of stock options
held in Apicore by these individuals and purchased by Medicure at a pre-specified price in accordance with Apicore’s stock
option plan and Medicure’s option rights. Medicure currently owns approximately 61% of Apicore on a fully diluted basis
and continues to hold option rights until July 3, 2017 to acquire additional shares in Apicore.



Apicore is a private, New Jersey based developer
and manufacturer of specialty APIs and pharmaceuticals, including over 15 aNDA’s, one of which, is partnered with Medicure
and two of which have been approved by the FDA. Apicore has two FDA approved facilities. In the United States, the Somerset, New
Jersey facility can produce volumes from a few grams up to 200kg and in India, the Vadodara, Gujarat facility can produce volumes
from a few kilograms up to sixty metric tons annually. Both facilities are equipped with state-of-the-art analytical and research
capabilities. Apicore manufactures over 100 different API’s, including over 35 for which Drug Master Files have been submitted
to the FDA and 12 that are approved for commercial sale in the U.S. by Apicore’s customers.  Apicore specializes in
the manufacture of difficult to synthesize, high value and other niche API’s for many U.S. and international generic and
branded pharmaceutical companies.



On December
13, 2016, the Company in conjunction with Apicoreannounced that the aNDA resulting from the collaboration project between
Medicure and Apicore was filed with the FDA. The collaborative project was focused on the development
of an intravenous drug product for an acute cardiovascular indication.



On March 23, 2017, the Company announced that
its majority-owned subsidiary, Apicore Inc., has received final approval from the FDA for the Company’s aNDA for tetrabenazine
tablets in the 12.5 mg and 25 mg strengths. The newly approved product is a generic equivalent of the branded product Xenazine®
sold in the United States by Valeant Pharmaceuticals. Xenazine is indicated to treat the involuntary movements (chorea) of Huntington’s
disease. Development of tetrabenazine was done in partnership with TAGI Pharma Inc., which recently launched the product commercially.



The Company’s plan of operations is
to increase Apicore’s revenues and customer base over time. The Company believes there is opportunity for organic growth
within Apicore as it begins to receive FDA approval for products that are currently under development, as well as continuing to
develop additional new products.



Since the date of the Acquisition, the Company
has continued to operate the Apicore business separately from the Company’s pre-existing specialty pharmaceutical business,
and Apicore, Inc. continues to be managed under the direction of its Board consisting of six directors, of which four are members
of the Board of Directors of Medicure.



Competitive Strategy and Position



The Company is primarily focusing on:



| | · | Maintaining
                                         and growing AGGRASTAT® sales in the United States
| | - | ------------------------------------------------------------------------------------------------------



The Company is working to expand
sales of AGGRASTAT® in the United States. The present market for GPIs, of which AGGRASTAT® is one
of three agents, is approximately U.S. $200 million per year. The use of AGGRASTAT® is recommended by the AHA and
ACC Guidelines for the treatment of ACS. AGGRASTAT® has been shown, to reduce the rate of thrombotic cardiovascular
events (combined endpoint of death, myocardial infarction, or refractory ischemia/repeat cardiac procedure) in patients with NSTE
ACS.



40







| | · | The
                                         development and implementation of a new regulatory, brand and clinical strategy for AGGRASTAT®
| | - | -------------------------------------------------------------------------------------------------------------------------------------------



As stated previously, one of the
Company’s primary ongoing research and development activities is the development and further implementation of a new regulatory,
brand and life cycle management strategy for AGGRASTAT®.



An important aspect of the AGGRASTAT®strategy is the revision of its approved prescribing information. On October 11, 2013, the Company announced that the FDA
has approved the AGGRASTAT® High Dose Bolus (“HDB”) regimen, as requested under Medicure's sNDA. The
AGGRASTAT® HDB regimen (25 mcg/kg over 3 minutes, followed by 0.15 mcg/kg/min) now becomes the recommended dosing
for the reduction of thrombotic cardiovascular events in patients with NSTE ACS.



The Company believes that further
expanded indications and dosing regimens could provide added value to further maximize the revenue potential for AGGRASTAT®.
The Company is currently exploring the potential to make such changes, and the Company may need to conduct appropriate clinical
trials, obtain positive results from those trials, or otherwise provide support in order to obtain regulatory approval for such
proposed indications and dosing regimens.



On September 10, 2015, the Company
announced that it submitted a sNDA to the FDA to expand the label for AGGRASTAT® to include the treatment of patients
presenting with STEMI. AGGRASTAT® is currently approved by the FDA for treatment of patients presenting with NSTE
ACS. If approved for STEMI, AGGRASTAT® would be the first in its class of GPI to receive such a label in the United
States. On July 7, 2016, the Company announced that it has received a Complete Response Letter from the FDA for its sNDA requesting
an expanded indication for patients presenting with STEMI. The FDA issued the Complete Response Letter to communicate that its
initial review of the application is complete; however it cannot approve the application in its present form and requested additional
information. The Company continues to work directly with the FDA to address these comments.



The Company is also continuing
to explore other experimental uses and product formats related to AGGRASTAT®. On September 1, 2016, the Company
announced that is has received approval from the FDA for its new bolus vial product format for AGGRASTAT®. The
newly approved product format is a concentrated, pre-mixed, 15 ml vial designed specifically for convenient delivery of the AGGRASTAT®bolus does (25 mcg/kg). Development of the bolus vial was in response to feedback from interventional cardiologists and
catheterization lab nurses from across the United States. Commercial launch of the bolus vial has taken place in October of 2016
and the Company believes this new product format will have a positive impact on hospital utilization of AGGRASTAT®.
The Company is also providing funding for a number of investigator sponsored research projects targeting contemporary utilization
of AGGRASTAT® relative to its competitors.



The “Shortened AGGRASTAT®Versus Integrilin in Percutaneous Coronary Intervention” (“SAVI PCI”) trial is intended to generate additional
clinical data related to use of AGGRASTAT® which may help support future investments in the product. The SAVI PCI
study is not expected nor intended to support further changes to AGGRASTAT®’s prescribing information.



| | · | Developing
                                         additional acute cardiovascular generic and reformulation products
| | - | ----------------------------------------------------------------------------------------------------------------------



On
January 6, 2016, the Company announced that it had initiated the development of a cardiovascular generic drug. The project was
a collaboration between Medicure International, Inc. and Apicore US LLC (together with its affiliates “Apicore”),
a leading-edge manufacturer of generic active pharmaceutical ingredients ("APIs”). The collaborative project was focused
on the development of an intravenous aNDA drug product for an acute cardiovascular indication. Medicure and Apicore have entered
into an exclusive product supply and development agreement under which Medicure holds all commercial rights. On December 13, 2016,
the Companyannounced that the aNDA was filed with the FDA. Medicure has also begun the
development of two additional generic versions of acute cardiovascular drugs and is exploring other potential opportunities.



41







| | · | Generating
                                         material value for the Company from the majority ownership position in Apicore and, potentially,
                                         from the Company’s option to acquire additional shares of Apicore
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



On July 3, 2014, the Company acquired
a minority interest in Apicore along with an option to acquire all of the remaining issued shares of Apicore within the next three
years at a predetermined price. The business and operations of Apicore are distinct from the Company, and the Company’s
primary operating focus remains on the sale and marketing of AGGRASTAT®.



On November 17, 2016, the Company
and its wholly owned subsidiary, Medicure Mauritius Limited, exercised its option rights to purchase interests in Apicore, Inc.
and Apicore LLC. The 2016 Apicore Transaction was closed on December 1, 2016. Apicore, Inc. and Apicore LLC are affiliated entities
that together operate the Apicore pharmaceutical business and are referred to together as “Apicore”. Apicore is a
leading process research and development and Active Pharmaceutical Ingredients (“APIs”) manufacturing service provider
for the worldwide pharmaceutical industry. The acquisition brings the Company and its subsidiary’s ownership interests in
Apicore, Inc. to 64% (or approximately 59% on a fully diluted basis) and the Company and its subsidiary’s ownership in Apicore
LLC. to 64% (basic and fully-diluted). Five percent of Medicure’s ownership in Apicore LLC is held by Apigen Investments
Limited (“Apigen”), a Company which owned 100 percent of Apicore LLC, before the Acquisition. The Company intends
to seek opportunities to increase the value of its majority position in Apicore and believes that the potential realization of
value through the exercise of its option to acquire all of the remaining issued shares of Apicore could benefit the Company’s
shareholders.



| | · | The
                                         development of TARDOXALTM for Tardive Dyskinesia and other neurological indications
| | - | --------------------------------------------------------------------------------------------------------------------------------



The Company is actively working
and devoting a modest amount of resources to this program, including, but not limited to the development of TARDOXALTM(formerly
known as MC-1) for neurological conditions such as Tardive Dyskinesia. This work includes, but is not limited to, working with
the FDA to better understand and refine the next steps in development of the product.



It is the Company’s intention
to develop TARDOXALTM independently and/or in conjunction with a larger pharmaceutical company for commercialization
of the product. Similar partnerships may be required for other products that the Company may from time to time seek to develop.
Such a partnership would provide funding for clinical development, add experience to the product development process and provide
market positioning expertise. No formal agreement for such a commercial partnership has been entered into by the Company as of
the date hereof.



C. Organizational
Structure



Medicure International, Inc., a wholly owned
subsidiary of the Company, was incorporated pursuant to the laws of Barbados, West Indies, on May 23, 2000. Medicure International,
Inc.’s registered office is located at Whitepark House, White Park Road, Bridgetown, Barbados. Medicure International Inc.’s
head office is located at 1st Floor Limegrove Centre Holetown, St. James, Barbados.



Medicure Pharma, Inc., a wholly owned subsidiary
of the Company, was incorporated pursuant to the laws of the State of Delaware, United States of America, on September 30, 2005.
Medicure Pharma Inc.’s registered office is 2711 Centerville Road, Suite 400, Wilmington, Delaware, 19808. Medicure Pharma,
Inc.’s head office is located at 49 Napoleon Court, Suite 2, Somerset, NJ, 08873.



Medicure U.S.A., Inc., a wholly owned subsidiary
of the Company, was incorporated pursuant to the laws of the State of Delaware, United States of America, on June 23, 2014. Medicure
U.S.A. Inc.’s registered office is 2711 Centerville Road, Suite 400, Wilmington, Delaware, 19808.



42







Medicure Mauritius Limited, a wholly owned
subsidiary of the Company was incorporated pursuant to the laws of the Republic of Mauritius on November 17, 2016. Medicure Mauritius
Limited’s registered office is 6th floor, Tower A, 1 CyberCity, Ebene, Mauritius.



Apicore, Inc., a majority owned subsidiary
of the Company, was incorporated pursuant to the laws of the State of Delaware, United States of America, on March 19, 2014. Apicore,Inc.’s
registered and head offices are 49 Napoleon Court, Somerset, New Jersey, 08873. Apicore US, LLC. is a wholly owned subsidiary
of Apicore, Inc.



Apicore LLC, a a majority owned subsidiary
of the Company, was incorporated pursuant to the laws of the State of Delaware, United States of America, on March 19, 2014. Apicore
Pharmaceuticals Private Limited is a wholly-owned subsidiary of Apicore LLC. and was incorporated in India in July 2006.



Apigen Investments Limited, a Company that
is 12% owned by Medicure Inc. was incorporated pursuant to the laws of the Republic of Mauritius on June 27, 2014. Apigen Investments
Limited’s registered office is 4th floor, Tower A, 1 CyberCity, Ebene, Mauritius.



American Cardio Therapeutics Inc., a Company
that is 49% owned by Medicure Pharma Inc., was incorporated pursuant to the laws of the State of Delaware, United States of America,
on September 30, 2005. American Cardio Therapeutics Inc.’s registered office is 2711 Centerville Road, Suite 400, Wilmington,
Delaware, 19808. As at May 31, 2014, American Cardio Therapeutics Inc. had no activity and it is the Company’s intention
that American Cardio Therapeutics Inc. will be wound up.



D. Property, Plant and Equipment



Office Space



Included within the business and administration
services agreemententered into with Genesys Venture Inc. (see Item 5F - Contractual Obligations), is the use of office
space at Genesys Venture Inc.’s head office located at 1250 Waverley Street in Winnipeg, Manitoba, Canada. As at December
31, 2016, the Company had use of approximately 10,000 square feet.



Apicore US LLC. has leased office space and
production facilities at 49 Napoleon Court in Somerset, New Jersey, United States of America from Dap Dhaduk II, LLC. As at December
31, 2016, the Company had use of approximately 32,500 square feet.



Apicore Pharmaceuticals Private Limited owns
approximately eight acres of land and manufacturing facilities in India, with approximately 61,500 square feet of production and
utilities space.



ITEM 4A. UNRESOLVED STAFF COMMENTS



Not applicable



ITEM 5. OPERATING AND FINANCIAL REVIEW
AND PROSPECTS



This section contains forward-looking statements
involving risks and uncertainties. The Company's actual results could differ materially from those anticipated in these forward-looking
statements as a result of certain factors, including those set forth under part Item 3D - Risk Factors. The following discussion
of the financial condition, changes in financial conditions and results of operations of the Company for the years ended December
31, 2016 and December 31, 2015 should be read in conjunction with the consolidated financial statements of the Company. The Company’s
consolidated financial statements are presented in Canadian dollars and have been prepared in accordance with IFRS included under
Item 18 to this Annual Report.



43







Critical Accounting Policies and Estimates



Estimates



The preparation of the Company’s consolidated
financial statements in conformity with IFRS requires management to make estimates and assumptions that affect the application
of accounting policies and the reported amounts of assets, liabilities, revenue and expenses. Actual results may differ from these
estimates.



Estimates and underlying assumptions are reviewed
on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in
any future periods affected.



Areas where management has made critical judgments
in the process of applying accounting policies and that have the most significant effect on the amounts recognized in the consolidated
financial statements include the determination of the Company and its subsidiaries functional currency and the determination of
the Company's cash generating units ("CGU") for the purposes of impairment testing.



Information about key assumptions and estimation
uncertainties that have a significant risk of resulting in a material adjustment to the carrying amount of assets and liabilities
within the next financial year are as follows:



| | · | Valuation
                                         of the royalty obligation
| | - | ----------------------------------------------------------------------------



| | · | Provisions
                                         for returns, chargebacks and discounts
| | - | ------------------------------------------------------------------------------------------



| | · | The
                                         measurement and valuation of inventory
| | - | -----------------------------------------------------------------------------------



| | · | The
                                         measurement and period of use of intangible assets
| | - | -----------------------------------------------------------------------------------------------



| | · | The
                                         estimation of accruals for research and development costs
| | - | ------------------------------------------------------------------------------------------------------



| | · | The
                                         measurement of the amount and assessment of the recoverability of income tax assets
| | - | --------------------------------------------------------------------------------------------------------------------------------



| | · | Allocation
                                         of purchase consideration to the fair value of assets acquired and liabilities assumed.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------



| | · | Valuation
                                         of acquired intangible assets.
| | - | ---------------------------------------------------------------------------------



| | · | The
                                         assumptions and model used to estimate the value of share-based payment transactions
                                         and warrants
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Valuation of the royalty obligation, warrant
liability and other long-term liability



The Company has the following non-derivative
financial liabilities which are classified as other financial liabilities: short-term borrowings,
accounts payable and accrued liabilities, income taxes payable, deferred revenue, finance lease obligations and long-term debt.



All other financial liabilities are recognized
initially on the trade date at which the Company becomes a party to the contractual provisions of the instrument. Such financial
liabilities are recognized initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition,
these financial liabilities are measured at amortized cost using the effective interest rate method. Costs incurred to obtain
financing are deferred and amortized over the term of the associated debt using the effective interest rate method. Amortization
is a non-cash charge to finance expense.



The Company derecognizes a financial liability
when its contractual obligations are discharged or cancelled, or when they expire.



The royalty obligation was recorded at its
fair value at the date at which the liability was incurred and subsequently measured at amortized cost using the effective interest
rate method at each reporting date. Estimating fair value for this liability required determining the most appropriate valuation
model which is dependent on its underlying terms and conditions. This estimate also requires determining expected revenue from
AGGRASTAT® sales and an appropriate discount rate and making assumptions about them.



44







The other long-term liability was recorded
at its fair value at the date at which the liability was incurred and subsequently measured at amortized cost using the effective
interest rate method at each reporting date. Estimating fair value for this liability required determining the most appropriate
valuation model which is dependent on its underlying terms and conditions. This estimate also requires determining the time frame
when certain sales targets are expected to be met and an appropriate discount rate and making assumptions about them.



Warrants with an exercise price denominated
in a foreign currency are recorded as a liability and classified as fair value through profit and loss. The warrant liability
was included within accounts payable and accrued liabilities and the change in the fair value of the warrants was recorded as
a gain or loss in the consolidated statement of net income and comprehensive income within finance expense. These warrants have
not been listed on an exchange and therefore do not trade on an active market.



The warrant liability was recorded at the
fair value of the warrants at the date at which they were granted and subsequently revalued at each reporting date. Estimating
fair value for these warrants required determining the most appropriate valuation model which is dependent on the terms and conditions
of the grant. This estimate also required determining the most appropriate inputs to the valuation model including the expected
life of the warrants, volatility and dividend yield and making assumptions about them. These warrants expired, unexercised, on
December 31, 2016



The liability to repurchase Apicore Class
E shares was recorded at its fair value based on the fixed price of the employees’s put option net of the option’s
exercise price.



The derivative option on Apicore Class C shares
was recorded at the fixed purchase price in accordance with the terms and conditions of the grant.



The Apicore Series A-1 preferred shares were
valued at their fair value in relation to the valuation of Apicore conducted to value the Company’s business combination.



Estimating fair value required using the most
appropriate valuation model which is dependent on management’s assumptions on future cash flows and an appropriate discount
rate.



IFRS 13 Fair Value Measurement, establishes
a fair value hierarchy that reflects the significance of the inputs used in measuring fair value. The fair value hierarchy has
the following levels:



| | • | Level 1 – Quoted prices (unadjusted) in active markets
for identical assets or liabilities;
| | - | -------------------------------------------------------------------------------------------



| | • | Level 2 – Inputs other than quoted prices included
within Level 1 that are either directly or indirectly observable;
| | - | --------------------------------------------------------------------------------------------------------------------



| | • | Level 3 - Unobservable inputs in which little or no market
activity exists, therefore requiring an entity to develop its own assumptions about the assumptions that market participants would
use in pricing.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The fair value of the warrant liability is
based on level 2 (significant observable inputs) and the fair value of the royalty obligation and other long-term liability are
based on level 3 (unobservable inputs).



Provision for returns and discounts



Revenue from the sale of AGGRASTAT® generally
comprises finished commercial product, in the course of ordinary activities, is measured at the fair value of the consideration
received or receivable, net of estimated returns, chargebacks, trade discounts and volume rebates. Revenue is recognized when
persuasive evidence exists, usually in the form of an executed sales agreement, that the significant risks and rewards of ownership
have been transferred to the buyer, recovery of the consideration is probable, the associated costs and possible return of goods
can be estimated reliably, there is no continuing management involvement with the goods, and the amount of revenue can be measured
reliably. If it is probable that discounts will be granted and the amount can be measured reliably, then the discount is recognized
as a reduction of revenue as the sales are recognized.



45







Revenue from the sale of APIs, in the course
of ordinary activities is measured at the fair value of the consideration received or receivable, net of estimated returns, trade
discounts and volume rebates, if any. Revenue is recognized when persuasive evidence exists, usually upon shipment of the product,
that the significant risks and rewards of ownership have been transferred to the buyer, recovery of the consideration is probable,
the associated costs and possible return of goods can be estimated reliably, there is no continuing management involvement with
the goods, and the amount of revenue can be measured reliably. If it is probable that discounts will be granted and the amount
can be measured reliably, then the discount is recognized as a reduction of revenue as the sales are recognized.



The Company may enter into collaboration agreements
for product development for its APIs and product pipeline. The terms of the agreements may include nonrefundable signing fees,
milestone payments and profit sharing arrangements on any profits derived from product sales from these collaborations. These
multiple element arrangements are analyzed to determine whether the deliverables can be separated or whether they must be accounted
for as a single unit of accounting. Up-front fees are recognized as revenue when persuasive evidence of an arrangement exists,
the fee is fixed or determinable, delivery or performance has been substantially completed and collection is reasonably assured.
If there are no substantive performance obligations over the life of the contract, the up-front non-refundable payment is recognized
when the underlying performance obligation is satisfied. If substantive contractual obligations are satisfied over time or over
the life of the contract, revenue may be deferred and recognized over the performance. The term over which upfront fees are recognized
is revised if the period over which the Company maintains substantive contractual obligations changes.



Milestone payments are recognized as revenue
when the condition is met, if the milestone is not a condition to future deliverables and collectability is reasonably assured.
Otherwise, they are recognized over the remaining term of the agreement or the performance period.



The measurement and valuation of inventory



AGGRASTAT® inventories consist of unfinished
product (raw materials in the form of API) and finished commercial product which are available for sale and are measured at the
lower of cost and net realizable value.



AGGRASTAT® pre-launch inventory represents
inventory for which regulatory approval is being sought, but has not yet been received and therefore is not available for sale.
Pre-launch inventory is capitalized when the likelihood of obtaining regulatory approval is high. Should the likelihood of obtaining
regulatory approval decline, any capitalized costs will be written-off in cost of goods sold. If regulatory approval is subsequently
obtained, any write-down would be reversed, to the extent that the assigned cost is realizable.



Additionally, inventory includes raw materials,
work in process and finished goods (APIs) which are manufactured and sold within the Apicore business and are measured at the
lower of cost and net realizable value.



The cost of inventories is based on the first-in
first-out principle, and includes expenditures incurred in acquiring the inventories, production or conversion costs and other
costs incurred in bringing them to their existing location and condition.



Inventories are written down to net realizable
value when the cost of inventories is estimated to be unrecoverable due to obsolescence, damage, or declining selling prices.
 Net realizable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion
and selling expenses. When the circumstances that previously caused inventories to be written down below cost no longer exist,
or when there is clear evidence of an increase in selling prices, the amount of the write-down previously recorded is reversed.



The measurement and period of use of intangible
assets



Intangible assets that are acquired separately
are measured at cost less accumulated amortization and accumulated impairment losses. The cost of intangible assets acquired in
a business combination is their fair value at the date of acquisition. Subsequent expenditures are capitalized only when they
increase the future economic benefits embodied in the specific asset to which they relate. All other expenditures are recognized
in profit or loss as incurred.



46







The cost of intangible assets acquired in
a business combination is its fair value at the date of acquisition. Patents are amortized on a straight-line basis over the legal
life of the respective patent, ranging from five to twenty years, or its economic life, if shorter. Trademarks are amortized on
a straight-line basis over the legal life of the respective trademark, being ten years, or its economic life, if shorter. Customer
lists are amortized on a straight-line basis over approximately twelve years, or its economic life, if shorter.



Following initial recognition, intangible
assets are carried at cost less accumulated amortization and accumulated impairment losses. The cost of servicing the Company's
patents and trademarks are expensed as incurred.



The amortization method and amortization period
of an intangible asset with a finite useful life are reviewed at least annually. Changes in the expected useful life or the expected
pattern of consumption of future economic benefits embodied in the asset are accounted for by changing the amortization period
or method, as appropriate, and ae treated as changes in accounting estimates in the consolidated statements of income.



Estimation of accruals for research and
development costs



Expenditure on research activities, undertaken
with the prospect of gaining new scientific or technical knowledge and understanding, is recognized in profit or loss as incurred.



Development activities involve a plan or design
for the production of new or substantially improved products and processes. Development expenditures are capitalized only if development
costs can be measured reliably, the product or process is technically and commercially feasible, future economic benefits are
probable, and the Company intends to and has sufficient resources to complete development and to use or sell the asset. No development
costs have been capitalized to date.



Research and development expenses include
all direct and indirect operating expenses supporting the products in development.



Clinical trial expenses are a component of
the Company’s research and development costs. These expenses include fees paid to contract research organizations, clinical
sites, and other organizations who conduct research and development activities on the Company’s behalf. The amount of clinical
trial expenses recognized in a period related to clinical agreements are based on estimates of the work performed using an accrual
basis of accounting. These estimates incorporate factors such as patient enrolment, services provided, contractual terms, and
prior experience with similar contracts.



The measurement of the amount and assessment
of the recoverability of income tax assets



The Company and its subsidiaries are generally
taxable under the statutes of their country of incorporation.



Income tax expense comprises current and deferred
taxes. Current taxes and deferred taxes are recognized in profit or loss except to the extent that it relates to a business combination,
or items recognized directly in equity or in other comprehensive income (loss).



Current taxes are the expected tax receivable
or payable on the taxable income or loss for the year, using tax rates enacted or substantively enacted at the reporting date,
and any adjustment to tax receivable or payable in respect of previous years.



The Company follows the liability method of
accounting for deferred taxes. Under this method, deferred taxes are recognized in respect of temporary differences between the
carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred
taxes are not recognized for the following temporary differences: the initial recognition of assets or liabilities in a transaction
that is not a business combination and that affects neither accounting nor taxable profit or loss, and differences relating to
investments in subsidiaries and jointly controlled entities to the extent that it is probable that they will not reverse in the
foreseeable future. In addition, deferred taxes are not recognized for taxable temporary differences arising on the initial recognition
of goodwill. Deferred taxes are measured at the tax rates that are expected to be applied to temporary differences when they reverse,
based on the tax laws that have been enacted or substantively enacted by the reporting date. Deferred tax assets and liabilities
are offset if there is a legally enforceable right to offset current tax assets and liabilities, and they relate to income taxes
levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax
assets and liabilities on a net basis or their tax assets and liabilities will be realized simultaneously.



47







A deferred tax asset is recognized for unused
tax losses, tax credits and deductible temporary differences, to the extent that it is probable that future taxable profits will
be available against which they can be utilized. Deferred tax assets are reviewed at each reporting date and are reduced to the
extent that it is no longer probable that the related tax benefit will be realized.



Tax benefits acquired as part of a business
combination, but not satisfying the criteria for separate recognition at that date, would be recognized subsequently if information
about facts and circumstances changed. The adjustment would either be treated as a reduction to goodwill if it occurred during
the measurement period or in profit or loss, when it occurs subsequent to the measurement period.



Allocation of purchase consideration to
the fair value of assets acquired and liabilities assumed and valuation of acquired intangible assets.



Business combinations are accounted for using
the acquisition method. The consideration for an acquisition is measured at the fair values of the assets transferred, the liabilities
assumed and the equity interests issued at the acquisition date. Transaction costs that are incurred in connection with a business
combination, other than costs associated with the issuance of debt or equity securities, are expensed as incurred. Identified
assets acquired and liabilities and contingent liabilities assumed are measured initially at fair values at the date of acquisition.
On an acquisition-by-acquisition basis, any non-controlling interest is measured either at fair value of the non-controlling interest
or at the fair value of the proportionate share of the net assets acquired.



Contingent consideration is measured at fair
value on acquisition date and is included as part of the consideration transferred. The fair value of the contingent consideration
liability is remeasured at each reporting date with the corresponding gain or loss being recognized in earnings.



Goodwill is initially measured at cost, being
the excess of fair value of the cost of the business combinations over the Company’s share in the net fair value of the
acquiree’s identifiable assets, liabilities and contingent liabilities. Any negative difference is recognized directly in
the consolidated statements of income. If the fair values of the assets, liabilities and contingent liabilities can only be calculated
on a provisional basis, the business combination is recognized using provisional values. Any adjustments resulting from the completion
of the measurement process are recognized within 12 months of the date of the acquisition.



Assumptions and model used to estimate
the value of share-based payment transactions



The grant date fair value of share-based payment
awards granted to employees is recognized as a personnel expense, with a corresponding increase in equity, over the period that
the employees unconditionally become entitled to the awards. The amount recognized as an expense is adjusted to reflect the number
of awards for which the related service and non-market vesting conditions are expected to be met, such that the amount ultimately
recognized as an expense is based on the number of awards that do meet the related service and non-market performance conditions
at the vesting date. For share-based payment awards with non-vesting conditions, the grant date fair value of the share-based
payment is measured to reflect such conditions and there is no true-up for differences between expected and actual outcomes.



Share-based payment arrangements in which
the Company receives goods or services as consideration for its own equity instruments are accounted for as equity-settled share-based
payment transactions. In situations where equity instruments are issued and some or all of the goods or services received by the
entity as consideration cannot be specifically identified, they are measured at fair value of the share-based payment.



For share-based payment arrangements with
non-employees, the expense is recorded over the service period until the options vest. Once the options vest, services are deemed
to have been received.



48







Where the terms of an equity-settled transaction
award are modified, the minimum expense recognized is the expense as if the terms had not been modified, if the original terms
of the award are met. An additional expense is recognized for any modification that increases the total fair value of the share-based
payment transaction, or is otherwise beneficial to the employee as measured at the date of modification.



Where an equity-settled award is cancelled,
it is treated as if it vested on the date of the cancellation and any expense not yet recognized for the award [being the total
expense as calculated at the grant date] is recognized immediately. This includes any awards where vesting conditions within the
control of either the Company or the employee are not met. However, if a new award is substituted for the cancelled award, and
designated as a replacement award on the date that it is granted, the cancelled award and new awards are treated as if they were
a modification of the original



A. Operating Results



General



Although the Company is currently focused
on Medicure International’s sole commercial product, AGGRASTAT®, this product has not been able to generate enough revenue
for the Company to reach sustained profitability.



Historically, the Company concentrated primarily
on research and development and continues to invest a significant amount of funds in research and development activities. To date,
the Company has yet to and may never derive any revenues from its research and development products.



The Company has a limited operating history
and its prospects must be considered in light of the risks, expenses and difficulties frequently encountered with the establishment
of a business in a highly competitive industry, characterized by frequent new product introductions.



Twelve Months Ended December 31, 2016 Compared
to the Twelve Months Ended December 31, 2015



For the twelve months ended December 31, 2016,
the results described below contain the operations of Apicore for the period from December 1, 2016 to December 31, 2016, which
was acquired in the 2016 Apicore Transaction as at December 1, 2016.



Net AGGRASTAT® product sales for year
ended December 31, 2016 were $29,980,000, compared to $22,083,000 in the comparable period in 2015. The Company currently sells
finished AGGRASTAT® to drug wholesalers. These wholesalers subsequently sell AGGRASTAT®to the hospitals where
health care providers administer the drug to patients. Wholesaler management decisions to increase or decrease their inventory
of AGGRASTAT®may result in sales of AGGRASTAT®to wholesalers that do not track directly with demand
for the product at hospitals. All of the Company’s sales are denominated in US dollars.



Net revenue from the sale of finished AGGRASTAT®products for the year ended December 31, 2016 increased by 36% over the net revenue for the year ended December 31, 2015.
All of the Company’s sales are denominated in U.S. dollars. Hospital demand for AGGRASTAT® increased significantly
compared to the comparable period in the prior year. The increase in revenue is primarily attributable to an increase in the number
of new hospital customers using AGGRASTAT®. The number of new customers reviewing and implementing AGGRASTAT®has increased sharply as a result of FDA approval of the new dosing regimen for AGGRASTAT® as announced on
October 11, 2013. Additionally, favourable fluctuations in the U.S. dollar exchange rate contributed to the increase in revenue.



The Company also recorded and additional $7,799,000
in revenues from Apicore for the period from December 1, 2016 to December 31, 2016.



AGGRASTAT® cost of goods sold represents
direct product costs associated with AGGRASTAT®including and write-downs for obsolete inventory and amortization
of the related acquired AGGRASTAT®intangible assets.



49







AGGRASTAT® cost of goods sold, excluding
amortization, for the year ended December 31, 2016 were $2,374,000 compared to $1,604,000 for the comparable period in the prior
year. For the year ended December 31, 2016, increases to cost of goods sold are the result of increases in net sales of AGGRASTAT®
during the period when compared to the same period in 2015.



Amortization of AGGRASTAT® intangible
assets decreased for the year ended December 31, 2016 to $1,347,000, when compared to $656,000 for the comparable period in the
prior year. The decrease is as a result of the AGGRASTAT® intangible assets becoming fully amortized during 2016 resulting
in only ten months of amortization being recorded.



Additionally, the Company recorded cost
of goods sold pertaining to Apicore totalling $6,048,000, however this included $2,731,000 that related to cost of goods sold
on fair valued inventory.



Total selling, general, and administrative
expenditures for the year ended December 31, 2016 were $16,233,000, compared to $10,237,000 for the comparable period in the prior
year. Selling, general, and administrative expenditures related to AGGRASTAT®were $11,730,000 for the year ended
December 31, 2016, compared to $7,666,000 for the comparable period in the prior year. Selling, general, and administrative expenditures
– Other were $3,672,000 for the year ended December 31, 2016, compared to $2,571,000 the comparable period in the prior
year. Selling, general, and administrative expenditures – Apicore were $831,000 for the period from December 1, 2016 to
December 31, 2016. Selling, general and administrative expenses include salaries and related costs for those employees not directly
involved in research and development. The expenditures are required to support sales and marketing efforts of AGGRASTAT®and ongoing business development and corporate stewardship activities. The balance also includes professional fees such
as legal, audit, investor and public relations.



Selling, general and administrative expenditures
– AGGRASTAT®increased during the year ended December 31, 2016 as compared to same period in the prior year
mainly due to:



| | · | Additional
                                         payroll costs associated with the sale of AGGRASTAT® due to additional head office
                                         employees providing support for AGGRASTAT® as the Company’s headcount increased
                                         from 39 at December 31, 2015 to over 50 at December 31, 2016; and
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Increased
                                         travel costs associated with the sale of AGGRASTAT® due to more sales people travelling
                                         to service accounts and increased frequency of hospital visits.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Selling, general and administrative expenditures
– Other increased during the year ended December 31, 2016 as compared to same period in the prior year mainly due to:



| | · | Higher
                                         costs associated with the acquisition of Apicore including legal and professional fees
                                         and additional salaries relating to corporate and business development activities.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Net research and development expenditures
for the year ended December 31, 2016 were $5,092,000, compared to $4,865,000 for the comparable period in the prior year. Research
and development expenditures include costs associated with the Company’s on-going AGGRASTAT development, clinical development
and preclinical programs including salaries, research centred costs and monitoring costs, as well as research and, development
costs associated with the development projects being undertaken to develop additional cardiovascular generic products and research
and development conducted within the Apicore business. The Company expenses research costs and has not had any development costs
that meet the criteria for capitalization under IFRS. The increase in research and development expenditures, for the year ended
December 31, 2016 as compared to the year ended December 31, 2015 is primarily the development of additional cardiovascular generic
products, as well as amortization of Apicore intangible assets which was recorded within research and development expenses.



50







Generally, included in research and development
expenses are charges related to impairment of the Company’s intangibles assets, however there were no impairments recorded
in either period. Intangible assets are reviewed for impairment on an ongoing basis whenever events or changes in circumstances
indicate that the carrying amount may not be recoverable. Based on this review certain patents were deemed not significant to
the Company’s commercial and research operations and a decision was made to no longer pursue these patents and as a result
the carrying value of these patents was written off.



It is important to note that historical
patterns of impairment charges cannot be taken as an indication of future impairments. The amount and timing of impairments and
write-downs may vary substantially from period to period depending on the business and research activities being undertaken at
any one time and changes in the Company's commercial strategy.



On December 1, 2016, the Company exercised
certain option rights that resulted in the Company acquiring a majority interest in Apicore Inc. and Apicore LLC. The transaction
was accounted for as a business combination achieved in stages. Apicore is a private, New Jersey based developer and manufacturer
of specialty Active Pharmaceutical Ingredients (“API”) and pharmaceuticals specializing in the manufacturing of difficult
to synthesize, high value and other niche APIs for many United States and international generic and branded pharmaceutical companies.
The exercise of certain options resulted in the Company acquiring 4,717,000 Series A Preferred Shares and 1,250,000 Class D Warrants
in Apicore in exchange for US$33,750,000 cash, increasing the Company’s ownership in Apicore to 64% (approximately 60% on
a fully diluted basis). The Company retains option rights to purchase the issued Class C common shares in Apicore until July 3,
2017, which represent 39% of the outstanding Apicore shares. In addition, Apicore has issued and outstanding Series A-1 preferred
shares representing 2% of the outstanding shares which are redeemable at the option of the holder after December 31, 2019. Finally,
Apicore’s Class E shares are reserved for the exercise of employee stock options. At December 1, 2016, 25,000 Class E shares,
were issued and outstanding and 447,500 options became fully vested on the change in control with the employee’s right to
put the outstanding Apicore Class E shares and options to the Company upon the change in control. Remaining Apicore stock options
outstanding of 400,000 were unaffected by the change of control and will fully vest in 2017.



As at July 3, 2014, the investment in
Apicore was initially valued at $1,276,849 and subsequently measured at amortized cost and the option rights received were recorded
at a value of $275,922 and subsequently revalued at each reporting date to fair value. Immediately prior to the Company exercising
certain options to acquire a controlling interest in Apicore, the investment in Apicore was recorded at $6,418,867. The increase
in value 0f $4,895,573 was recorded on the statement of net income (loss). In addition, immediately prior to the exercise of certain
options to acquire a controlling interest in Apicore, the derivative representing the value associated to the option rights was
revalued to its fair value of $20,788,011. The change in the value of the option rights of $20,560,440 was recorded in the statement
of net income (loss) for the year ended December 31, 2016 as a revaluation of the derivative.



During the year ended December 31, 2015,
the Company recorded a reversal of an impairment loss relating to AGGRASTAT intangible assets, originally written down during
the year ended May 31, 2008, totalling $788,305 as a result of sustained improvements in the AGGRASTAT business



Finance expense for the year ended December
31, 2016 was $3,417,000, compared to $4,123,000 in the comparable period in the prior year. The increase in finance expense for
the year ended December 31, 2016 as compared to the prior fiscal year is due to the loan obtained from Crown Capital in November
of 2016, higher accretion on the Company’s royalty obligation resulting from the Company’s continued sales growth
and interest cists associated with the debt that was obtained within Apicore as part of the 2016 Apicore Transaction. The royalty
obligation arose out of the previous debt settlement.



The net foreign exchange loss for the
year ended December 31, 2016 was $262,000, compared to a net foreign exchange loss of $69,000 for the comparable period in the
prior year. The change is due to higher fluctuations in the Canadian dollar versus the US dollar experienced during the year ended
December 31, 2016 compared to the year ended December 31, 2015.



51







The Company recorded current income tax
expense of $501,000 for the year ended December 31, 2016 relating to becoming taxable in the United States during 2016 and a future
income tax expense of $302,000 pertaining to temporary differences.



For
the year ended December 31, 2016, the Company recorded consolidated net income of $27,657,000 or $1.84 per share compared to $1,668,000
or $0.12 per share for the twelve months ended December 31, 2015. As discussed above, the main factors contributing to the increase
in the net income were the revaluation of the option and existing investment in Apicore , as well asrevenue increases which were
partially offset by increases in cost of goods sold, selling, general and administration andresearch and development.



For
the year ended December 31, 2016, the Company recorded total comprehensive income of $27,235,000 compared to $2,474,000 for the
year ended December 31, 2015. The change in comprehensive income results from the factors described above.



The weighted average number of common
shares outstanding used to calculate basic income per share was 15,002,005 for the year ended December 31, 2016 and 13,461,609
for the year ended December 31, 2015.



The weighted average number of common
shares outstanding used to calculate diluted income per share was 17,316,401 for the year ended December 31, 2016 and 15,765,570
for the year ended December 31, 2015.



Twelve Months Ended December 31, 2015
Compared to the Twelve Months Ended December 31, 2014



On December 18, 2014, the Company announced
that the Board of Directors had approved a change in the Company's fiscal year end from May
31 to December 31. The change resulted in a stub period from June 1, 2014, to December 31, 2014, and as a result of the change,
the first full fiscal year ended on December 31, 2015. This change in year end from May 31 to December 31 was being made by the
Company to better align the Company’s financial reporting calendar with its industry peers and with most other companies
trading on the TSX-V. As a result of this change in year end, it is important to note that the comparable period, being the twelve
months ended December 31, 2014 is unaudited and considered estimated.



Net product sales for year ended December
31, 2015 were $22,083,000, compared to $8,426,000 in the comparable period in 2014. The Company currently sells finished AGGRASTAT®
to drug wholesalers. These wholesalers subsequently sell AGGRASTAT®to the hospitals where health care providers
administer the drug to patients. Wholesaler management decisions to increase or decrease their inventory of AGGRASTAT®may result in sales of AGGRASTAT®to wholesalers that do not track directly with demand for the product at
hospitals. All of the Company’s sales are denominated in US dollars.



Net revenue from the sale of finished
AGGRASTAT® products for the year ended December 31, 2015 increased by 162% over the net revenue for the twelve
months ended December 31, 2014. The increase in revenue compared to the previous year and the comparable quarter for the previous
year is primarily attributable to an increase in the number of new hospital customers using AGGRASTAT® and
the increase in market share held by the product. Revenue growth was also aided by favourable fluctuations in the U.S. dollar
exchange rate throughout the third quarter. The Company's commercial team continues to work on further expanding its customer
base.



Cost of goods sold represents direct product
costs associated with AGGRASTAT®including and write-downs for obsolete inventory and amortization of the related
acquired AGGRASTAT®intangible assets.



Cost of goods sold, excluding amortization,
for the year ended December 31, 2015 were $1,604,000 compared to $393,000 for the comparable period in the prior year. For the
year ended December 31, 2015, increases to cost of goods sold are the result of increases in net sales of AGGRASTAT® during
the period when compared to the same period in 2014.



52







Amortization of AGGRASTAT® intangible
assets increased for the year ended December 31, 2015 to $656,000, when compared to $663,000 for the comparable period in the
prior year. The increase is as a result of fluctuations in foreign exchange rates causing the amortization expense to be higher
during the year ended December 31, 2015 as the asset is owned by a subsidiary whose functional currency is the US dollar.



Total selling, general, and administrative
expenditures for the year ended December 31, 2015 were $10,237,000, compared to $5,549,000 for the comparable period in the prior
year. Selling, general, and administrative expenditures related to AGGRASTAT®were $7,666,000 for the year ended
December 31, 2015, compared to $4,038,000 for the comparable period in the prior year. Selling, general, and administrative expenditures
– Other were $2,571,000 for the year ended December 31, 2015, compared to $1,511,000 the comparable period in the prior
year. Selling, general and administrative expenses include salaries and related costs for those employees not directly involved
in research and development. The expenditures are required to support sales and marketing efforts of AGGRASTAT®and
ongoing business development and corporate stewardship activities. The balance also includes professional fees such as legal,
audit, investor and public relations.



Selling, general and administrative expenditures
– AGGRASTAT®increased during the year ended December 31, 2015 as compared to same period in the prior year
mainly due to:



| | · | Additional
                                         payroll costs associated with the sale of AGGRASTAT® due to additional head office
                                         employees providing support for AGGRASTAT® as the Company’s headcount increased
                                         from 18 at December 31, 2014 to 39 at December 31, 2015; and
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Increased
                                         travel costs associated with the sale of AGGRASTAT® due to more sales people travelling
                                         to service accounts and increased frequency of hospital visits.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Selling, general and administrative expenditures
– Other increased during the year ended December 31, 2015 as compared to same period in the prior year mainly due to:



| | · | Higher
                                         stock-based compensation expenses, which totaled $1,460,318 during the year ended December
                                         31, 2015 as a result of stock options issued during the year, compared to $915,849 for
                                         the twelve months ended December 31, 2014.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Net research and development expenditures
for the year ended December 31, 2015 were $4,865,000, compared to $999,000 for the comparable period in the prior year. Research
and development expenditures include costs associated with the Company’s on-going AGGRASTAT development, clinical development
and preclinical programs including salaries, research centred costs and monitoring costs. The Company expenses research costs
and has not had any development costs that meet the criteria for capitalization under IFRS. The increase in research and development
expenditures, for the year ended December 31, 2015 as compared to the twelve months ended December 31, 2014 is primarily due to
the filing of a sNDA during 2015 with the FDA to expand the label for AGGRASTAT® to include the treatment of patients presenting
with ST segment elevation myocardial infarction (STEMI). This filing included a one-time filing fee paid to the FDA of $1.5 million
($1.2 million USD), as well as approximately $700,000 in other costs associated with its filing and preparation incurred during
the quarter. Additionally research and development expenditures increased as a result of manufacturing set-up costs associated
with the AGGRASTAT® finished product and development costs associated with non-AGGRASTAT® projects.



Generally, included in research and development
expenses are charges related to impairment of the Company’s intangibles assets, however there were no impairments recorded
in either period. Intangible assets are reviewed for impairment on an ongoing basis whenever events or changes in circumstances
indicate that the carrying amount may not be recoverable. Based on this review certain patents were deemed not significant to
the Company’s commercial and research operations and a decision was made to no longer pursue these patents and as a result
the carrying value of these patents was written off.



53







It is important to note that historical
patterns of impairment charges cannot be taken as an indication of future impairments. The amount and timing of impairments and
write-downs may vary substantially from period to period depending on the business and research activities being undertaken at
any one time and changes in the Company's commercial strategy.



During the year ended December 31, 2015,
the Company recorded a reversal of an impairment loss relating to AGGRASTAT intangible assets, originally written down during
the year ended May 31, 2008, totalling $788,305 as a result of sustained improvements in the AGGRASTAT business



During the twelve months ended December
31, 2014, the Company recognized $1,385,000 of income pertaining to investment structuring services resulting from its acquisition
of a minority interest in a pharmaceutical manufacturing business known as Apicore. The Company’s equity interest and certain
other rights, including the option rights, were obtained by the Company for services provided in its lead role in structuring
a US$22.5 million majority purchase and financing of Apicore. There was no cash outflow in connection with the acquisition of
the minority interest in Apicore, with the exception of costs incurred by the Company in relation to the transaction which totalled
$167,672.



Finance expense for the year ended December
31, 2015 was $4,123,000, compared to $2,145,000 in the comparable period in the prior year. The increase in finance expense for
the year ended December 31, 2015 as compared to the prior fiscal year is due to higher accretion on the Company’s royalty
obligation resulting from higher revenue estimates as a result of the October 2013 label change and the Company’s continued
sales growth. The royalty obligation arose out of the previous debt settlement.



The net foreign exchange loss for the
year ended December 31, 2015 was $69,000, compared to a net foreign exchange loss of $18,000 for the comparable period in the
prior year. The change is due to higher fluctuations in the Canadian dollar versus the US dollar experienced during the year ended
December 31, 2015 compared to the twelve months ended December 31, 2014.



The Company recognized an income tax recovery
of $379,000 for the year ended December 31, 2015 to the extent it is probable that future taxable profits will be available against
which the accumulated tax losses and temporary differences can be utilized.



For
the year ended December 31, 2015, the Company recorded consolidated net income of $1,668,000 or $0.12 per share compared to $463,000
or $0.04 per share for the twelve months ended December 31, 2014. As discussed above, the main factors contributing to the increase
in the net income were the income resulting from investment structuring services relating to the acquisition of a minority interest
in Apicore in the comparable period offset by the significant increase revenues experienced during the year ended December 31,
2015 when compared to the comparable period in the prior year. Revenue increase were partially offset by increases in selling,
general and administration, research and development and finance expenses.



For
the year ended December 31, 2015, the Company recorded total comprehensive income of $2,474,000 compared to $620,000 for the twelve
months ended December 31, 2014. The change in comprehensive income results from the factors described above.



The weighted average number of common
shares outstanding used to calculate basic income per share was 13,461,608 for the year ended December 31, 2015 and 12,209,907
for the twelve months ended December 31, 2014.



The weighted average number of common
shares outstanding used to calculate diluted income per share was 15,765,570 for the year ended December 31, 2015 and 13,843,126
for the twelve months ended December 31, 2014.



54







B. Liquidity and Capital Resources



Since the Company’s inception, it
has financed operations primarily from net revenue received from the sale of AGGRASTAT®, sale of its equity securities, the
issue and exercise of warrants and stock options, interest on excess funds held and the issuance of debt as well as a build up
in accounts payable associated with a reliance on trade debt.



On July 18, 2011, the Company borrowed
$5,000,000 from the Government of Manitoba, under the Manitoba Industrial Opportunities Program, to assist with settling the Company’s
debt to Birmingham. Effective August 1, 2013, the Company renegotiated this debt and received an additional two year deferral
of principal repayments. Under the renegotiated terms, the loan continued to be interest only until August 1, 2015 when blended
payments of principal and interest commenced, and the loan maturity date was extended to July 1, 2018.



On November 17, 2016, in connection with
the exercise of the Company’s acquisition of the controlling ownership in Apicore, the Company received a term loan (the
“Term Loan”) from Crown Capital Fund IV LP, an investment fund managed by Crown Capital Partners Inc. (“Crown”)
(TSX: CRN), in which Crown holds a 40% interest for $60,000,000 of which $30,000,000 was syndicated to the Ontario Pension Board
(“OPB”) a limited partner in Crown’s funds. Under the terms of the loan agreement with Crown, the loan bears
interest at a fixed rate of 9.5% per annum, compounded monthly and payable on an interest only basis, maturing in 48 months, and
is repayable in full upon maturity.



The loan was used by the Company and its
wholly owned subsidiary, Medicure Mauritius Limited, exercised its option rights to purchase interests in Apicore, Inc. and Apicore
LLC. The 2016 Apicore Transaction was closed on December 1, 2016. Apicore, Inc. and Apicore LLC are affiliated entities that together
operate the Apicore pharmaceutical business and are referred to together as “Apicore”. Apicore is a leading process
research and development and Active Pharmaceutical Ingredients (“APIs”) manufacturing service provider for the worldwide
pharmaceutical industry. The acquisition brings the Company and its subsidiary’s ownership interests in Apicore, Inc. to
64% (or approximately 59% on a fully diluted basis) and the Company and its subsidiary’s ownership in Apicore LLC. to 64%
(basic and fully-diluted). Five percent of Medicure’s ownership in Apicore LLC is held by Apigen Investments Limited (“Apigen”),
a Company which owned 100 percent of Apicore LLC, before the Acquisition.



On December 18, 2014, the Company announced
that the Board of Directors had approved a change in the Company's fiscal year end to December 31. The change resulted in a stub
period from June 1, 2014, to December 31, 2014, and as a result of the change, the first full fiscal year ended on December 31,
2015. This change in year end from May 31 to December 31 was made by the Company to better align the Company’s financial
reporting calendar with its industry peers and with most other companies trading on the TSX-V. As a result of this change in year
end, it is important to note that the comparable period, being the twelve months ended December 31, 2014 is unaudited.



Cash from operating activities for the
year ended December 31, 2016 increased by $6.3 million to 6.4 million compared to cash from operating activities of $143,000 for
the comparable period in the prior year primarily due to higher net income after adjusting for non-cash items.



Investing activities for the year ended
December 31, 2016 were cash used totaling $42.2 million and related to the acquisition of Apicore upon completion of the 2016
Apicore Transaction on December 1, 2016, and the acquisition property and equipment, including leasehold improvements of $464,000,
compared to $227,000 relating to the acquisition of property and equipment for the twelve months ended December 31, 2015.



Cash from financing activities for the
twelve months ended December 31, 2016 included $60.0 million received from the term debt financing completed in November of 2016,
$1.8 million and $39,000 received upon the exercise of stock options and warrants, respectively, during fiscal this period and
$1.7 million in repayments on the MIOP debt. Financing activities for the year ended December 31, 2015 included $3.6 million received
from a private placement financing completed in June of 2015, $33,000 and $150,000 received upon the exercise of stock options
and warrants, respectively, during fiscal this period and $694,000 in repayments on long-term debt.



55







As at December
31, 2016, the Company had unrestricted cash totaling $12.3 million compared to $3.6 million as of December 31, 2015. As at December
31, 2016, the Company had a negative working capital of $5.7 million versus working capital of $7.0 million at December 31, 2015.



The Company has long-term debt at December
31, 2016 of $71.1 million recorded in its financial statements.



On July 18, 2011, the Company borrowed
$5,000,000 from the Government of Manitoba, under the Manitoba Industrial Opportunities Program, to assist with settling the Company’s
long-term debt at that time. The loan bears interest annually at the crown corporation borrowing rate plus two percent. The loan
was renegotiated effective August 1, 2013 to remain subject to interest-only monthly payments until August 1, 2015, at which time
the monthly payments became blended as to principal and interest, and the maturity date of the loan was extended from July 1,
2016 to July 1, 2018. The loan is secured by the Company’s assets and guaranteed by the Chief Executive Officer of the Company
and entities controlled by the Chief Executive Officer. The Company must meet its debt repayment obligations and failure to do
so could cause the lender to realize upon its security interest in the Company’s assets, and to call on the guarantee provided
by the Chief Executive Officer and entities controlled by him. The Company has made all payments to date in relation to this indebtedness;
however, there is no certainty that the Company will be able to continue servicing the debt.



On November 17, 2016, in connection with
the exercise of the Company’s acquisition of the controlling ownership in Apicore, the Company received a term loan (the
“Term Loan”) from Crown Capital Fund IV LP, an investment fund managed by Crown Capital Partners Inc. (“Crown”)
(TSX: CRN), in which Crown holds a 40% interest for $60,000,000 of which $30,000,000 was syndicated to the Ontario Pension Board
(“OPB”) a limited partner in Crown’s funds. Under the terms of the loan agreement with Crown, the loan bears
interest at a fixed rate of 9.5% per annum, compounded monthly and payable on an interest only basis, maturing in 48 months, and
is repayable in full upon maturity. The loan is secured by the Company’s assets including its ownership interests in Apicore.
The Company must meet its debt repayment obligations and on-going financial covenants and failure to do so could cause the lender
to realize upon its security interest in the Company’s assets. The Company has made all payments to date in relation to
this indebtedness,; however, there is no certainty that the Company will be able to continue servicing the debt.



Through the acquisition completed in the
2016 Apicore Transaction, the Company, through Apicore, has additional debt agreement with Knight Therapeutics Inc. The Knight
Loan bears interest at 12% per annum, with interest paid quarterly at the end of each quarter with unpaid interest and principal
due June 30, 2018. The Knight Loan is secured by a security interest in substantially all of the Apicore Inc’s, as well
as the assets of another subsidiary acquired. The subsidiary is required to maintain certain financial covenants, based on results
of the subsidiary, under the terms of the Knight Loan. Subsequent to December 31, 2016, on January 6, 2017, the interest and principal
remaining were paid in full in regards to the Knight Loan.



Finally, through the acquisition completed
in the 2016 Apicore Transaction, the Company, through Apicore, has an additional debt agreement with Dena Bank. The loan bears
interest at LIBOR plus 4%, with equal monthly payments of principal and interest, maturing June 30, 2020. The loan is secured
by land, building, and machinery of the Company, a pledge of 778,440 equity shares of Apicore LLC, each with a value of $0.15
USD and a guarantee by the directors of Apicore.



The minimum annual debt obligations are
disclosed under Contractual Obligations.



56







C. Research and Development, Patents
and Licenses, Etc.



Research and Development



The Company’s research and development
activities are predominantly conducted by its subsidiary, Medicure International, Inc.



One of the primary ongoing research and
development activities is the continued development and further implementation of a new regulatory, brand and life cycle management
strategy for AGGRASTAT®. The extent to which the Company is able to invest in this plan is dependent upon the availability
of sufficient finances.



An important aspect of the AGGRASTAT®strategy is the revision of its approved prescribing information. On October 11, 2013, the Company announced that the FDA
has approved the AGGRASTAT® HDB regimen, as requested under Medicure's sNDA. The AGGRASTAT® HDB
regimen (25 mcg/kg over 3 minutes, followed by 0.15 mcg/kg/min) now becomes the recommended dosing for the reduction of thrombotic
cardiovascular events in patients with NSTE ACS.



The Company believes that further expanded
indications and dosing regimens could provide added value to further maximize the revenue potential for AGGRASTAT®.
The Company is currently exploring the potential to make such changes, and the Company may need to conduct appropriate clinical
trials, obtain positive results from those trials, or otherwise provide support in order to obtain regulatory approval for such
proposed indications and dosing regimens.



On April 23, 2015, the Company announced
that the FDA has approved a revision to the duration of the bolus delivery for the AGGRASTAT® HDB regimen. The
dosing change and label modification was requested by the Company to help health care professionals more efficiently meet patient-specific
administration needs and to optimize the implementation of AGGRASTAT® at new hospitals. The newly approved labeling
supplement now allows the delivery duration of the AGGRASTAT® high-dose bolus (25 mcg/kg) to occur anytime within
5 minutes, instead of the previously specified duration of 3 minutes. This change is part of Medicure’s ongoing regulatory
strategy to expand the applications for AGGRASTAT®.



On September 10, 2015, the Company announced
that it submitted a sNDA to FDA to expand the label for AGGRASTAT® to include the treatment of patients presenting
with STEMI. AGGRASTAT® is currently approved by the FDA for treatment of patients presenting with NSTE ACS. If
approved for STEMI, AGGRASTAT® would be the first in its class of GPIs to receive such a label in the United States.



In previous communication with the Company,
the FDA’s Division of Cardiovascular and Renal Drug Products indicated its willingness to review and evaluate this label
change request based substantially on data from the On-TIME 2 study, with additional support from published studies and other
data pertinent to the use of the AGGRASTAT® HDB regimen in the treatment of STEMI. The efficacy and safety of the
HDB regimen in STEMI has been evaluated in more than 20 clinical studies involving over 11,000 patients and is currently recommended
by the ACCF/AHA Guideline for the Management of STEMI.



On July 7, 2016, the Company announced
that it has received a Complete Response Letter from the FDA for its sNDA requesting an expanded indication for patients presenting
with STEMI. The FDA issued the Complete Response Letter to communicate that its initial review of the application is complete;
however it cannot approve the application in its present form and requested additional information. The Company continues to work
directly with the FDA to address these comments.



The sNDA filing was accompanied by a mandatory
US $1.167 million user fee paid by Medicure International, Inc. to the FDA. In December 2016, the Company received a waiver and
full refund of the user fee which had been paid and expensed during fiscal 2015.



The Company is also continuing to explore
other experimental uses and product formats related to AGGRASTAT®. On September 1, 2016, the Company announced
that it has received approval from the FDA for its new bolus vial product format for AGGRASTAT®.



The new product format is a concentrated,
pre-mixed, 15 ml vial containing sufficient drug to administer the FDA approved, high dose bolus (“HDB”) of 25 mcg/kg
at the beginning of treatment. AGGRASTAT is currently only sold in a pre-mixed intravenous bag format that comes in two sizes,
100 ml and 250 ml. The existing, pre-mixed products will continue to be available, providing a convenient concentration for administering
the post-HDB maintenance infusion of 0.15 mcg/kg/min. (Approved Dosing: Administer intravenously 25 mcg/kg within 5 minutes and
then 0.15 mcg/kg/min for up to 18 hours).



57







Commercial launch of the bolus vial occurred
during the fourth quarter of 2016 and the Company believes this new product format will have a positive impact on hospital utilization
of AGGRASTAT®. Another aspect of the AGGRASTAT® strategy is to advance studies related to the contemporary
use and future regulatory positioning of the product. On May 10, 2012, the Company announced the commencement of enrolment in
a new clinical trial of AGGRASTAT® entitled “Shortened AGGRASTAT® Versus Integrilin in Percutaneous
Coronary Intervention” (SAVI-PCI). SAVI PCI is a randomized, open-label study enrolling patients undergoing percutaneous
coronary intervention (PCI) at sites across the United States. In June 2013, the target number of patients to be enrolled in the
study was increased from 600 to 675. The study is designed to evaluate whether patients receiving the investigational, HDB regimen
of AGGRASTAT® (25 mcg/kg bolus over 3 minutes) followed by an infusion of 0.15 mcg/kg/min for either a shortened duration
of 1 to 2 hours or a lengthened infusion of 12 to 18 hours will have outcomes that are similar, or “non-inferior,”
to patients receiving a 12 to 18 hour infusion of Integrilin® (eptifibatide) (Merck & Co., Inc.) at its FDA approved dosing
regimen. The study arm investigating AGGRASTAT® HDB followed by a 12 to 18 hour infusion was added subsequent to
enrolment commencing.



The primary objective of SAVI-PCI is to
demonstrate AGGRASTAT® is non-inferior to Integrilin with respect to the composite endpoint of death, PCI-related
myocardial infarction, urgent target vessel revascularization, or major bleeding within 48 hours following PCI or hospital discharge.
The secondary objectives of this study include the assessment of safety as measured by the incidence of major bleeding.



The first patient was enrolled in June
2012. As of April 26, 2017, the study was approximately 80% through to completion of enrolment.



The Company is also continuing to explore
other experimental uses and product formats related to AGGRASTAT®.



Through an ongoing research and development
investment, the Company is also exploring other new product opportunities in the interest of developing future sources of revenue
and growth.



On January
6, 2016, the Company announced that it had initiated the development of a cardiovascular generic drug. The project was a collaboration
between Medicure International, Inc. and Apicore US LLC (together with its affiliates “Apicore”), a leading-edge manufacturer
of generic active pharmaceutical ingredients ("APIs”). The collaborative project was focused on the development of
an intravenous aNDA drug product for an acute cardiovascular indication. Medicure and Apicore have entered into an exclusive product
supply and development agreement under which Medicure holds all commercial rights. On December 13, 2016, the Companyannounced
that the aNDA was filed with the U.S. Food and Drug Administration.



In addition to the collaboration with
Apicore, the Company is focused on the development of two additional cardiovascular generic drugs. When combined with the aNDA
described above, the Company expects to transform its commercial suite of products from a single product to four approved products
by the end of 2019.



The Company is actively working and devoting
a modest amount of resources to this program, including, but not limited to the development of TARDOXALTM(formerly
known as MC-1) for neurological conditions such as Tardive Dyskinesia. This work includes, but is not limited to, working with
the FDA to better understand and refine the next steps in development of the product.



On August 13, 2014, the Company announced
that the preliminary results of its Phase IIa Clinical Trial, TARDOXALTM for the Treatment of Tardive Dyskinesia (TEND-TD)
showed a non-statistically significant improvement in the primary efficacy endpoint in patients treated with TARDOXALTM.
Medicure views these preliminary results as supportive of continuing the program and developing a modified formulation as a prelude
to a larger, confirmatory Phase II study.



58







It is the Company’s intention to
develop TARDOXALTM independently and/or in conjunction with a larger pharmaceutical company for commercialization of
the product. Similar partnerships may be required for other products that the Company may from time to time seek to develop. Such
a partnership would provide funding for clinical development, add experience to the product development process and provide market
positioning expertise. No formal agreement for such a commercial partnership has been entered into by the Company as of the date
hereof. Company-sponsored research and development net expenditures the year ended December 31, 2016 were $4,113,000, excluding
amortization of intangible assets (year ended December 31, 2015 - $4,865,000, seven months ended December 31, 2014 - $783,000
and year ended May 31, 2014 - $689,000).



Patents and Licenses



In addition to a number of pending patent
applications, the Company has 7 issued patents from the United States Patent Office providing protection for AGGRASTAT®and related its current and historic development compounds. The Company will continue to file patents related to its research
and development activities. The United States patents currently issued to the Company are as follows:



|Patent Number |  | Issue Date       |  | Title                                                                                                              
|------------- |  | ---------------- |  | -------------------------------------------------------------------------------------------------------------------
|5,965,581     |  | October 12, 1999 |  | Compositions for Inhibiting Platelet
    Aggregation                                                               
|5,972,967     |  | October 26, 1999 |  | Compositions for Inhibiting Platelet
    Aggregation                                                               
|5,978,698     |  | November 2, 1999 |  | Angioplasty Procedure Using Nonionic
    Contrast Media                                                            
|6,136,794     |  | October 24, 2000 |  | Platelet Aggregation Inhibition Using Low Molecular Weight Heparin in Combination with a
    GP IIb/IIIa Antagonist
|6,770,660     |  | August 3, 2004   |  | Method for Inhibiting Platelet Aggregation                                                                         



Patents 5,965,581, 5,972,967, 5,978,698,
6,136,794, 6,538,112 and 6,770,660 were purchased by the Company from MGI GP, INC. (a Delaware corporation doing business as MGI
PHARMA and its Affiliate, Artery, LLC). Pursuant to an Asset Purchase Agreement dated August 8, 2006, MGI GP, INC. sold the exclusive
use of the patents to the Company in the specified territory (the United States of America including the Commonwealth of Puerto
Rico; Guam; and the United States Virgin Islands). Pursuant to the Asset Purchase Agreement the Company agreed to pay MGI GP,
INC. a one-time fee for the procurement of the acquired assets. The Asset Purchase Agreement was executed August 8, 2006.



Apicore US LLC Issued Patents List:



|Patent Number   |  | Issue Date |  | Title                                                                                        
|--------------- |  | ---------- |  | ---------------------------------------------------------------------------------------------
|                |  |            |  |                                                                                              
|US 7,446,227 B2 |  | 11/4/2008  |  | Process for preparation of 5H-dibenzo[a,d] cycloheptene derivatives                          
|                |  |            |  |                                                                                              
|US 7,662,992 B2 |  | 2/16/2010  |  | Process for preparation of isosulfan blue                                                    
|                |  |            |  |                                                                                              
|US 9,353,050    |  | 5/31/2016  |  | Process for preparation of isosulfan blue                                                    
|                |  |            |  |                                                                                              
|US 8,969,616    |  | 3/3/2015   |  | Process for preparation of isosulfan blue                                                    
|                |  |            |  |                                                                                              
|US 8,450,487 B2 |  | 5/28/2013  |  | Process for the preparation of cis-2-methylspiro (1,3-oxathiolane 5-3′) quinuclidine         
|                |  |            |  |                                                                                              
|US 8,748,631    |  | 6/10/2014  |  | Process for preparing saxagliptin and its novel intermediates useful in the synthesis thereof
|                |  |            |  |                                                                                              
|US 9,150,511    |  | 10/6/2015  |  | Process for preparing saxagliptin and its novel intermediates useful in the synthesis thereof
|                |  |            |  |                                                                                              
|US 9,493,473    |  | 11/15/2016 |  | Processes for making ponatinib and intermediates thereof                                     



59







Apicore relies on a number of patents,
patent applications and proprietary knowledge to maintain its competitive advantage over other API/ aNDA generic, and branded
companies



Much of the work, including some of the
research methods, that is important to the success of the Company’s business is germane to the industry and may not be patentable.
For this reason all employees, contracted researchers and consultants are bound by non-disclosure agreements.



Given that the patent applications for
these technologies involve complex legal, scientific and factual questions, there can be no assurance that patent applications
relating to the technology used by the Company will result in patents being issued, or that, if issued, the patents will provide
a competitive advantage or will afford protection against competitors with similar technology, or will not be challenged successfully
or circumvented by competitors.



The Company has filed patents in accordance
with the Patent Cooperation Treaty (the ‘‘PCT’’). The PCT is a multilateral treaty that was concluded
in Washington in 1970 and entered into force in 1978. It is administered by the International Bureau of the World Intellectual
Property Organization (the ‘‘WIPO’’), headquartered in Geneva, Switzerland. The PCT facilitates the obtaining
of protection for inventions where such protection is sought in any or all of the PCT contracting states (total of 104 at July
1999). It provides for the filing of one patent application (the ‘‘international application’’), with
effect in several contracting states, instead of filing several separate national and/or regional patent applications. At the
present time, an international application may include designation for regional patents in respect of contracting states party
to any of the following regional patent treaties: The Protocol on Patents and Industrial Designs within the framework of the African
Regional Industrial Property Organization, the Eurasian Patent Convention, the European Patent Convention, and the Agreement Establishing
the African Intellectual Property Organization. The PCT does not eliminate the necessity of prosecuting the international application
in the national phase of processing before the national or regional offices, but it does facilitate such prosecution in several
important respects by virtue of the procedures carried out first on all international applications during the international phase
of processing under the PCT. The formalities check, the international search and (optionally) the international preliminary examination
carried out during the international phase, as well as the automatic deferral of national processing which is entailed; give the
applicant more time and a better basis for deciding whether and in what countries to further pursue the application. Further information
may be obtained from the official WIPO internet website (http://www.wipo.int).



Although the Company is no longer developing
MC-1 for cardiovascular indications, the Company does have a royalty bearing agreement with its subsidiary in regards to this
development program. On June 1, 2000, the Company entered into the Medicure International Licensing Agreement whereby it licensed
the world-wide development and marketing rights for MC-1, except for Canada, to its wholly owned subsidiary, Medicure International,
Inc. As consideration for the grant of the license, Medicure International, Inc. agreed to pay the Company a fee of $1.00 upon
the completion of specified milestones in the development process, together with a variable royalty of 7% to 9% of net sales of
MC-1 (if any sales are ever in fact made). The term of the Medicure International Licensing Agreement will expire on the date
of expiration of the last to expire patent on MC-1, or in the absence of any such patent, on the 10th anniversary of the date
of the first commercial sale of MC-1 in the country where it was last introduced (if it is ever so introduced). The Medicure International
Licensing Agreement may be terminated under a number of circumstances and, in any event, by either party at any time by providing
the other with at least 90 days prior written notice of its intention to terminate the Medicure International Licensing Agreement.



Medicure International, Inc. subsequently
entered into a development agreement with CanAm on June 1, 2000 to perform research and development of MC-1 and other compounds
at cost, plus a reasonable mark-up not to exceed ten percent of any amount invoiced. The parties to the development agreements
have agreed that the aggregate amount of all invoiced expenditures shall not exceed $30,000,000 over the term of each agreement.
The term of the CanAm development agreement is to expire on the completion of all research and development activities by CanAm
and the written acknowledgment by CanAm and Medicure International, Inc. that no further research projects will be undertaken.
CanAm continues to perform work on AGGRASTAT®, TARDOXALTM and other projects under this agreement, however there
is no ongoing research activity related to MC-1.



60







The development agreements may be terminated
under a number of circumstances and, in any event, by Medicure International, Inc. at any time by providing CanAm with at least
30 days prior written notice of its intention to terminate, or by CanAm at any time by providing Medicure International, Inc.,
with at least 90 days prior written notice of its intention to terminate the development agreement.



The agreements provide that all confidential
information developed or made known during the course of the relationship with the Company is to be kept confidential except in
specific circumstances.



D. Trend Information



Net product sales for AGGRASTAT® for
the year ended December 31, 2016 were $29,980,000, compared to $22,083,000 for the twelve months ended December 31, 2015. The
Company currently sells finished AGGRASTAT® to drug wholesalers. These wholesalers subsequently sell AGGRASTAT®to
the hospitals where health care providers administer the drug to patients. Wholesaler management decisions to increase or decrease
their inventory of AGGRASTAT®may result in sales of AGGRASTAT®to wholesalers that do not track
directly with demand for the product at hospitals. All of the Company’s sales are denominated in US dollars.



Net revenue from the sale of finished
AGGRASTAT® products for the year ended December 31, 2016 increased by 36% over the net revenue for the year ended
December 31, 2015. All of the Company’s sales are denominated in U.S. dollars. Hospital demand for AGGRASTAT®
increased significantly compared to the comparable period in the prior year. The increase in revenue is primarily attributable
to an increase in the number of new hospital customers using AGGRASTAT®. The number of new customers reviewing
and implementing AGGRASTAT® has increased sharply as a result of FDA approval of the new dosing regimen for AGGRASTAT®as announced on October 11, 2013. Additionally, favourable fluctuations in the U.S. dollar exchange rate contributed to
the increase in revenue.



The Company is not aware of any other
trends, uncertainties, demands, commitments or events which are reasonably likely to have a material effect upon the Company’s
net sales or revenues, income from continuing operations, profitability, liquidity or capital resources, or that would cause reported
financial information not necessarily to be indicative of future operating results or financial condition.



E. Off-balance Sheet Arrangements



As of December 31, 2016, the Company does
not have any off-balance sheet arrangements, other than those disclosed below.



61







F. Contractual Obligations



The following tables set forth the Company’s
contractual obligations as of December 31, 2016:



|                                         |  | Contractual Obligations Payment Due By Period |       
|---------------------------------------- |  | --------------------------------------------- | ------
|(in thousands of CDN$)                   |  | Total                                         |       
|Short-term borrowings                    |  | $                                             | 1,384 
|Accounts Payable and Accrued Liabilities |  |                                               | 17,242
|Long-term debt obligations               |  |                                               | 63,557
|Finance lease obligations                |  |                                               | 368   
|Purchase Agreement commitments           |  |                                               | 6,148 
|Total                                    |  | $                                             | 28,699



Short-term Borrowings



The Company, through the acquisition of
a subsidiary as described in note 4 of the Company’s financial statements has entered into a credit facility with Dena
Bank, headquartered in India. The facility provides a USD denominated pre-shipment credit facility “Pre-shipment
credit facility” and an Indian Rupee (INR) denominated working capital facility “Working capital facility”.
The available credit facility is an aggregate amount of the Dena facility and pre-shipment credit facility to a maximum of INR
75,000,000 (CAD $1,480,547).



Crown Capital Fund IV LP Term
Loan (“Crown Loan”)



On November 17, 2016, in connection with
the exercise of the Company’s acquisition of the controlling ownership in Apicore, described in Note 4, the Company received
a term loan from Crown Capital Fund IV LP, an investment fund managed by Crown Capital Partners Inc. (“Crown”), in
which Crown holds a 40% interest for $60,000,000 of which $30,000,000 was syndicated to the Ontario Pension Board (“OPB”)
a limited partner in Crown’s funds. Under the terms of the loan agreement, the Crown Loan bears interest at a fixed rate
of 9.5% per annum, compounded monthly and payable on an interest only basis, maturing in 48 months, and is repayable in full upon
maturity.



The Company has granted 450,000 warrants
to each of Crown and OPB. Each warrant entitles the holder to purchase one Medicure common share at an exercise price of $6.50
for a period of four years. The Company presents and discloses its financial instruments in accordance with the substance of its
contractual arrangement. Accordingly, the Company recorded a liability of $58,200,000 less related debt issuance costs of $3,538,648.
The liability component has been accreted using the effective interest rate method, and during the year ended December 31, 2016,
the Company recorded accretion of $36,884, non-cash interest expense related to financing costs of $110,237 and interest expense
of $702,574 on the Crown Loan. The fair value assigned to the warrants issued of $1,948,805 has been separated from the fair value
of the liability and is included in shareholder’s equity, net of its pro rata share of financing costs of $116,695.



The effective interest rate on the Crown
Loan for the year ended December 31, 2016 was 12%.



Beginning in 2017, the Company will be
required to maintain certain financial covenants under the terms of the Crown Loan.



62







Knight Therapeutics Inc. Loan (“Knight
Loan”)



The Company, through the acquisition of
a subsidiary as described Note 4 of the Company’s financial statements, has a debt agreement with Knight Therapeutics Inc.
The Knight Loan bears interest at 12% per annum, with interest paid quarterly at the end of each quarter with unpaid interest
and principal due June 30, 2018. The Knight Loan is secured by a security interest in substantially all of the acquired subsidiary’s
assets.



The effective rate of interest on the
Knight Loan for the year ended December 31, 2016 was 12%.



The subsidiary is required to maintain
certain financial covenants, based on results of the subsidiary, under the terms of the Knight Loan. As at December 31, 2016,
the Company was in compliance with the terms of the Knight Loan.



Subsequent to December 31, 2016, on January
6, 2017, the interest and principal outstanding on the Knight Loan were repaid in full from the remaining funds provided under
the Crown Loan, which was recorded on the statement of financial position at December 31, 2016 as cash held in escrow. As a result,
the repayments relating to the Knight Loan have not been included in contractual obligations table.



Dena Bank Loan



The Company, through the acquisition of
a subsidiary as described in Note 4 of the Company’s financial statements has a debt agreement with Dena Bank. The loan
bears interest at LIBOR plus 4%, with equal monthly payments of principal and interest, maturing June 30, 2020. The loan is secured
by the land, building, and machinery of a subsidiary, a pledge of 778,440 equity shares of Apicore LLC. with a value each of $0.15
USD, and a guarantee by directors of Apicore LLC.



The effective rate of the loan for the
year ended December 31, 2016 was 9%.



Manitoba Industrial Opportunities Loan
(“MIOP Loan)



On July 18, 2011, the Company borrowed
$5,000,000 from the Government of Manitoba, under the Manitoba Industrial Opportunities Program ("MIOP"), to assist
in the settlement of its then existing long-term debt. The loan bears interest annually at 5.25% and originally matured on July
1, 2016. The loan was payable interest only for the first 24 months, with blended principal and interest payments made monthly
thereafter until maturity. Effective August 1, 2013, the Company renegotiated its long-term debt and received an additional two-year
deferral of principal repayments. Under the renegotiated terms, the loan continued to be interest only until August 1, 2015, at
which point blended principal and interest payments began. The loan matures on July 1, 2018 and is secured by the Company's assets
and guaranteed by the Chief Executive Officer of the Company and entities controlled by the Chief Executive Officer. The Company
issued 1,333,333 common shares (20,000,000 pre-consolidated common shares) of the Company with a fair value of $371,834, net of
share issue costs of $28,166, in consideration for the guarantee to the Company's Chief Executive Officer and entities controlled
by the Chief Executive Officer. In connection with the guarantee, the Company entered into an indemnification agreement with the
Chief Executive Officer under which the Company shall pay the Guarantor on demand all amounts paid by the Guarantor pursuant to
the guarantee. In addition, under the indemnity agreement, the Company agreed to provide certain compensation upon a change in
control of the Company. The Company relied on the financial hardship exemption from the minority approval requirement of Multilateral
Instrument ("MI") 61-101. Specifically, pursuant to MI 61-101, minority approval is not required for a related party
transaction in the event of financial hardship in specified circumstances.



The Company is required to maintain certain
non-financial covenants under the terms of the MIOP loan. In connection with the business combination described in note 4, the
Company did not obtain required approvals from MIOP prior to completing the transaction due to the timing of the closing of the
transaction. As a result, $969,413, net of deferred debt issue costs has been included within current liabilities on the statement
of financial position as at December 31, 2016. The Company has subsequently received a waiver from MIOP waiving any right to call
the loan and the long-term portion of the MIOP loan will no longer be included within current liabilities going forward. Aside
from this approval, the Company was in compliance with the terms of the loan as at December 31, 2016.



The effective interest rate on the MIOP
loan for the year ended December 31, 2016 was 7%.



63







Finance Lease Obligations



The Company, through the acquisition of
a subsidiary as described in note 4 of the Company’s financial statements has entered into three capital lease arrangements
to finance the acquisition of certain equipment. The Company’s obligations under finance leases are secured by the associated
equipment.



Commitments



The Company has entered into a manufacturing
and supply agreement to purchase a minimum quantity of AGGRASTAT®unfinished product inventory totalling US$150,000
annually (based on current pricing) until 2024.



Effective November 1, 2014, the Company
entered into a sub-lease with Genesys Venture Inc. (“GVI”) to lease office space at a rate of $170,000 per annum for
three years ending October 31, 2017. The lease was amended on May 1, 2016 and increased the leased area covered under lease agreement
at a rate of $212,000 per annum until October 31, 2019.



The Company, through the acquisition of
a subsidiary as described in Note 4 of the Company’s financial statements, leases office and manufacturing facilities from
a related part, under a non-cancelable agreement expiring in 2024 at escalating rental rates throughout the term of the lease.
The terms of the agreement specify that the Company has the option to purchase the building and land at the then fair value, as
well as the option to renew the lease for an additional five year period



Effective January 1, 2016, the Company
entered into a new business and administration services agreement with GVI, under which the Company is committed to pay $7,083
per month or $85,000 per year for a one year term. Subsequent to December 31, 2016 and effective January 1, 2017, this agreement
was renewed for an additional year for $7,083 per month or $85,000 per year.



The Company had entered into manufacturing
and supply agreements, as amended, to purchase a minimum quantity of AGGRASTAT® from a third party and all remaining
committed payments relating to inventory purchases were completed prior to December 31, 2016. Effective January 1, 2014, the agreement
was amended and the amounts previously due during fiscal 2014 were deferred and bore interest at 3.25% per annum, with monthly
payments being made against this balance owing of US$45,000 until June 30, 2015. These payments were applied to inventory purchases
made during fiscal 2015 and prepayments for future manufacturing that were completed during fiscal 2016, and as at December 31,
2016, there is no amount owing or prepaid under this agreement. As at December 31, 2015 and 2014, there was $1,063,707 and $549,247,
respectively recorded within prepaid expenses in regards to this agreement. For the year ended December 31, 2016, no interest
was recorded relating to amounts owing under this agreement For the year ended December 31, 2015 and the seven months ended December
31, 2014, $22,675 and $18,738, respectively, was recorded within finance expense relating to this agreement. The Company signed
an amendment to this manufacturing and supply agreement which extended the agreement to October 31, 2017 however all purchase
commitments were fulfilled prior to December 31, 2016.



The Company, through the acquisition of
a subsidiary as described in Note 4 of the Company’s financial statements, the Company has entered into various collaborative
agreements with six parties for the development of products which continue through 2025. The agreements include terms of renewal,
ranging from one to three years, subject to mutual approval. The total expected costs to be incurred under these agreements approximated
US$8.7 million as at December 31, 2016.



Contracts with contract research organizations
are payable over the terms of the associated agreements and clinical trials and timing of payments is largely dependent on various
milestones being met, such as the number of patients recruited, number of monitoring visits conducted, the completion of certain
data management activities, trial completion, and other trial related activities.



Subsequent to December 31, 2016, a subsidiary
of the Company entered into a purchase arrangement with a vendor to purchase software in the next year with an estimated cost
of US$149,000.



64







Debt obligations reflect
the minimum annual payments under the debt financing agreement. In addition to the contractual obligations disclosed above, the
Company and its wholly-owned subsidiaries, have ongoing research and development agreements with third parties in the ordinary
course of business. These agreements include research and development related to AGGRASTAT® and TARDOXALTM as well
as other product opportunities.



The Company received
$200,000 of funding from the Province of Manitoba’s Commercialization Support for Business program to assist the Company
with the completion of a study evaluating AGGRASTAT® in patients with impaired kidney function. The study was completed and
the funds received during the year ended May 31, 2013. The funding is repayable when certain sales targets are met and the repayable
requirement will remain in effect for a period not less than eight fiscal years. $100,000 of the funding was repaid during the
year ended December 31, 2016 and the remaining $100,000 will be repaid during the year ended December 31, 2017.



The Company periodically enters into research
agreements with third parties that include indemnification provisions customary in the industry. These guarantees generally require
the Company to compensate the other party for certain damages and costs incurred as a result of claims arising from research and
development activities undertaken on behalf of the Company. In some cases, the maximum potential amount of future payments that
could be required under these indemnification provisions could be unlimited. These indemnification provisions generally survive
termination of the underlying agreement. The nature of the indemnification obligations prevents the Company from making a reasonable
estimate of the maximum potential amount it could be required to pay. Historically, the Company has not made any indemnification
payments under such agreements and no amount has been accrued in the accompanying financial statements with respect to these indemnification
obligations.



As a part of the Birmingham debt settlement
described in note 10 of the Company’s financial statements, beginning on July 18, 2011, the Company is obligated to pay
a royalty to the previous lender based on future commercial AGGRASTAT® sales until 2023. The royalty is based on
4% of the first $2,000,000 of quarterly AGGRASTAT® sales, 6% on the portion of quarterly sales between $2,000,000
and $4,000,000 and 8% on the portion of quarterly sales exceeding $4,000,000 payable within 60 days of the end of the preceding
quarter. The previous lender has a one-time option to switch the royalty payment from AGGRASTAT® to a royalty on
MC-1 sales. Management has determined there is no value to the option to switch the royalty to MC-1 as the product is not commercially
available for sale and development of the product is on hold. Royalties recorded for the year ended December 31, 2016 totalled
$1,795,089, (year ended December 31, 2015 - $1,207,772, seven months ended December 31, 2014 - $210,576, year ended May 31, 2014
- $201,131) with payments made during the year ended December 31, 2016 of $1,712,389 (year ended December 31, 2015 - $642,768,
seven months ended December 31, 2014 - $156,722, year ended May 31, 2014 - $165,291).



The Company is obligated to pay royalties
to third parties based on any future commercial sales of MC-1, aggregating up to 3.9% on net sales. To date, no royalties are
due and/or payable.



In the normal course of business, the
Company may from time to time be subject to various claims or possible claims. Although management currently believes there are
no claims or possible claims that if resolved would either individually or collectively result in a material adverse impact on
the Company’s financial position, results of operations, or cash flows, these matters are inherently uncertain and management’s
view of these matters may change in the future.



On September 10, 2015, the Company submitted
a supplemental New Drug Application to the United States Food and Drug Administration ("FDA") to expand the label for
AGGRASTAT®. The label change is being reviewed and evaluated based substantially on data from published studies.
If the label change submission is successful, the Company will be obligated to pay 300,000 Euros over the course of a three year
period in equal quarterly instalments following approval. On July 7, 2016 the Company announced it has received a Complete Response
Letter stating the sNDA cannot be approved in its present form and requested additional information. The payments are contingent
upon the success of the filing and as such the Company has not recorded any amount in the consolidated statements of net income
and comprehensive income pertaining to this contingent liability.



65







The Company, through the acquisition of
a subsidiary as described in Note 4, is subject to a stringent regulatory environment. Any product designed and labeled for use
in humans requires regulatory approval by government agencies prior to commercialization. In particular, human therapeutic products
are subject to rigorous preclinical and clinical trials to demonstrate safety and efficacy and other approval procedures of the
FDA. Various Federal, state, local, and foreign statutes and regulations also govern testing, manufacturing, labeling, distribution,
storage, and record-keeping related to such products and their promotion and marketing. In addition, the current regulatory environment
at the FDA could lead to increased testing and data requirements which could impact regulatory timelines and costs to the Company
and its suppliers.



The Company, through the acquisition of
a subsidiary as described in Note 4, the Company is involved in legal matters. In 2016, the Company and another pharmaceutical
company filed a complaint in the United States District Court for the Eastern District of Texas against a third party asserting
that the patents of two of the Company’s products were infringed and, in a later filing, sought monetary damages and injunctive
relief. The Court has not issued a final ruling or entered an order on the matter. The Company and the other pharmaceutical company
prevailed in a similar action filed in the United States District Court for the District of New Jersey. However, the defendant
has indicated that they will file a formal request for a review of the disputed patents with the United States Patent and Trademark
Office.



These related matters are in early stages
of the legal process; however, management does not believe that the ultimate resolution of this matter will have a material adverse
impact on the Company’s financial position, results of operations or cash flows.



G. Safe Harbor



Statements in Item 5.E and Item 5.F of
this Annual Report on Form 20-F that are not statements of historical fact, constitute “forward-looking statements.”
See “Forward-Looking Statements” on page 1 of this Annual Report. Our Company is relying on the safe harbor provided
in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended,
in making such forward-looking statements.



ITEM 6. DIRECTORS, SENIOR MANAGEMENT
AND EMPLOYEES



A. Directors and Senior Management



Directors and Senior Management



The members of the board of directors
and senior officers of the Company including a brief biography of each are as follows:



Dr. Albert D. Friesen, Winnipeg, Manitoba,
Canada - Director, Chairman and Chief Executive Officer



The founder, President, CEO and Chair
of the Board of Medicure Inc., Dr. Friesen holds a Ph.D. in protein chemistry from the University of Manitoba.  Dr. Friesen
played a key role in founding several health industry companies including the first employee and President of the Winnipeg Rh
Institute for over 20 years, where he oversaw the development of WinRho (then acquired by Cangene Inc. and more recently by Emergent
BioSolutions), ABI Biotechnology (acquired by Apotex Inc.), Viventia Biotech Inc., Genesys Pharma Inc., DiaMedica Inc, Miraculins
Inc., Kane Biotech Inc. and KAM Scientific Inc.  Dr. Friesen has experience in the establishment of pharmaceutical production
facilities and has also managed and initiated the research and clinical development of several pharmaceutical candidates. 
Dr. Friesen is a founder of the Industrial Biotechnology Association of Canada (IBAC) and past Chairman of its board of directors
and former member of the Industrial Advisory Committee to the Biotechnology Research Institute in Montreal.  In addition
to his role with the Company, Dr. Friesen is currently the President and Chairman of Genesys Venture Inc., a biotech incubator,
based in Winnipeg.  Dr. Friesen provides his services to the Company through A.D. Friesen Enterprises Ltd., his private consulting
corporation.  Dr. Friesen served as both CEO and President of Medicure Inc. Dr. Friesen’s date of birth is May 19,
1947.



66







Dr. Arnold Naimark, Winnipeg, Manitoba,
Canada - Director



Dr. Arnold Naimark, O.C., O.M., M.D.,
L.L.D., F.R.C.P.(C), F.R.S.C, FCAHS,. has had a distinguished career in biomedical research, medicine and higher education. 
He is President Emeritus and Dean of Medicine Emeritus and Professor of Medicine and Physiology at the University of Manitoba. 
He is currently Director of the Centre for the Advancement of Medicine, Chair of Genome Prairie Immediate Past-Chair
of CancerCare Manitoba.  Dr. Naimark serves on the National Statistics Council of Canada and is Vice-Chair of the Statistics
Canada Audit Committee. He was formerly on the Research Council of the Canadian Institute for Advanced Research, Chair of Health
Canada’s Ministerial Science Advisory Board, Member of the International Advisory Committee on Research of the Alberta Cancer
Board, Vice-Chair of the Manitoba Health Research Council and Director of the Robarts Research Institute. He is the founding Chairman
of the North Portage Development Corporation, the Canadian Health Services Research Foundation and the Canadian Biotechnology
Advisory Committee. He has served as President of several academic bodies including, the Canadian Physiological Society, the Canadian
Society for Clinical Investigation, the Association of Canadian Medical Colleges, the Association of Universities and Colleges
of Canada and as Chairman of the Association of Commonwealth Universities.  Dr. Naimark is an Officer of the Order of Canada,
a Member of the Order of Manitoba and a Fellow of the Royal College of Physicians and Surgeons of Canada, the Royal Society of
Canada, and the Canadian Academy of Health Sciences.  He is recipient of the G. Malcolm Brown Award of the Royal College
of Physicians and Surgeons and Medical Research Council of Canada, the Osler Award, the Distinguished Service Award of Ben Gurion
University, the Symons Award of the Association of Commonwealth Universities; and of honorary doctorates from Mount Allison University
and the University of Toronto, and of several other awards and distinctions related to his professional, academic and civic activities.
Date of birth is August 24, 1933.



Gerald P. McDole, Mississauga, Ontario,
Canada, MBA – Director



Mr. McDole is currently a director of
one Canadian healthcare company. Mr. McDole is Past President of AstraZeneca Canada Inc. He was named President and CEO of AstraZeneca
Canada Inc.'s pharmaceutical operations in 1999 and immediately led the merger of Astra Pharma and Zeneca Pharma Inc. Prior to
this, Mr. McDole was president and CEO of Astra Pharma Inc., a position he assumed in 1985 after having served as Executive Vice-President.
Mr. McDole is a member of the Canadian Healthcare Marketing Hall of Fame, and has been recognized by Canadian Healthcare Manager
Magazine with the Who's Who in Healthcare Award in the pharmaceutical category. In recognition of Mr. McDole's outstanding contributions
to the biotech and pharmaceutical industries, the University of Manitoba established The Gerry McDole Fellowship in Health Policy
and Economic Growth. Mr. McDole holds a Bachelor of Science and a Certificate of Business Management from the University of Manitoba,
an MBA from Simon Fraser University, and a Business Administration diploma from the University of Toronto. Date of birth is January
25, 1940.



Peter Quick, Mill Neck, New York, USA
- Director



Peter Quick has over 30 years experience
in the securities and financial services industries. He is a recognized leader in the securities industry with experience in the
domestic and international equities market, equities market making, market structure reform, trading technology and clearing operations.
Mr. Quick is a Partner of Burke and Quick Partners Holdings LLP, the parent company of Burke & Quick Partners LLC a broker
dealer. Mr. Quick was President at the American Stock Exchange from 2000 to 2005. Prior to joining the American Stock Exchange
he served as President of Quick & Reilly Inc., a Quick & Reilly subsidiary and a national discount brokerage firm. He
also served as President of Quick & Reilly/Fleet Securities. Mr. Quick is a graduate from the University of Virginia with
a B.S. in Engineering, and attended Stanford University’s Graduate School of Petroleum Engineering. He served four years
active duty from 1978 to 1982 as an Officer in the United States Navy. He is Chairman of the Board of Directors of Gain Capital
(GCAP: NYSE) and a member of the Boards of Trustees of First of Long Island Corporation (FLIC: NASDAQ) and First National Bank
of Long Island. He is a member of the Board of Directors of Fund for the Poor. Mr. Quick serves as the Mayor of the Incorporated
Village of Mill Neck, NY. He is a former member of the Board of Alliance Capital Money Market Fund, Chicago Stock Exchange Inc
(CHX), The Depository Trust & Clearing Corporation (DTCC), The Midwest Trust Company, Securities Industry Automation Corporation
(SIAC), National Security Clearing Corporation, The American Stock Exchange and the National Association of Security Dealers Inc),
Quick & Reilly, Inc., (NYSE: BQR), Reckson Associates Realty Corp (NYSE: RX) and The Bear Stearns Current Yield Fund (AMEX:YYY).
He is a former Chairman of the Board of Governors of St. Francis Hospital, Roslyn, NY and Mercy Medical Center, Rockville Centre,
NY. Date of birth is February 11, 1956.



67







Brent Fawkes, Winnipeg, Manitoba, Canada
- Director



Mr.
Fawkes is a Chartered Accountant with over 20 years of experience in accounting and finance. Mr. Fawkes is currently the Vice
President of Finance with Standard Aero Limited, one of the world’s largest independent providers of a variety of aerospace
services serving a diverse array of customers in business and general aviation, airline, military, helicopter, components, energy
and VIP completions markets. In his current role, Mr. Fawkes is responsible for the oversight of the finance department including
external reporting, budgeting and planning and treasury management. Date of birth isDecember 21, 1969.



James Kinley, CA –
Chief Financial Officer



Effective
September 21, 2011 Mr. James Kinley was appointed as CFO of the Company, replacing Dawson Reimer, who has served as Chief Financial
Officer in an interim capacity since July 15, 2011 until Mr. Kinley’s appointment. Mr. Kinley’s services are provided
to the Company through a Consulting Agreement. Previous to his time at Genesys Venture Inc. and the Company, he was Manager, Financial
Reporting at Manitoba Telecom Services Inc. and was involved in all aspects of financial reporting, including publicly filed documents
such as their financial statements. James is a Chartered Accountant and holds a Bachelor of Commerce (Hons.) degree from the University
of Manitoba. Date of birth is July 9, 1978.



Graeme Merchant, B.B.A.
– Vice President, Commercial Operations



Graeme
Merchant joined the Company as an analyst in business development and commercial operations in 2007. He was soon promoted to Manager
of Commercial Operations for AGGRASTAT, and eventually named Director. Since 2013, Mr. Merchant has been Vice President of Commercial
Operations. He is responsible for all sales, marketing, and medical activities for AGGRASTAT within the United States. Graeme
was instrumental in helping guide the Company through its corporate restructuring and the relaunch of AGGRASTAT under the FDA
approved High-Dose Bolus regimen. He has a B.B.A. from the University of New Brunswick with a specialization in finance.



Management



Dr. Albert D. Friesen - Chairman, Chief
Executive Officer and Director: Dr. Friesen directs the overall business management of the Company (see “Directors and
Senior Management” under this item).



James Kinley, CA - Chief Financial
Officer: Mr. Kinley is responsible for the Company’s financial management and accounting practices (see “Directors
and Senior Management” under this item).



Graeme Merchant, B.B.A. – Vice
President, Commercial Operations: Mr. Merchant is responsible for the Company’s Commercial
Operations pertaining to AGGRASTAT and other development products (see “Directors and Senior Management” under this
item).



68







B. Compensation



Compensation paid to the directors, and
executive officers of the Company during the year ended December 31, 2015, is described below and stock-based compensation described
in Item 6(E) below:



The Company recorded $99,309 in fees paid
or payable to Board members for attendance at meetings between January 1, 2016 and December 31, 2016 and the chairs of the Audit
and Finance Committee and executive compensation, nominating and corporate governance committee were paid an additional $5,000
each for services are committee chairs.



On October 1, 2001, a compensation agreement
was entered into between the Company and A.D. Friesen Enterprises Ltd., a corporation owned by Dr. Friesen and subsequently amended
on October 1, 2003, October 1, 2005, October 1, 2006, October 1, 2007, July 18, 2011 and July 18, 2016. For the year ended December
31, 2016, the Company recorded payable to A.D. Friesen Enterprises Ltd., $237,790 in consulting compensation, including taxable
benefits. Dr. Friesen is eligible for an annual bonus, if certain objectives of the Company are met, as determined by the Board
of Directors. During the year ended December 31, 2016, a bonus of $54,247 was accrued to Dr. Friesen.



Dawson Reimer served as the Company’s
as President and Chief Operating Officer and received a salary of $205,000 payable in equal semi-monthly instalments and a bonus
at the discretion of the Board of Directors of the Company. On May 9, 2016, the Company announced that the employment agreement
with the Company’s President and Chief Operating Officer had been terminated, effective immediately. Mr. Reimer was paid
$73,458 up to the date of his termination and $222,478 pertaining to severance during the year ended December 31, 2016. All amounts
pertaining to this severance were paid during 2016 and there is no additional liability in this regard.



Effective January 1, 2016, the business
and administration services agreement with GVI no longer included the Chief Financial Officer's services and the Company signed
a consulting agreement with its Chief Financial Officer, through JFK Enterprises Ltd., a company owned by the Chief Financial
Officer, for a one year term, at a rate of $135,000 annually. The Company recorded a bonus of $10,000 to its Chief Financial Officer.



Graeme Merchant serves the Company as
Vice President, Commercial Operations and received a salary of $172,500 payable in equal semi-monthly instalments and bonuses
aggregating $12,938 paid during the year ended December 31, 2016.



During the year ended December 31, 2016,
the Company paid directors a total of Nil (Year ended May 31, 2015: Nil seven months ended December 31, 2014: Nil, Year ended
May 31, 2014: Nil; Year ended May 31, 2013: Nil; and Year ended May 31, 2012: Nil) for consulting fees.



The Company has agreed to provide its
independent directors $2,000 for each quarterly board meeting they personally attend ($1,000 via telephone), and $1,500 for each
quarterly executive compensation, nominating and corporate governance committee meeting or audit and finance committee meeting
they attend that is not held in conjunction with a regular Board meeting.



For fiscal 2011 and prior, due to the
Company’s financial position, the board had offered and committed not to request, and has therefore not received, any compensation
for their services as independent directors. Subsequent to the debt settlement that occurred on July 18, 2011, the Company began
paying the Board members this amount owing and had paid $54,000 during fiscal 2013 relating to these accrued amounts. During fiscal
2013, the members of the Board of Directors agreed to further defer payments on amounts owing. Beginning on February 22, 2013
and until June 30, 2015, these amounts bore interest at a rate of 5.5% per annum. For the year ended December 31, 2015, $4,517
(seven months ended December 31, 2014 - $10,127 and year ended May 31, 2014 - $14,918) was recorded within finance expense in
relation to these amounts payable to the members of the Company’s Board of Directors. No interest was paid or recorded pertaining
to these amounts payable to the Board of Directors for the year ended December 31, 2016. As at December 31, 2016, the Company
has $13,279 of accrued compensation owing to the independent members of the Board of Directors relating to Directors fees.



69







On July
11, 2014, the Company announced that, subject to all necessary regulatory approvals, it has
entered into shares for debt agreements with certain members of the Board of Directors, pursuant to which the Company will issue
106,490 of its common shares at a deemed price of $1.98 per common share to satisfy $210,850 of outstanding amounts owing to the
Company’s Board of Directors. The shares were issued on January 9, 2015.



On January
27, 2015, the Company announced that, subject to all necessary regulatory approvals, it has
entered into shares for debt agreements with certain members of the Board of Directors, pursuant to which the Company will issue
75,472 of its common shares at a deemed price of $1.44 per common share to satisfy $108,680 of outstanding amounts owing to these
individuals. The shares were issued on March 20, 2015.



The Company does not provide any cash
compensation for its directors who are also officers of the Company for their services as directors.



No pension, retirement fund and other
similar benefits have been set aside for the officers and directors of the Company.



C. Board Practices



The Board of Directors presently consists
of five directors, who were all elected at the Company’s annual general meeting of the shareholders held on June 22, 2016.
Each director holds office until the next annual general meeting of the Company or until his successor is elected or appointed,
unless his office is earlier vacated in accordance with the By-Laws of the Company, or pursuant to the provisions of the Canada
Business Corporations Act.



Dr. Albert D. Friesen has served as a
director of the Company since September 1997. Dr. Arnold Naimark has served as a director of the Company since March 2000. Gerald
McDole has served as a director of the Company since January 2004. Peter Quick has served as a director of the Company since November
2005. Brent Fawkes has served as a director of the Company since January 2013.



As discussed in more detail below, the
Board of Directors maintains an Audit and Finance Committee and an Executive Compensation, Nominating and Corporate Governance
Committee.



Corporate Governance



The Canadian Securities Administrators
(the "CSA") have adopted National Policy 58-201 Corporate Governance Guidelines, which provides non-prescriptive
guidelines on corporate governance practices for reporting issuers such as the Company. In addition, the CSA have implemented
National Instrument NI 58-101 Disclosure of Corporate Governance Practices, which prescribes certain disclosure by the
Company of its corporate governance practices. The Company's approach to corporate governance is set forth below.



The Board believes that a clearly defined
system of corporate governance is essential to the effective and efficient operation of the Company. The system of corporate governance
should reflect the Company’s particular circumstances, having always as its ultimate objective, the best long-term interests
of the Company and the enhancement of value for all shareholders.



Directors are considered to be independent
if they have no direct or indirect material relationship with the Company. A "material relationship" is a relationship
which could, in the view of the Company's board of directors, be reasonably expected to interfere with the exercise of a director's
independent judgment.



70







The Executive Compensation, Nominating
and Corporate Governance Committee has reviewed the independence of each director on the basis of the definition in section 1.4
of National Instrument 52-110 – Audit Committees ("NI 52-110"). The Board has determined, after reviewing
the roles and relationships of each of the directors, that Dr. Arnold Naimark, Brent Fawkes, Gerald McDole and Peter Quick are
independent from the Company. Only Dr. Albert Friesen is deemed to not be independent from the Company. As part of every regularly
scheduled Board and committee meeting, the independent directors are given the opportunity to meet separately from management
and the non-independent director. Board committees are entirely composed of independent directors who meet without management
when required.



The Board has an orientation program in
place for new directors which the Board feels is appropriate having regard to the current makeup of the Board. Each director receives
relevant corporate and business information on the Company, the Board, and its committees. The directors regularly meet with Management
and are given periodic presentations on relevant business issues and developments.



Presentations are made to the Board from
time to time to educate and keep it informed of changes within the Company and of regulatory and industry requirements and standards.



The Company’s Board has adopted
a Code of Ethics applicable to directors, officers and employees, copies of which are available on the Company’s website
(www.medicure.com). A copy may also be obtained upon request to the Secretary of the Company at its head office, 2-1250 Waverley
Street, Winnipeg, Manitoba, R3T 6C6. The ECNCG Committee regularly monitors compliance with the Code of Ethics and also ensures
that Management encourages and promotes a culture of ethical business conduct.



Audit and Finance Committee



Pursuant to Section 171 of the Canada
Business Corporations Act (the “Act”), the Company is required to have an Audit Committee. Section 171(1)
of the Act requires the directors of a reporting corporation to elect from among their number a committee composed of not fewer
than three directors, of whom a majority must not be officers or employees of the corporation or an affiliate of the corporation.
Section 171(3) of the Act provides that, before financial statements are approved by the directors, they must be submitted to
the audit committee for review. Section 171(4) of the Act provides that the auditor must be given notice of, and has the right
to appear before and to be heard at, every meeting of the audit committee, and must appear before the audit committee when requested
to do so by the committee. Finally, section 171(5) of the Act provides that on the request of the auditor, the audit committee
must convene a meeting of the audit committee to consider any matters the auditor believes should be brought to the attention
of the directors or members.



Pursuant to section 6.1 of NI 52-110,
the Company is exempt from the requirements of Parts 3 and 5 of NI 52-110 for the year ended December 31, 2016, by virtue of the
Company being a "venture issuer" (as defined in NI 52-110).



Part 3 of NI 52-110 prescribes certain
requirements for the composition of audit committees of non-exempt companies that are reporting issuers under Canadian provincial
securities legislation. Part 3 of NI 52-110 requires, among other things that an audit committee be comprised of at three directors,
each of whom, is, subject to certain exceptions, independent and financially literate in accordance with the standards set forth
in NI 52-110.



Part 5 of NI 52-110 requires an annual
information form that is filed by a non-exempt reporting issuer under National Instrument 51-102 – Continuous Disclosure
Obligations, as adopted the CSA, to include certain disclosure about the issuer's audit committee, including, among other
things: the text of the audit committee's charter; the name of each audit committee member and whether or not the member is independent
and financially literate; whether a recommendation of the audit committee to nominate or compensate an external auditor was not
adopted by the issuer's board of directors, and the reasons for the board's decision; a description of any policies and procedures
adopted by the audit committee for the engagement of non-audit services; and disclosure of the fees billed by the issuer's external
auditor in each of the last two fiscal years for audit, tax and other services.



71







Notwithstanding the exemption available
under section 6.1 of NI 52-110, as at the date hereof, the Audit and Finance Committee is comprised of four independent directors:
Brent Fawkes (Chair), Gerald McDole, Dr. Arnold Naimark, and Peter Quick. The relevant experience of each member is described
above. (See “Item 6 - Directors, Senior Management and Employees”.)



As a result of their education and experience,
each member of the audit committee has familiarity with, an understanding of, or experience in:



| | · | the
                                         accounting principles used by the Company to prepare its financial statements, and the
                                         ability to assess the general application of those principles in connection with estimates,
                                         accruals and reserves;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | reviewing
                                         or evaluating financial statements that present a breadth and level of complexity of
                                         accounting issues that are generally comparable to the breadth and complexity of issues
                                         that can reasonably be expected to be raised by the Company's financial statements, and
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | an
                                         understanding of internal controls and procedures for financial reporting.
| | - | ----------------------------------------------------------------------------------------------------------------------



Under the Sarbanes-Oxley Act of 2002,
the independent auditor of a public Company is prohibited from performing certain non-audit services. The Audit and Finance Committee
has adopted procedures and policies for the pre-approval of non-audit services, as described in the Audit and Finance Committee
Charter reproduced below.



72







|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|AUDIT
    AND FINANCE COMMITTEE CHARTER                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|GENERAL
    FUNCTIONS, AUTHORITY, AND ROLE                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|The
    purpose of the Audit and Finance Committee (the “Committee”) is to oversee the accounting, financial reporting
    and disclosure processes of the Company and the audits of its financial statements, and thereby assist the Board of Directors
    of the Company (the “Board”) in monitoring the following:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|(1)
    the integrity of the financial statements of the Company;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|(2)
    compliance by the Company with ethical policies and legal and regulatory requirements related to financial reporting and disclosure;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|(3)
    the appointment, compensation, qualifications, independence and performance of the Company’s internal and external auditors;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|(4)
    the performance of the Company's independent auditors;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|(5)
    performance of the Company's internal controls and financial reporting and disclosure processes; and                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|(6)
    that management of the Company has assessed areas of potential significant financial risk to the Company and taken appropriate
    measures.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|The
    Committee has the power to conduct or authorize investigations into any matters within its scope of responsibilities, with
    full access to all books, records, facilities and personnel of the Company, its auditors and its legal advisors. In connection
    with such investigations or otherwise in the course of fulfilling its responsibilities under this charter, the Committee has
    the authority to independently retain, and set and pay compensation to, special legal, accounting, or other consultants to
    advise it, and may request any officer or employee of the Company, its independent legal counsel or independent auditor to
    attend a meeting of the Committee or to meet with any members of, or consultants to, the Committee. The Committee has the
    power to create specific sub-committees with all of the power to conduct or authorize investigations into any matters within
    the scope of the mandate of the sub-committee, with full access to all books, records, facilities and personnel of the Company,
    its auditors and its legal advisors.
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|In
    the course of fulfilling its specific responsibilities hereunder, the Committee has authority to, and must, maintain free
    and open communication between the Company's independent auditor, Board and Company management. The responsibilities of a
    member of the Committee are in addition to such member's duties as a member of the Board.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|While
    the Committee has the responsibilities and powers set forth in this charter, it is not the duty of the Committee to plan or
    conduct audits or to determine that the Company's financial statements are complete, accurate, and in accordance with International
    Financial Reporting Standards (“IFRS”). This is the responsibility of management and the independent auditor.
    Nor is it the duty of the Committee to conduct investigations, to resolve disagreements, if any, between management and the
    independent auditor or to assure compliance with laws and regulations and the Company’s Code of Ethics. Any responsibilities
    that the Committee has the power to act upon, may be recommended to the Board to act upon.                                                                                                                                                                                                                                                                                                                                                 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|MEMBERSHIP                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|The
    membership of the Committee will be as follows:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|The
    Committee shall consist of a minimum of three members of the Board, appointed from time to time, each of whom is affirmatively
    confirmed as independent by the Board in accordance with the definition of independence for audit committee members set out
    in Appendix I hereto, with such affirmation disclosed in the Company's Management Information Circular for its annual meeting
    of shareholders. All members of the Committee should be “financially literate”, as defined in Appendix I, and
    at least one of the members shall be an “audit committee financial expert” as defined in as defined in Appendix
    I.                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                



73







|                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|The
    Board will elect, by a majority vote, one member as chairperson. In the absence of the Chair of the Committee, the members
    shall appoint an acting Chair.                                                                                                                                                                                                                                                                                   
|                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|The
    members of the Committee shall meet all independence and financial literacy requirements of The TSX Venture Exchange, and
    the requirements of such other securities exchange or quotations system or regulatory agency as may from time to time apply
    to the Company.                                                                                                                                                                   
|                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|Any
    member of the Committee may be removed and replaced at any time by the Board and will automatically cease to be a member of
    the Committee as soon as such member ceases to be a Director. The Board may fill vacancies in the Committee by election from
    among the members of the Board. If and whenever a vacancy exists on the Committee, the remaining members may exercise all
    its powers so long as a quorum remains in office.
|                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|A
    quorum shall be a majority of the members provided that if the number of members is an even number, one half of the number
    plus one shall constitute a quorum.                                                                                                                                                                                                                                                                                
|                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|A
    member of the Committee may not, other than in his or her capacity as a member of the Committee, the Board, or any other Board
    committee, accept any consulting, advisory, or other compensatory fee from the Company, and may not be an affiliated person
    of the Company or any subsidiary thereof.                                                                                                                                      
|                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|RESPONSIBILITIES                                                                                                                                                                                                                                                                                                                                                                                                                                        
|                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|The
    responsibilities of the Committee shall be as follows:                                                                                                                                                                                                                                                                                                                                                                                          
|                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|Frequency
    of Meetings                                                                                                                                                                                                                                                                                                                                                                                                                               
|                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|Meet
    quarterly or more often as may be deemed necessary or appropriate in its judgment, either in person or telephonically.                                                                                                                                                                                                                                                                                                                         
|                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|The
    Committee will meet with the independent auditor at least annually, either in person or telephonically.                                                                                                                                                                                                                                                                                                                                         
|                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|Reporting
    Responsibilities                                                                                                                                                                                                                                                                                                                                                                                                                          
|                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|Provide
    to the Board proper Committee minutes.                                                                                                                                                                                                                                                                                                                                                                                                      
|                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|Report
    Committee actions to the Board with such recommendations as the Committee may deem appropriate.                                                                                                                                                                                                                                                                                                                                              
|                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|Committee
    and Charter Evaluation                                                                                                                                                                                                                                                                                                                                                                                                                    
|                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|The
    Committee shall annually review, discuss and assess its own performance. In addition, the Committee shall periodically review
    its role and responsibilities.                                                                                                                                                                                                                                                                                
|                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|Annually
    review and reassess the adequacy of this Charter and recommend any proposed changes to the Board for approval.                                                                                                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|Whistleblower
    Mechanism                                                                                                                                                                                                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|Adopt
    and review annually a procedure through which employees and others can confidentially and anonymously inform the Committee
    regarding any concerns about the Company's accounting, internal accounting controls or auditing matters. The procedure shall
    include responding to and the retention of, any such complaints.                                                                                                              
|                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|Legal
    Responsibilities                                                                                                                                                                                                                                                                                                                                                                                                                              
|                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|Perform
    such functions as may be assigned by law, by the Company's certificate of incorporation, memorandum, articles or similar documents,
    or by the Board.                                                                                                                                                                                                                                                                                    
|                                                                                                                                                                                                                                                                                                                                                                                                                                                        



74







|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|INDEPENDENT
    AUDITOR                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|Nomination,
    Compensation and Evaluation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|The
    Company’s independent auditor is ultimately accountable to the Committee and the Board and shall report directly to
    the Committee. The Committee shall review the independence and performance of the auditor and annually recommend to the Board
    the appointment and compensation of the independent auditor or approve any discharge of auditor when circumstances warrant.                                                                                                                                                                                                                                                                         
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|Review
    of Work                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|The
    Committee is directly responsibility for overseeing the work of the independent auditor engaged to prepare or issue an audit
    report or perform other audit, review or attest services for the Company, including the resolution of disagreements between
    management and the independent auditor regarding financial reporting.                                                                                                                                                                                                                                                                                                                        
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|Approval
    in Advance of Related Party Transactions                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|Pre-approval
    of all “related party transactions,” which are transactions or loans between the Company and a related party involving
    goods, services, or tangible or intangible assets that are:                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|(1)
    material to the Company or the related party; or                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|(2)
    unusual in their nature or conditions.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|A
    related party includes an affiliate, major shareholder, officer, other key management personnel or director of the Company,
    a company controlled by any of those parties or a family member of any of those parties.                                                                                                                                                                                                                                                                                                                                                                                                                                        
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|Engagement
    Procedures for Audit and Non-Audit Services                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|Approve
    in advance all audit services to be provided by the independent auditor. Establish policies and procedures that establish
    a requirement for approval in advance of the engagement of the independent auditor to provide permitted non-audit services
    provided to the Company or its subsidiary entities and to prohibit the engagement of the independent auditor for any activities
    or services not permitted by any of the Canadian provincial securities commissions, the Securities Exchange Commission (“SEC”)
    or any securities exchange on which the Company's shares are traded including any of the following non-audit services:
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|1)	   Bookkeeping
    or other services related to accounting records or financial statements of the
    Company;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|2)	   Financial
    information systems design and implementation consulting services;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|3)	  Appraisal
    or valuation services, fairness opinions, or contributions-in-kind reports;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|4)	  Actuarial
    services;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|5)	  Internal
    audit outsourcing services;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|6)	  Any
    management or human resources function;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|7)	  Broker,
    dealer, investment advisor, or investment banking services;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|8)	  Legal
    services;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      



75







|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|9)	  Expert
    services related to the auditing service; and                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|10)	Any
    other service the Board determines is not permitted.                                                                                                                                                                                                                                                                                                                                                                                                                                               
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|Hiring
    Practices                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|Review
    and approve the Company’s hiring policy regarding the partners, employees and former partners and employees of the present
    and former independent auditor of the Company. Ensure that no individual who is, or in the past three years has been, affiliated
    with or employed by a present or former auditor of the Company or an affiliate, is hired by the Company as a senior officer
    until at least three years after the end of either the affiliation or the auditing relationship.
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|Independence
    Test                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|Take
    reasonable steps to confirm the independence of the independent auditor, which shall annually include:                                                                                                                                                                                                                                                                                                                                                                                                
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               

| | i) | Ensuring receipt from the independent auditor of a formal written statement delineating all relationships between the independent auditor and the Company, consistent with the Independence Standards Board Standard No. 1 and related Canadian regulatory body standards;
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                           
| | j) | Considering and discussing with the independent auditor any relationships or services provided to the Company, including non-audit services, that may impact the objectivity and independence of the independent auditor; and                                             
| |    |                                                                                                                                                                                                                                                                           
| | k) | As necessary, taking, or recommending that the Board take, appropriate action to oversee the independence of the independent auditor and evaluate whether it is appropriate to rotate the independent auditor on a regular basis.                                         

|                                                                                                                                                                                                   
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Audit
    and Finance Committee Meetings                                                                                                                                                           
|                                                                                                                                                                                                   
|Notify
    the independent auditor of every Committee meeting and permit the independent auditor to appear and speak at those meetings.                                                            
|                                                                                                                                                                                                   
|At
    the request of the independent auditor, convene a meeting of the Committee to consider matters the auditor believes should
    be brought to the attention of the directors or shareholders.
|                                                                                                                                                                                                   
|Keep
    minutes of its meetings and report to the Board for approval of any actions taken or recommendations made.                                                                                
|                                                                                                                                                                                                   
|Restrictions                                                                                                                                                                                       
|                                                                                                                                                                                                   
|Confirm
    with management and the independent auditor that no restrictions are placed on the scope of the auditors' review and examination
    of the Company's accounts.                        
|                                                                                                                                                                                                   
|OTHER
    PROFESSIONAL CONSULTING SERVICES                                                                                                                                                         
|                                                                                                                                                                                                   
|Engagement
    Review                                                                                                                                                                              
|                                                                                                                                                                                                   
|As
    necessary, consider with management the rationale and selection criteria for engaging professional consulting services firms.                                                               
|                                                                                                                                                                                                   
|Ultimate
    authority and responsibility to select, evaluate and approve professional consulting services engagements.                                                                            
|                                                                                                                                                                                                   



76







|                                                                                                                                          
|------------------------------------------------------------------------------------------------------------------------------------------
|AUDIT
    AND REVIEW PROCESS AND RESULTS                                                                                                  
|                                                                                                                                          
|Scope                                                                                                                                     
|                                                                                                                                          
|Consider,
    in consultation with the independent auditor, the audit scope, staffing and planning of the independent auditor.            
|                                                                                                                                          
|Review
    Process and Results                                                                                                            
|                                                                                                                                          
|Consider
    and review with the independent auditor the matters required to be discussed by such auditing standards as may be applicable.
|                                                                                                                                          
|Review
    and discuss with management and the independent auditor at the completion of annual and quarterly examinations, if any:        

| |    |                                                                                                                                              
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------
| | l) | The Company's audited and unaudited financial statements and related notes;                                                                  
| |    |                                                                                                                                              
| | m) | The Company's Management Discussion & Analysis (“MD&A”) and news releases related to financial results;                                      
| |    |                                                                                                                                              
| | n) | The Company’s management certifications of the financial statements and accompanying MD&A as required under applicable securities laws;      
| |    |                                                                                                                                              
| | o) | The Company’s annual information form (“AIF”), if one is prepared and filed.                                                                 
| |    |                                                                                                                                              
| | p) | The independent auditor's audit of the financial statements and its report thereon;                                                          
| |    |                                                                                                                                              
| | q) | Any significant changes required in the independent auditor's audit plan;                                                                    
| |    |                                                                                                                                              
| | r) | The appropriateness of the presentation of any non-IFRS related financial information;                                                       
| |    |                                                                                                                                              
| | s) | Any serious difficulties or disputes with management encountered during the course of the audit; and                                         
| |    |                                                                                                                                              
| | t) | Other matters related to the conduct of the audit, which are to be communicated to the Committee under generally accepted auditing standards.

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Review
    the management letter, if any, delivered by the independent auditor in connection with the audit.                                                                                                                                                                                                                                                                                                                                                                                    
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|Following
    such review and discussion, if so determined by the Committee, recommend to the Board that the annual financial statements
    be included in the Company's annual report.                                                                                                                                                                                                                                                                                                        
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|Review
    and discuss with management and the independent auditor the adequacy of the Company's internal accounting and financial controls
    that management and the Board have established and the effectiveness of those systems, and inquire of management and the independent
    auditor about significant financial risks or exposures and the steps management has taken to minimize such risks to the Company.                                                                       
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|Meet
    separately with the independent auditor and management, as necessary or appropriate, to discuss any matters that the Committee
    or any of these groups believe should be discussed privately with the Committee.                                                                                                                                                                                                                                                                    
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|Review
    and discuss with management and the independent auditor the accounting policies which may be viewed as critical, including
    all alternative treatments for financial information within IFRS that have been discussed with management, and review and
    discuss any significant changes in the accounting policies of the Company and industry accounting and regulatory financial
    reporting proposals that may have a significant impact on the Company's financial reports
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                



77







|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Review
    with management and the independent auditor the effect of regulatory and accounting initiatives as well as off-balance sheet
    structures, if any, on the Company's financial statements.                                                                                                                                                                                                                                                                                                              
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|Review
    with management and the independent auditor any correspondence with regulators or governmental agencies and any employee complaints
    or published reports which raise material issues regarding the Company's financial statements or accounting policies.                                                                                                                                                                                                                                            
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|Review
    with the Company's legal counsel legal matters that may have a material impact on the financial statements, the Company's
    financial compliance policies and any material reports or inquiries received from regulators or governmental agencies related
    to financial matters.                                                                                                                                                                                                                    
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|SECURITIES
    REGULATORY FILINGS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|Review
    filings with the Canadian provincial securities commissions and the SEC and other published documents containing the Company's
    financial statements.                                                                                                                                                                                                                                                                                                                                                 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|Review,
    with management, prior to public disclosure, the Company’s financial statements and MD&A and related press releases.
    The chairperson of the Committee may represent the entire Committee for purposes of this review.                                                                                                                                                                                                                                                                               
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|Ensure
    that adequate procedures are in place for the review of the Company’s public disclosure of financial information extracted
    or derived from the Company’s financial statements, other than the disclosure stated above, and periodically assess
    the adequacy of those procedures.                                                                                                                                                                                                                 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|RISK
    ASSESSMENT                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|Meet
    periodically with management to review the Company's major financial risk exposures and the steps management has taken to
    monitor and control such exposures.                                                                                                                                                                                                                                                                                                                                          
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|Assess
    risk areas and policies to manage risk including, without limitation, environmental risk, insurance coverage and other areas
    as determined by the Board from time to time.                                                                                                                                                                                                                                                                                                                           
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|Review
    and discuss with management, and approve changes to, the Company's Corporate Investment Policy.                                                                                                                                                                                                                                                                                                                                                                                                          
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|LIMITATION
    ON DUTIES OF AUDIT AND FINANCE COMMITTEE                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|In
    contributing to the Committee’s discharging of its duties under this charter, each member of the Committee shall be
    obliged only to exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances.
    Nothing in this charter is intended, or may be construed, to impose on any member of the Committee a standard of care or diligence
    that is in any way more onerous or extensive than the standard to which all Board members are subject.
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|ADOPTION
    OF CHARTER                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|This
    charter was originally adopted by the Board on August 23, 2004 and revised on January 17, 2012.                                                                                                                                                                                                                                                                                                                                                                                                            
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|APPENDIX
    I                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|GLOSSARY
    OF TERMS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|“Independent”means a director who has no direct or indirect material relationship with the Company or its subsidiaries.                                                                                                                                                                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|A
    “material relationship”is a relationship which could, in the view of the Board of the Company, be reasonably
    expected to interfere with the exercise of the person’s independent judgment.                                                                                                                                                                                                                                                                                                                
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    



78









|                                                                                
|--------------------------------------------------------------------------------
|For greater certainty, certain individuals will be deemed not to be independent:
|                                                                                

|· | an individual who is, or has been within the last three years, an employee or executive officer of the Company;                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|· | an individual whose immediate family member is, or has been within the last three years, an executive officer of the Company;                                                                                                                                                                                                                                                                                                                                                                                                                                                
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|· | an individual who is a partner of, or employed by the Company’s internal or external auditor or who was, within the last three years, a partner or employee of that audit firm and personally worked on the Company’s audit within that time. For this purpose, “partner” does not include a fixed income partner;                                                                                                                                                                                                                                                           
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|· | an individual whose child or stepchild shares a home with the individual or whose spouse, is a partner of the Company’s internal or external auditor, or is an employee of the audit firm and participates in its audit, assurance or tax compliance practice or who was within the last three years a partner or employee of the audit firm and personally worked on the Company’s audit within that time. For this purpose, “partner” does not include a fixed income partner;                                                                                             
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|· | an individual who, or whose immediate family member, is or has been within the last three years, an executive officer of an entity if any of the Company’s current executive officers serve or served at the same time on the entity’s compensation committee; and                                                                                                                                                                                                                                                                                                           
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|· | an individual who received, or whose immediate family member who is employed as an executive officer of the Company received, more than $75,000 in direct compensation from the Company during any 12 month period within the last three years. For purposes hereof, direct compensation does not include remuneration for acting as a member of the Board or of any Board committee or remuneration consisting of fixed amounts of compensation under a retirement plan for prior service provided that such compensation is not contingent on any way on continued service.

|                                                                                                                                         
|-----------------------------------------------------------------------------------------------------------------------------------------
|For purposes hereof, “Company”includes Medicure Inc. and any subsidiaries thereof.                                                       
|                                                                                                                                         
|Notwithstanding the foregoing, a person will not be considered to have a material relationship with the Company solely because he or she:

|  |                                                                                                                   
|- | ------------------------------------------------------------------------------------------------------------------
|· | has previously acted as an interim chief executive officer of the issuer, or                                      
|  |                                                                                                                   
|· | acts, or has previously acted, as a chair or vice-chair of the Board or any Board committee, on a part-time basis.

|                                                                                                                                                                                              
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Meaning Of “Independence” For Audit Committees                                                                                                                                                
|                                                                                                                                                                                              
|In addition to the requirement of being an Independent Director as described above, members of the Audit Committee will not be considered “independent” for that purpose where the individual:

|  
|--
|1.
|  
|2.

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|For purposes hereof, indirect acceptance by an individual of any consulting, advisory or other compensatory fee includes acceptance of a fee by (i) an individual’s spouse, minor child or stepchild, or child or stepchild who shares the individual’s home, or (ii) an entity in which such individual is a partner, member, executive officer or managing director (or comparable position) and which provides accounting, consulting, legal, investment banking or financial advisory services to the Company or any subsidiary of the Company. Notwithstanding the foregoing, compensatory fees do not include receipt of fixed amounts of compensation under a retirement plan (including deferred compensation) for prior service with the issuer if the compensation is not contingent in any way on continued service.
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               





79







|                                                                                                                                                                                                                                                                                                                                                                                                                 
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                                                                                                 
|Meaning
    of “financially literate”                                                                                                                                                                                                                                                                                                                                                                            
|                                                                                                                                                                                                                                                                                                                                                                                                                 
|For
    purposes hereof, an individual is financially literate if he or she has the ability to read and understand a set of financial
    statements that present a breadth and level of complexity of accounting issues that are generally comparable to the breadth
    and complexity of the issues that can reasonably be expected to be raised by the Company’s financial statements.                       
|                                                                                                                                                                                                                                                                                                                                                                                                                 
|Meaning
    of “audit committee financial expert”                                                                                                                                                                                                                                                                                                                                                                
|                                                                                                                                                                                                                                                                                                                                                                                                                 
|An
    “audit committee financial expert” means a person who has the following attributes:                                                                                                                                                                                                                                                                                                                       
|                                                                                                                                                                                                                                                                                                                                                                                                                 
|(1)
    An understanding of generally accepted accounting principles and financial statements;                                                                                                                                                                                                                                                                                                                   
|                                                                                                                                                                                                                                                                                                                                                                                                                 
|(2)
    The ability to assess the general application of such principles in connection with the accounting for estimates, accruals
    and reserves;                                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                                                                                                                                                                                                 
|(3)
    Experience preparing, auditing, analyzing or evaluating financial statements that present a breadth and level of complexity
    of accounting issues that are generally comparable to the breadth and complexity of issues that can reasonably be expected
    to be raised by the Company’s financial statements, or experience actively supervising one or more persons engaged in
    such activities;
|                                                                                                                                                                                                                                                                                                                                                                                                                 
|(4)
    An understanding of internal controls over financial reporting;                                                                                                                                                                                                                                                                                                                                          
|                                                                                                                                                                                                                                                                                                                                                                                                                 
|(5)
    An understanding of audit committee functions.                                                                                                                                                                                                                                                                                                                                                           
|                                                                                                                                                                                                                                                                                                                                                                                                                 
|A
    person shall have acquired such attributes through:                                                                                                                                                                                                                                                                                                                                                        
|                                                                                                                                                                                                                                                                                                                                                                                                                 
|(1)
    Education and experience as a principal financial officer, principal accounting officer, controller, public accountant or
    auditor or experience in one or more positions that involve the performance of similar functions;                                                                                                                                                                          
|                                                                                                                                                                                                                                                                                                                                                                                                                 
|(2)
    Experience actively supervising a principal financial officer, principal accounting officer, controller, public accountant,
    auditor or person performing similar functions;                                                                                                                                                                                                                          
|                                                                                                                                                                                                                                                                                                                                                                                                                 
|(3)
    Experience overseeing or assessing the performance of companies or public accountants with respect to the preparation, auditing
    or evaluation of financial statements; or                                                                                                                                                                                                                            
|                                                                                                                                                                                                                                                                                                                                                                                                                 
|(4)
    Other relevant experience.                                                                                                                                                                                                                                                                                                                                                                               
|                                                                                                                                                                                                                                                                                                                                                                                                                 



Executive Compensation, Nominating
and Corporate Governance Committee



The Executive Compensation, Nominating
and Corporate Governance Committee is responsible for determining the compensation of executive officers of the Company. The current
members of the Committee are Dr. Arnold Naimark (Chair), Gerald McDole, Peter Quick and Brent Fawkes, none of whom is a current
or former executive officer of the Company. The Committee meets at least once a year.



The Committee has developed a policy to
govern the Company's approach to corporate governance issues and provides a forum for concerns of individual directors about matters
not easily or readily discussed in a full board meeting, e.g., the performance of management. The Committee ensures there is a
clear definition and separation of the responsibilities of the Board, the Committees of the Board, the Chief Executive Officer
and other management employees. It also ensures there is a process in place for the orientation and education of new directors
and for continuing education of the Board. The Committee also assesses the effectiveness of the Board and its committees on an
ongoing ad hoc basis. It also reviews at least annually the Company's responsiveness to environmental impact, health and safety
and other regulatory standards.



80







The Committee reviews the objectives,
performance and compensation of the Chief Executive Officer at least annually and makes recommendations to the Board for change.
The Committee makes recommendations based upon the Chief Executive Officer’s suggestions regarding the salaries and incentive
compensation for senior officers of the Company. The Committee also reviews significant changes to compensation, benefits and
human resources policies and compliance with current human resource management practices, such as pay equity, performance review
and staff development. The Committee is responsible for reviewing and recommending changes to the compensation of directors as
necessary.



The charter of the Executive Compensation,
Nominating and Corporate Governance Committee can be found on the Company’s website at www.medicure.com.



D. Employees



In addition to the individuals disclosed
in Section A. Directors and Senior Management of this item, the Company has 58 employees through Medicure and 245 through Apicore
as at December 31, 2016. During the year ended December 31, 2016, the Company increased its total employment and plans to continue
to increase total employment during 2017.



E. Share Ownership



The following table discloses the number
of shares (each share possessing identical voting rights), stock options and percent of the shares outstanding held by the directors
and officers of the Company, and their respective affiliates, directly and indirectly, at December 31, 2016.



|Title of Class |  | Identity of Person or Group  |  | Amount Owned |           |     | Percentage of Class | 
|-------------- |  | ---------------------------- |  | ------------ | --------- | --- | ------------------- | 
|               |  |                              |  |              |           |     |                     | 
|Common shares  |  | Dr. Albert D. Friesen(1) (2) |  |              | 2,461,955 | (1) |                     | 
|Common shares  |  | Dr. Arnold Naimark (3)       |  |              | 35,194    |     |                     | 
|Common shares  |  | Gerald P. McDole (2)         |  |              | 44,950    |     |                     | 
|Common shares  |  | Peter Quick (3)              |  |              | 40,278    |     |                     | 
|Common shares  |  | Brent Fawkes (2)             |  |              | 12,376    |     |                     | 
|Common shares  |  | James Kinley                 |  |              | 2,100     |     |                     | 
|Common shares  |  | Graeme Merchant              |  |              | 20,367    |     |                     | 



| | (1) | Dr. Albert D. Friesen holds 834,867
                                         shares personally or in an RRSP, a Canadian individual retirement plan. The rest of the
                                         shares are held by ADF Family Holding Corp. ADF Enterprises Inc., his wife Mrs. Leona
                                         M. Friesen, and CentreStone Ventures Limited Partnership Fund (the “Fund”).
                                         Dr. Friesen is the General Partner of the Fund.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (2) | On
                                         July 11, 2014, the Company announced that, subject
                                         to all necessary regulatory approvals, it has entered into shares for debt agreements
                                         with its Chief Executive Officer, Dr. Albert Friesen and certain members of the Board
                                         of Directors, pursuant to which the Company will issue 205,867 of its common shares at
                                         a deemed price of $1.98 per common share to satisfy $407,617 of outstanding amounts owing
                                         to CEO and members of the Company’s Board of Directors. The shares were issued
                                         on January 9, 2015.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (3) | On
                                         January 27, 2015, the Company announced that, subject
                                         to all necessary regulatory approvals, it has entered into shares for debt agreements
                                         with certain members of the Board of Directors and a consultant, pursuant to which the
                                         Company will issue 108,206 of its common shares at a deemed price of $1.44 per common
                                         share to satisfy $155,817 of outstanding amounts owing to these individuals. The shares
                                         were issued on March 20, 2015.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



81







Incentive Stock Options



The Company has established an Incentive
Stock Option Plan (the ‘‘Plan’’) for its directors, key officers, employees and consultants. Options granted
pursuant to the Plan will not exceed a term of ten years and are granted at an option price and on other terms which the directors
determine is necessary to achieve the goal of the Plan and in accordance with regulatory requirements, including those of the
TSX Venture Exchange. Each option entitles the holder thereof to purchase one (1) Common Share of the Company on the terms set
forth in the Plan and in such purchaser’s specific stock option agreement. The option price may be at a discount to market
price, which discount will not, in any event, exceed that permitted by any stock exchange on which the Company’s Common
Shares are listed for trading.



The number of Common Shares allocated
to the Plan, the exercise period for the options, and the vesting provisions for the options will be determined by the board of
directors of the Company from time to time. The aggregate number of shares reserved for issuance under the Plan, together with
any stock options outstanding, will not exceed 20% of the issued and outstanding Common Shares at the date of adoption of the
Plan. The Plan was adopted by the shareholders of the Company on June 22, 2016.



The Common Shares issued pursuant to the
exercise of options, when fully paid for by a participant, are not included in the calculation of Common Shares allocated to or
within the Plan. Should a participant cease to be eligible due to the loss of corporate office (being that of an officer or director)
or employment, the option shall cease for varying periods not exceeding 90 days. Loss of eligibility for consultants is regulated
by specific rules imposed by the directors when the option is granted to the appropriate consultant. The Plan also provides that
estates of deceased participants can exercise their options for a period not exceeding one year following death.



The following table discloses the stock
options beneficially held by the directors and officers of the Company, and their respective affiliates, directly and indirectly,
as of December 31, 2016. The stock options are subject to the Plan and are for shares of Common Stock of the Company.



|Name of Person        |  | Number of Shares Subject to Issuance |         |  | Exercise Price per Share |   |       | Expiry Date
|--------------------- |  | ------------------------------------ | ------- |  | ------------------------ | - | ----- | -----------
|Dr. Albert D. Friesen |  |                                      | 5,000   |  |                          | $ | 6.16  |            
|                      |  |                                      | 414,000 |  |                          | $ | 1.50  |            
|                      |  |                                      | 7,500   |  |                          | $ | 1.90  |            
|                      |  |                                      | 9,000   |  |                          | $ | 1.90  |            
|Dr. Arnold Naimark    |  |                                      | 7,333   |  |                          | $ | 14.70 |            
|                      |  |                                      | 3,333   |  |                          | $ | 0.60  |            
|                      |  |                                      | 667     |  |                          | $ | 0.60  |            
|                      |  |                                      | 4,000   |  |                          | $ | 6.16  |            
|                      |  |                                      | 45,000  |  |                          | $ | 0.30  |            
|                      |  |                                      | 4,500   |  |                          | $ | 1.90  |            
|                      |  |                                      | 7,200   |  |                          | $ | 1.90  |            
|Gerald P. McDole      |  |                                      | 667     |  |                          | $ | 14.70 |            
|                      |  |                                      | 3,333   |  |                          | $ | 0.60  |            
|                      |  |                                      | 667     |  |                          | $ | 0.60  |            
|                      |  |                                      | 4,000   |  |                          | $ | 6.16  |            
|                      |  |                                      | 45,000  |  |                          | $ | 0.30  |            
|                      |  |                                      | 4,500   |  |                          | $ | 1.90  |            
|                      |  |                                      | 7,200   |  |                          | $ | 1.90  |            
|Peter Quick           |  |                                      | 3,333   |  |                          | $ | 23.10 |            
|                      |  |                                      | 667     |  |                          | $ | 14.70 |            
|                      |  |                                      | 3,333   |  |                          | $ | 0.60  |            
|                      |  |                                      | 667     |  |                          | $ | 0.60  |            
|                      |  |                                      | 4,000   |  |                          | $ | 6.16  |            
|                      |  |                                      | 45,000  |  |                          | $ | 0.30  |            
|                      |  |                                      | 4,500   |  |                          | $ | 1.90  |            
|                      |  |                                      | 7,200   |  |                          | $ | 1.90  |            
|Brent Fawkes          |  |                                      | 4,000   |  |                          | $ | 6.16  |            
|                      |  |                                      | 45,000  |  |                          | $ | 0.30  |            
|                      |  |                                      | 4,500   |  |                          | $ | 1.90  |            
|                      |  |                                      | 7,200   |  |                          | $ | 1.90  |            
|James Kinley          |  |                                      | 4,000   |  |                          | $ | 6.16  |            
|                      |  |                                      | 45,000  |  |                          | $ | 0.30  |            
|                      |  |                                      | 7,500   |  |                          | $ | 1.90  |            
|                      |  |                                      | 7,200   |  |                          | $ | 1.90  |            
|Graeme Merchant       |  |                                      | 430     |  |                          | $ | 14.70 |            
|                      |  |                                      | 3,333   |  |                          | $ | 0.60  |            
|                      |  |                                      | 6,667   |  |                          | $ | 0.60  |            
|                      |  |                                      | 4,000   |  |                          | $ | 6.16  |            
|                      |  |                                      | 100,000 |  |                          | $ | 1.50  |            
|                      |  |                                      | 8,500   |  |                          | $ | 1.90  |            
|                      |  |                                      | 7,200   |  |                          | $ | 1.90  |            



82







On April 6, 2016, the Company granted
an aggregate of 265,025 options to certain directors, officers, employees, management company employees and consultants of the
Company pursuant to the Company’s Stock Option Plan. Of these options, 225,025 are set to expire on the fifth anniversary
of the date of grant and 40,000 are set to expire on the first anniversary of the date of grant. All of the options were issued
at an exercise price of $6.16 per share. Of the 265,025 options granted on April 6, 2016, 235,025 vested immediately, 10,000 vested
on June 30, 2016, 10,000 vested on September 30, 2016 and 10,000 vest on December 31, 2016. The options vesting on June 30, 2016,
September 30, 2016 and December 31, 2016 were forfeited and terminated during the year ended December 31, 2016.



Subsequent to December 31, 2016, 50,950
stock options were exercised, 1,400 at an exercise price of $1.90 per common share and 35,500 at an exercise price of $3.90 per
common share and 14,050 at an exercise price of $6.16 per common share for total gross proceeds to the Company of $227,658.



None of the exercised stock options pertained
to officers or directors of the Company.



ITEM 7. MAJOR SHAREHOLDERS AND RELATED
PARTY TRANSACTIONS



A. Major Shareholders



As of December 31, 2016, the following
table sets forth the beneficial ownership of the Company's common shares by each person known by the Company to own beneficially
more than 5% of the issued and outstanding common shares of the Company. Information as to shares beneficially owned, directly
or indirectly, by each nominee or over which each nominee exercises control or direction, not being within the knowledge of the
Company, has been furnished by the respective nominees individually. The Company does not know the majority of the ultimate beneficial
owners of these common shares.



83







|Title of Class |  | Identity of Person or Group |  | Amount Owned |           |     | Percentage of Class | 
|-------------- |  | --------------------------- |  | ------------ | --------- | --- | ------------------- | 
|               |  |                             |  |              |           |     |                     | 
|Common shares  |  | Dr. Albert D. Friesen       |  |              | 2,461,955 | (1) |                     | 
|               |  | Winnipeg, Manitoba          |  |              |           |     |                     | 
|               |  |                             |  |              |           |     |                     | 
|Common shares  |  | MM Asset Management Inc.    |  |              | 2,524,445 |     |                     | 
|               |  | Toronto, Ontario            |  |              |           |     |                     | 



Notes:



| | (1) | Dr. Albert Friesen holds
                                         834,867 shares personally or in an RRSP. The rest of the shares are held by ADF Family
                                         Holding Corp., his wife Mrs. Leona M. Friesen, and the Fund.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



As of December 31, 2016, there were approximately
6,500 shareholders of record worldwide. As of this date there were approximately 1,600 shareholders of record in the United States
holding a total of 3,450,000 common shares of the Company.



To the best of the Company's knowledge,
it is not owned or controlled, directly or indirectly, by another Company, by any foreign government or by any other natural or
legal person severally or jointly.



As of December 31, 2016, the total number
of issued and outstanding common shares of the Company beneficially owned by the directors and executive officers of the Company
as a group was 2,617,220 (or 16.85% of common shares).



To the best of the Company's knowledge,
there are no arrangements, the operation of which at a subsequent date will result in a change in control of the Company.



The major shareholders do not have any
special voting rights.



Insider Reports under Canadian Securities
Legislation



Since the Company a reporting issuer under
the Securities Acts of each of the provinces of Canada, certain "insiders" of the Company (including its directors,
certain executive officers, and persons who directly or indirectly beneficially own, control or direct more than 10% of its common
shares) are generally required to file insider reports of changes in their ownership of the Company's common shares five days
following the trade under National Instrument 55-104 – Insider Reporting Requirements and Exemptions, as adopted
by the Canadian Securities Administrators. Insider reports must be filed electronically five days following the date of the trade
at www.sedi.ca. The public is able to access these reports at www.sedi.ca.



The U.S. rules governing the ownership
threshold above which shareholder ownership must be disclosed are more stringent than those discussed above. Section 13 of the
Exchange Act imposes reporting requirements on persons who acquire beneficial ownership (as such term is defined in the Rule 13d-3
under the Exchange Act) of more than 5 per cent of a class of an equity security registered under Section 12 of the Exchange Act.
In general, such persons must file, within 10 days after such acquisition, a report of beneficial ownership with the Securities
and Exchange Commission containing the information prescribed by the regulations under Section 13 of the Exchange Act. This information
is also required to be sent to the issuer of the securities and to each exchange where the securities are traded.



84







B. Related Party Transactions



Except as disclosed below, the Company
has not, since June 1, 2013, and does not at this time propose to:



| | (1) | enter into any transactions which are
                                         material to the Company or a related party or any transactions unusual in their nature
                                         or conditions involving goods, services or tangible or intangible assets to which the
                                         Company or any of its former subsidiaries was a party;
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (2) | make any loans or guarantees directly
                                         or through any of its former subsidiaries to or for the benefit of any of the following
                                         persons:
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (a) | enterprises directly or indirectly
                                         through one or more intermediaries, controlling or controlled by or under common control
                                         with the Company;
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (b) | associates of the Company (unconsolidated
                                         enterprises in which the Company has significant influence or which has significant influence
                                         over the Company) including shareholders beneficially owning 10% or more of the outstanding
                                         shares of the Company;
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (c) | individuals owning, directly or
                                         indirectly, shares of the Company that gives them significant influence over the Company
                                         and close members of such individuals families;
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (d) | key management personnel (persons
                                         having authority in responsibility for planning, directing and controlling the activities
                                         of the Company including directors and senior management and close members of such directors
                                         and senior management); or
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (e) | enterprises in which a substantial
                                         voting interest is owned, directly or indirectly, by any person described in (c) or (d)
                                         or over which such a person is able to exercise significant influence.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



On July 18, 2011, the Company entered
into a consulting agreement with A.D. Friesen Enterprises Ltd. pursuant to which Dr. Albert Friesen serves the Company as its
Chief Executive Officer. The agreement is for a term of five years, at a rate of $180,000 annually. Dr. Friesen is also eligible
for a yearly merit/performance bonus, if any, that the Company’s board of directors, in its sole discretion, may authorize.
Effective July 18, 2016, the Company renewed its consulting agreement with its Chief Executive Officer, through A. D. Friesen
Enterprises Ltd. for a term of five years, at a rate of $300,000 annually.



During the year ended December 31, 2016,
the Company recorded a bonus of $54,380 to its Chief Executive Officer which is recorded within selling, general and administrative
expenses. During the year ended December 31, 2015, the Company recorded a bonus of $100,000 to its Chief Executive Officer which
is recorded within selling, general and administrative expenses. During the seven months ended December 31, 2014, the Company
recorded a bonus of $58,904 to its Chief Executive Officer which is recorded within selling, general and administrative expenses.
During the year ended May 31, 2014, the Company recorded a bonus of $286,849 to its Chief Executive Officer which is recorded
within selling, general and administrative expenses.



On July
11, 2014, the Company announced that, subject to all necessary regulatory approvals, it has
entered into shares for debt agreements with its Chief Executive Officer, Dr. Albert Friesen and certain members of the Board
of Directors, pursuant to which the Company will issue 205,867 of its common shares at a deemed price of $1.98 per common share
to satisfy $407,617 of outstanding amounts owing to CEO and members of the Company’s Board of Directors. The shares were
issued on January 9, 2015.



The Company may terminate the consulting
agreement with the CEO for any reason and at any time upon 120 days written notice. In relation to the consulting agreement with
A.D. Friesen Enterprises Ltd. the Company recorded consulting fees payable to A.D. Friesen Enterprises Ltd. During the year ended
December 31, 2016, the Company recorded a total of $237,790 to A.D. Friesen Enterprises Ltd. During the year ended December 31,
2015, the Company recorded a total of $186,000 to A.D. Friesen Enterprises Ltd. During the seven months ended December 31, 2014
the Company recorded a total $108,500 to A.D. Friesen Enterprises Ltd. During the year ended May 31, 2013, the Company recorded
a total of $186,000 to A.D. Friesen Enterprises Ltd. During the year ended May 31, 2012, the Company recorded a total of $186,000
to A.D. Friesen Enterprises Ltd.



85







Dr. Friesen, a director, the Chairman
and the Chief Executive Officer of the Company is also the majority shareholder in a management services company, Genesys Venture
Inc. (“GVI”) which entered into a management services agreement with the Company as of October 1, 2010. Effective
January 1, 2012, the Company entered into a new business and administration services agreement with GVI under which the Company
is committed to pay $15,833.33 per month or $190,000 per annum along with an additional $500 per month for each office space it
requests and is given access to by GVI. The agreement was for an initial term of one year and shall be automatically renewed for
succeeding terms of one year. Either party may terminate the agreement at any time after June 30, 2012, upon 90 days written notice
to the other party. The Chief Financial Officer's services, accounting, payroll, human resources, and information technology are
provided pursuant to this agreement. The agreement was renewed for the 2013 and 2014 calendar years. Effective November 1, 2014,
the business and administration services agreement was renegotiated for a further 14 month term ending December 31, 2015 at a
rate of $17,917 per month, or $215,000 per year. Effective January 1, 2016, the Company entered into a new business and administration
services agreement with GVI, under which the Company is committed to paying $7,083 per month or $85,000 per year for a one year
term and the agreement no longer includes the services of the Chief Financial Officer. Subsequent to December 31, 2016 and effective
January 1, 2017, this agreement was renewed for an additional one year term.



During the year ended December 31, 2016,
the Company paid GVI, a company controlled by the Chief Executive Officer, a total of $85,000 (year ended December 31, 2015 -
$215,000, seven months ended December 31, 2014 - $115,000, year ended May 31, 2014 - $190,000) for business administration services,
$222,500 (year ended December 31, 2015 - $176,051, seven months ended December 31, 2014 - $36,500, year ended May 31, 2014 - $30,500)
in rental costs and $41,975 (year ended December 31, 2015 - $33,575, seven months ended December 31, 2014 - $25,115, year ended
May 31, 2014 - $33,735) for commercial and information technology support services. As described in note 15, the business administration
services summarized above are provided to the Company through a consulting agreement with GVI. Until December 31, 2015, the GVI
agreement included the Chief Financial Officer's services to the Company, as well as accounting, payroll, human resources and
some information technology services. The business and administration services agreement entered into effective January 1, 2016
no longer includes the Chief Financial Officer's services, which effective January 1, 2016, will be paid directly by the Company
through a consulting agreement.



Dr. Friesen, a director, the Chairman
and the Chief Executive Officer of the Company also owns a clinical research organization, GVI Clinical Development Solutions
Inc. (“GVI CDS”) which entered into the following clinical research contracts with the Company;



86







|Nature of Agreement                           |  | Effective Date  |  | Terms                                                                                                    
|--------------------------------------------- |  | --------------- |  | ---------------------------------------------------------------------------------------------------------
|Regulatory affairs support                    |  | June 22, 2009   |  | Services provided as needed on an hourly basis                                                           
|Pharmacovigilance and medical affairs support |  | January 1, 2014 |  | Monthly retainer of $2,000, plus hourly charges for pharmacovigilance services outside base
    services.
|Pharmacovigilance and medical affairs support |  | January 1, 2014 |  | Monthly retainer of $1,250, plus hourly charges for pharmacovigilance services outside base
    services.
|Quality assurance support                     |  | June 1, 2010    |  | Services provided as needed on an hourly basis.                                                          
|AGGRASTAT®clinical trial management           |  | May 1, 2010     |  | Services provided as needed on an hourly basis.                                                          



During the year ended December 31, 2016,
the Company paid GVI CDS $595,464, (year ended December 31, 2015 - $330,764, seven months ended December 31, 2014 - $56,904, year
ended May 31, 2014 - $125,583) for clinical research services.



The Company also has a consulting agreement
with CanAm Bioresearch Inc. (CanAm), a company controlled by a close family member of Dr. Friesen’s to provide contract
research services. During the year ended December 31, 2016, the Company paid CanAm $560,205 (year ended December 31, 2015 - $399,580,
seven months ended December 31, 2014 - $233,938, year ended May 31, 2014 - $229,732) for research and development services.



These transactions were in the normal
course of business and have been measured at the exchange amount, which is the amount of consideration established and agreed
to by the related parties. Beginning on February 22, 2013 and until June 30, 2015, these amounts bore interest at a rate of 5.5%
per annum. For the year ended December 31, 2016, there was no interest charged on these amounts payable to related. For the year
ended December 31, 2015, seven months ended December 31, 2014 and the year ended May 31, 2014, $4,517, $10,127 and $14,918, respectively,
was recorded within finance expense in relation to these amounts payable to related parties.



Beginning with the acquisition on December
1, 2016 as described in note 4 of the Company’s financial statements, the Company incurred rental charges pertaining to
leased manufacturing facilities and office space from Dap Dhaduk II LLC (“Dap Dhaduk”), an entity controlled by a
minority shareholder and member of the board of directors of Apicore Inc. For the period from December 1, 2016 to December 31,
2016, rental expenses from Dap Dhaduk totalled $29,869.



Beginning with the acquisition on December
1, 2016 as described in note 4 of the Company’s financial statements, the Company purchased inventory totalling of $217,382,
from Aktinos Pharmaceuticals Private Limited (“Aktinos”), an Indian based entity that is significantly influenced
by a close family member of the Chief Executive Officer of Apicore Inc.



As at December 31, 2016, included in accounts
payable and accrued liabilities is $100,493 (December 31, 2015 - $23,494 and December 31, 2014 - $120,962) payable to GVI, $336,008
(December 31, 2015 - $64,539 and December 31, 2014 - $145,100) payable to GVI CDS, $80,582 (December 31, 2015 - $60,611 and December
31, 2014 - $247,752) payable to CanAm, and $467,250 payable to Aktinos which are unsecured, payable on demand and bear interest
as described above.



Effective July 18, 2016, the Company renewed
its consulting agreement with its Chief Executive Officer, through ADF Enterprises Inc, a company owned by the Chief Executive
Officer. for a term of five years, at a rate of $300,000 annually. The Company may terminate this agreement at any time upon 120
days written notice. During the year ended December 31, 2016 the Company recorded a bonus of $54,247 (year ended December 31,
2015 - $100,000, seven months ended December 31, 2014 - $58,904, year ended May 31, 2014 - $286,849) to its Chief Executive Officer
which is recorded within selling, general and administrative expenses. As at December 31, 2016, included in accounts payable and
accrued liabilities is $54,380 (December 31, 2015 – $45,753 and December 31, 2014 - $345,753) payable to A.D. Friesen Enterprises
Ltd. as a result of this consulting agreement, which is unsecured, payable on demand and non-interest bearing.



87







On July 11, 2014, the Company announced
that, subject to all necessary regulatory approvals, it had entered into a shares for debt agreement with its Chief Executive
Officer, pursuant to which the Company will issue common shares at a deemed price of $1.98 per common share to satisfy outstanding
amounts owing to the Chief Executive Officer. Of the amount payable to the Chief Executive Officer as at December 31, 2014, $297,808
was included in this shares for debt agreement. The shares were issued on January 9, 2015.



Effective January 1, 2016, the business
and administration services agreement with GVI no longer included the Chief Financial Officer's services and the Company signed
a consulting agreement with its Chief Financial Officer, through JFK Enterprises Ltd., a company owned by the Chief Financial
Officer, for a one year term, at a rate of $135,000 annually. The agreement may be terminated by either party at any time upon
30 days written notice. During the year ended December 31, 2016 the Company recorded a bonus of $10,000 to its Chief Financial
Officer which is recorded within selling, general and administrative expenses. As at December 31, 2016, included in accounts payable
and accrued liabilities is $22,313 payable to JFK Enterprises Ltd. as a result of this consulting agreement, which is unsecured,
payable on demand and non-interest bearing.



C. Interests of Experts and Counsel



Not applicable



ITEM 8. FINANCIAL INFORMATION



A. Consolidated Statements or Other
Financial Information



financial
Statements



The consolidated financial statements
of the Company for the years ended December 31, 2016 and 2015, the seven months ended December 31, 2014 and year ended May 31,
2014 have been prepared in accordance with IFRS, as issued by the IASB, and are included under Item 18 of this Annual Report.
The consolidated financial statements including related notes are accompanied by the report of the Company’s independent
registered public accounting firm, Ernst & Young LLP.



Legal Proceedings



There are no legal or arbitration proceedings,
including those relating to bankruptcy, receivership or similar proceedings and those involving any third party, which may have,
or have had in the recent past, significant effects on the Company’s financial position or profitability. There are no significant
legal proceedings to which the Company is a party, nor to the best of the knowledge of the Company’s management are any
legal proceedings contemplated.



Dividend Policy



The Company has not paid dividends in
the past and it has no present intention of paying dividends on its shares as it anticipates that all available funds will be
invested to finance the growth of its business. The directors of the Company will determine if and when dividends should be declared
and paid in the future based upon the Company’s financial position at the relevant time. All of the Company’s Shares
are entitled to an equal share of any dividends declared and paid.



B. Significant Changes



There have been no significant changes
to the accompanying financial statements since December 31, 2016, except as disclosed in this Annual Report on Form 20-F.



88







ITEM 9. THE OFFERING AND LISTING



A. Listing Details



From March 26, 2010 until October 21,
2011, shares of the Company traded on the NEX board of the TSX-V under the symbol “MPH.H”. On October 24, 2011 shares
of the Company commenced trading on the TSX-V under the symbol “MPH”.



By Articles of Amendment filed by the
Company under the Canada Business Corporations Act on November 1, 2012, the Company’s issued and outstanding common
shares were consolidated on the basis of one post-consolidation common share for every fifteen pre-consolidation common shares.
The Company's name and trading symbol did not change as a result of the consolidation. The Company’s common shares were
reduced from 182,947,595 to 12,196,508 issued and outstanding as a result of the consolidation. The trading prices presented here
have not been adjusted to reflect the consolidation.



The following table sets forth for the
periods indicated the price history of the Company’s common shares on the TSX-V and the NEX.



|                                                  |  | TSX/NEX/TSX-V |       |  | TSX/NEX/TSX-V | 
|------------------------------------------------- |  | ------------- | ----- |  | ------------- | 
|                                                  |  | High ($)      |       |  | Low ($)       | 
|                                                  |  |               |       |  |               | 
|Fiscal Quarter Ended                              |  |               |       |  |               | 
|December 31, 2016                                 |  |               | 10.67 |  |               | 
|September 30, 2016                                |  |               | 7.20  |  |               | 
|June 30, 2016                                     |  |               | 6.98  |  |               | 
|March 31, 2016                                    |  |               | 7.29  |  |               | 
|December 31, 2015                                 |  |               | 4.35  |  |               | 
|September 30, 2015                                |  |               | 3.94  |  |               | 
|June 30, 2015                                     |  |               | 2.74  |  |               | 
|March 31, 2015                                    |  |               | 2.39  |  |               | 
|Period from December 1, 2014 to December 31, 2014 |  |               | 2.51  |  |               | 
|November 30, 2014                                 |  |               | 2.91  |  |               | 
|August 31, 2014                                   |  |               | 2.97  |  |               | 
|May 31, 2014                                      |  |               | 3.15  |  |               | 
|February 28, 2014                                 |  |               | 0.70  |  |               | 
|November 30, 2013                                 |  |               | 0.53  |  |               | 
|August 31, 2013                                   |  |               | 0.28  |  |               | 
|May 31, 2013                                      |  |               | 0.45  |  |               | 
|February 28, 2013                                 |  |               | 0.67  |  |               | 



89







| | 1. | (1) The Company changed its fiscal year
                                         end from May 31 to December 31 in 2014, resulting in a stub fiscal year of June 1, 2014
                                         to December 31, 2014. For comparison purposes, trading data is presented for calendar
                                         rather than fiscal periods.
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



B. Plan of Distribution



Not applicable.



C. Markets



The Company's common shares are listed
for trading on the TSX-V under the symbol “MPH”. Certain market makers also trade the Company’s common shares
on the OTC Pink Market, under the symbol MCUJF.



D. Selling Shareholders



Not applicable.



E. Dilution



Not applicable.



F. Expenses of the Issue



Not applicable.



ITEM 10. ADDITIONAL INFORMATION



A. Share Capital



Not applicable



B. Memorandum and Articles of Association



1. Objects and Purposes of the Company



The Articles of Continuance (as amended,
the “Articles”) and the By-Laws of the Company place no restrictions upon the Company’s objects and purposes.



2. Directors



Under applicable Canadian law, the directors
and officers of the Company, in exercising their powers and discharging their duties, must act honestly and in good faith with
a view to the best interests of the Company. The directors and officers must also exercise the care, diligence and skill that
a reasonably prudent person would exercise in comparable circumstances.



90







Section 4.18 of By-Law No.1A of the Company
(the “By-Law”) provides that a director shall not be disqualified by reason of his office from contracting with the
Company or a subsidiary thereof. Subject to the provisions of the Canada Business Corporations Act(the “Act”),
a director shall not by reason only of his office be accountable to the Company or its shareholders for any profit or gain realized
from a contract or transaction in which he has an interest. Such contract or transaction shall not be voidable by reason only
of such interest, or by reason only of the presence of a director so interested at a meeting, or by reason only of his presence
being counted in determining a quorum at a meeting of the directors at which such a contract or transaction is approved, provided
that a declaration and disclosure of such interest shall have been made at the time and in the manner prescribed by section 120
of the Act, and the director so interested shall have refrained from voting as a director on the resolution approving the contract
or transaction (except as permitted by the Act) and such contract shall have been reasonable and fair to the Company and shall
have been approved by the directors or shareholders of the Company as required by section 120 of the Act.



The Company’s Articles provide that
the Company’s board shall consist of a minimum of one and a maximum of 15 directors. The exact number of directors to form
the board, between the minimum and maximum number of directors prescribed by the Articles, is determined from time to time by
the board. Section 4.01 of the By-Law states that the quorum of the board shall be a majority of the board, or such other number
of directors as the board may from time to time determine. No business shall be transacted at a meeting unless a quorum is present.



Section 3.01 of the By-Law states that
the board may, without the authorization of the shareholders:



| | i) | borrow money upon the credit of the Company;
| | -- | --------------------------------------------

| | ii) | issue, reissue, sell or pledge debt
                                         obligations of the Company, including bonds, debentures, notes or other evidences of
                                         indebtedness or guarantees, whether secured or unsecured;
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | iii) | subject to section 44 of the Act,
                                         give a guarantee on behalf of the Company to secure performance of any present or future
                                         indebtedness, liability or obligation of any person; and
| | ---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | iv) | mortgage, hypothecate, pledge or otherwise
                                         create a security interest in all or any property of the Company, owned or subsequently
                                         acquired, to secure any obligation of the Company.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The borrowing powers of the directors
can be varied by amending the By-Law of the Company.



There is no provision in the By-Law imposing
a requirement for retirement or non-retirement of directors under an age limit requirement.



Section 4.02 of the By-law states that
a director need not be a shareholder to be qualified as a director. However, section 4.02 also provides that at least 25% of the
directors shall be resident Canadians unless the Company has less than four directors, in which case at least one director must
be a resident Canadian.



Under section 4.03 of the By-law, directors
are to be elected yearly by ordinary resolution to hold office until the close of the next annual meeting of shareholder. If directors
fail to be elected at any such meeting of shareholders, then the incumbent directors continue in office until their successors
are elected.



3. Shares



The Articles of the Company provide that
the Company is authorized to issue an unlimited number of shares designated as Common Shares, Class A Common Shares and Preferred
Shares. Except for meetings at which only holders of another specified class or series of shares of the Company are entitled to
vote separately as a class or series, each holder of the Common and Class A shares is entitled to receive notice of, to attend
and to vote at all meetings of the shareholders of the Company. Subject to the rights, privileges, restrictions and conditions
attached to any other class of shares of the Company, the holders of the Common and Class A shares are also entitled to receive
dividends if, as and when declared by the directors of the Company and are entitled to share equally in the remaining property
of the Company upon liquidation, dissolution or winding-up of the Company.



91







The Preferred Shares may from time to
time be issued in one or more series and, subject to the following provisions, and subject to the sending of articles of amendment
in respect thereof, the directors may fix from time to time and before issue a series of Preferred Shares, the number of shares
which are to comprise that series and the designation, rights, privileges, restrictions and conditions to be attached to that
series of Preferred Shares including, without limiting the generality of the foregoing, the rate or amount of dividends or the
method of calculating dividends, the dates of payment of dividends, the redemption, purchase and/or conversion, and any sinking
fund or other provisions.



The Preferred Shares of each series shall,
with respect to the payment of dividends and the distribution of assets or return of capital in the event of liquidation, dissolution
or winding-up of the Company, whether voluntary or involuntary, or any other return of capital or distribution of the assets of
the Company among its shareholders for the purpose of winding-up its affairs, rank on a parity with the Preferred Shares of every
other series and be entitled to preference over the Common and Class A Common Shares and over any other shares of the Company
ranking junior to the Preferred Shares. The Preferred Shares of any series may also be given other preferences, not inconsistent
with these articles, over the Common Shares and Class A Common Shares and any other shares of the Company ranking junior to the
Preferred Shares of a series as may be fixed in accordance with terms outlined above.



If any cumulative dividends or amounts
payable on the return of capital in respect of a series of Preferred Shares are not paid in full, all series of Preferred Shares
shall participate rateably in respect of accumulated dividends and return of capital.



Unless the directors otherwise determine
in the articles of amendment designating a series of Preferred Shares, the holder of each share or a series of Preferred Shares
shall not, as such, be entitled to receive notice of or vote at any meeting of shareholders, except as otherwise specifically
provided in the Act.



4. Rights of Shareholders



Under the Act, shareholders of the Company
are entitled to examine, during its usual business hours, the Company’s articles and by-laws, notices of directors and change
of directors, any unanimous shareholder agreements, the minutes of meetings and resolutions of shareholders and the list of shareholders.



Shareholders of the Company may obtain
a list of shareholders upon payment of a reasonable fee and sending an affidavit to the Company or its transfer agent stating,
among other things, that the list of shareholders will not be used by any person except in connection with an effort to influence
the voting of shareholders of the Company, an offer to acquire shares of the Company or any other matter relating to the affairs
of the Company.



Under the Act, shareholders of the Company
may apply to a court having jurisdiction directing an investigation to be made of the Company. If it appears to the court that
the formation, business or affairs of the Company were conducted for fraudulent or unlawful purposes, or that the powers of the
directors were exercised in a manner that is oppressive or unfairly disregards the interests of the shareholders, the court may
order an investigation to be made of the Company.



92







To change the rights of holders of stock,
where such rights are attached to an issued class or series of shares, requires the consent by a separate resolution of the holders
of the class or series of shares, as the case may be, requiring a majority of two-thirds of the votes cast.



The Company is organized under the laws
of Canada. The majority of the Company’s directors, officers, and affiliates of the Company, as well as the experts named
in this registration statement, are residents of Canada and, to the best of the Company’s knowledge, all or a substantial
portion of their assets and all of the Company’s assets are located outside of the United States. As a result, it may be
difficult for shareholders of the Company in the United States to effect service of process on the Company or these persons above
within the United States, or to realize in the United States upon judgments rendered against the Company or such persons. Additionally,
a shareholder of the Company should not assume that the courts of Canada (i) would enforce judgments of U.S. courts obtained in
actions against the Company or such persons predicated upon the civil liability provisions of the U.S. federal securities laws
or other laws of the United States, or (ii) would enforce, in original actions, liabilities against the Company or such persons
predicated upon the U.S. federal securities laws or other laws of the United States.



Laws in the United States and judgments
of U.S. courts would generally be enforced by a court of Canada unless such laws or judgments are contrary to public policy in
Canada, are or arise from foreign penal laws or laws that deal with taxation or the taking of property by a foreign government
and are not in compliance with applicable laws in Canada regarding the limitation of actions. Further, a judgment obtained in
a U.S. court would generally be recognized by a court of Canada, except under the following examples:



| | i) | the judgment was rendered in a U.S.
                                         court that had no jurisdiction according to applicable laws in Canada;
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------

| | ii) | the judgment was subject to ordinary
                                         remedy (appeal, judicial review and any other judicial proceeding which renders the judgment
                                         not final, conclusive or enforceable under the laws of the applicable state) or not final,
                                         conclusive or enforceable under the laws of the applicable state;
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | iii) | the judgment was obtained by fraud
                                         or in any manner contrary to natural justice or rendered in contravention of fundamental
                                         principles of procedure; and
| | ---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | iv) | a dispute between the same parties,
                                         based on the same subject matter has given rise to a judgment rendered in a court of
                                         Canada or has been decided in a third country and the judgment meets the necessary conditions
                                         for recognition in a court of Canada.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



5. Meetings



Subject to the provisions of the Act,
the annual general meeting of the shareholders shall be on such date in each year as the board of directors may determine, and
a special meeting of the shareholders may be convened at any time by order of the President or by the board on their own motion
or on the requisition of shareholders as provided for in the Act. Notice of the time and place of each meeting of shareholders
shall be given not less than 21 days nor more than 60 days before the date of the meeting to each director and shareholder. A
meeting of shareholders may be held without notice at any time and at any place provided a waiver of notice is obtained in accordance
with section 136 of the Act. The quorum for the transaction of business at meetings of the shareholders shall consist of not less
than two shareholders present or represented by proxy and holding in all not less than 10% percent of the outstanding shares entitled
to vote at the meeting. At any meeting of shareholders, every person shall be entitled to vote who, at the time of the taking
of a vote (or, if there is a record date for voting, at the close of business on such record date) is entered in the register
of shareholders as the holder of one or more shares carrying the right to vote at such meeting, subject to the provisions of the
Act.



93







6. Ownership of Securities



There are no limitations imposed by the
Act, or by the Articles or By-Law or any other constituent document of the Company on the right of non-resident or foreign shareholders
to own or vote securities of the Company. However, the Investment Canada Act (Canada) will prohibit implementation, or if necessary,
require divestiture of an investment deemed “reviewable” under the Investment Canada Act (Canada) by an investor that
is not a “Canadian” as defined in the Investment Canada Act (Canada), unless after review the Minister responsible
for the Investment Canada Act (Canada) is satisfied that the “reviewable” investment is likely to be of net benefit
to Canada.



The following discussion summarizes the
principal features of the Investment Canada Act for a non-Canadian who proposes to acquire common shares of the Company. The discussion
is general only; it is not a substitute for independent legal advice from an investor's own adviser; and, except where expressly
noted, it does not anticipate statutory or regulatory amendments.



The Investment Canada Act is a federal
statute of broad application regulating the establishment and acquisition of Canadian businesses by non-Canadians, including individuals,
governments or agencies thereof, corporations, partnerships, trusts or joint ventures, Investments by non-Canadians to acquire
control over existing Canadian businesses or to establish new ones are either reviewable or notifiable under the Investment Canada
Act. If an investment by a non-Canadian to acquire control over an existing Canadian business is reviewable under the Investment
Canada Act, the Investment Canada Act generally

prohibits implementation of the investment
unless, after review, the Minister of Industry is satisfied that the investment is likely to be of net benefit to Canada.



An investment in the Company’s common
shares by a non-Canadian, who is not a resident of a World Trade Organization (“WTO”) member, would be reviewable
under the Investment Canada Act (Canada) if it was an investment to acquire control of the Company and the value of the assets
of the Company was CAN$5 million or more. An investment in common shares of the Company by residents of WTO members would be reviewable
only if it was an investment to acquire control of the Company and the value of the assets of the Company was equal to or greater
than a specified amount, which is published by the Minister after its determination for any particular year. This amount is currently
CAN $600 million for the year 2016; it will increase to CAN $800 million starting April 24, 2017.



A non-Canadian would be deemed to acquire
control of the Company for the purposes of the Investment Canada Act if the non-Canadian acquired a majority of the outstanding
common shares (or less than a majority but controlled the Company in fact through the ownership of one-third or more of the outstanding
common shares) unless it could be established that, on the acquisition, the Company is not controlled in fact by the acquirer
through the ownership of such common shares. Certain transactions in relation to the Company’s common shares would be exempt
from review under the Investment Canada Act, including, among others, the following:



| | a) | the acquisition of voting shares
                                         or other voting interests by any person in the ordinary course of that person’s
                                         business as a trader or dealer in securities;
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ii) | the acquisition of control of
                                         the Company in connection with the realization of security granted for a loan or other
                                         financial assistance and not for any purpose related to the provisions of the Investment
                                         Canada Act (Canada), if the acquisition is subject to approval under the Bank Act (Canada),
                                         the Cooperative Credit Associations Act (Canada), the Insurance Companies Act (Canada)
                                         or the Trust and Loan Companies Act (Canada); and
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | iii) | the acquisition of control of
                                         the Company by reason of an amalgamation, merger, consolidation or corporate reorganization
                                         following which the ultimate direct or indirect control of the Company, through the ownership
                                         of voting interests, remains unchanged.
| | ---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



94







7. Change in Control of Company



No provision of the Company’s Articles
or By-Law would have the effect of delaying, deferring, or preventing a change in control of the Company, and operate only with
respect to a merger, acquisition or corporate restructuring of the Company or any of its subsidiaries. The Company no longer has
a shareholder rights plan.



C. Material Contracts



The following are the material contracts
of the Company, other than those mentioned elsewhere in this Form, to which the Company or any member of the group is a party,
for the two years immediately preceding publication of this registration statement.



None



D. Exchange Controls



There is no law or governmental decree
or regulation in Canada that restricts the export or import of capital, or affects the remittance of dividends, interest or other
payments to a non-resident holder of Common Shares, other than withholding tax requirements. Any such remittances to United States
residents are generally subject to withholding tax, however no such remittances are likely in the foreseeable future. (See "Item
10E - Taxation", below.)



Except as provided in the Investment Canada
Act (Canada), which has rules regarding certain acquisitions of shares by non-residents, there is no limitation imposed by Canadian
law, or by the Company’s Articles or By-Law, or by any other constituent documents of the Company, on the right of a non-resident
to hold or vote the Company’s common shares. Investment Canada Act is a Canadian federal statute of broad application regulating
the establishment and acquisition of Canadian businesses by non-Canadians, including individuals, governments or agencies thereof,
corporations, partnerships, trusts or joint ventures, . Investments by non-Canadians to acquire control over existing Canadian
businesses or to establish new ones are either reviewable or notifiable under the Investment Canada Act. If an investment by a
non-Canadian to acquire control over an existing Canadian business is reviewable under the Investment Canada Act, the Investment
Canada Act generally prohibits implementation of the investment unless, after review, the Minister of Industry is satisfied that
the investment is likely to be of net benefit to Canada.



E. Taxation



U.S. Federal Income Tax Consequences



The following is a summary of the anticipated
material U.S. federal income tax consequences to a U.S. Holder (as defined below) arising from and relating to the acquisition,
ownership, and disposition of common shares of (“Common Shares”).



95







This summary is for general information
purposes only and does not purport to be a complete analysis or listing of all potential U.S. federal income tax consequences
that may apply to a U.S. Holder as a result of the acquisition, ownership, and disposition of Common Shares. In addition, this
summary does not take into account the individual facts and circumstances of any particular U.S. Holder that may affect the U.S.
federal income tax consequences of the acquisition, ownership, and disposition of Common Shares. Accordingly, this summary is
not intended to be, and should not be construed as, legal or U.S. federal income tax advice with respect to any U.S. Holder. Each
U.S. Holder should consult its own financial advisor, legal counsel, or accountant regarding the U.S. federal income, U.S. state
and local, and foreign tax consequences of the acquisition, ownership, and disposition of Common Shares.



Scope of this Summary



Authorities



This summary is based on the Internal
Revenue Code of 1986, as amended (the “Code”), Treasury Regulations (whether final, temporary, or proposed), published
rulings of the Internal Revenue Service (the “IRS”), published administrative positions of the IRS, the Convention
Between Canada and the United States of America with Respect to Taxes on Income and on Capital, signed September 26, 1980, as
amended (the “Canada-U.S. Tax Convention”), and U.S. court decisions that are applicable and, in each case, as in
effect and available, as of the date of this Annual Report. Any of the authorities on which this summary is based could be changed
in a material and adverse manner at any time, and any such change could be applied on a retroactive basis. This summary does not
discuss the potential effects, whether adverse or beneficial, of any proposed legislation that, if enacted, could be applied on
a retroactive basis.



U.S. Holders



For purposes of this summary, a “U.S.
Holder” is a beneficial owner of Common Shares that, for U.S. federal income tax purposes, is (a) an individual who
is a citizen or resident of the U.S., (b) a corporation, or any other entity classified as a corporation for U.S. federal
income tax purposes, that is created or organized in or under the laws of the U.S. or any state in the U.S., including the District
of Columbia, (c) an estate if the income of such estate is subject to U.S. federal income tax regardless of the source of
such income, or (d) a trust if (i) such trust has validly elected to be treated as a U.S. person for U.S. federal income
tax purposes or (ii) a U.S. court is able to exercise primary supervision over the administration of such trust and one or
more U.S. persons have the authority to control all substantial decisions of such trust.



Non-U.S. Holders



For purposes of this summary, a “non-U.S.
Holder” is a beneficial owner of Common Shares other than a U.S. Holder. This summary does not address the U.S. federal
income tax consequences of the acquisition, ownership, and disposition of Common Shares to non-U.S. Holders. Accordingly, a non-U.S.
Holder should consult its own financial advisor, legal counsel, or accountant regarding the U.S. federal income, U.S. state and
local, and foreign tax consequences (including the potential application of and operation of any tax treaties) of the acquisition,
ownership, and disposition of Common Shares.



96







U.S. Holders Subject to Special U.S.
Federal Income Tax Rules Not Addressed



This summary does not address the U.S.
federal income tax consequences of the acquisition, ownership, and disposition of Common Shares to U.S. Holders that are subject
to special provisions under the Code, including the following U.S. Holders: (a) U.S. Holders that are tax-exempt organizations,
qualified retirement plans, individual retirement accounts, or other tax-deferred accounts; (b) U.S. Holders that are financial
institutions, insurance companies, real estate investment trusts, or regulated investment companies; (c) U.S. Holders that
are dealers in securities or currencies or U.S. Holders that are traders in securities that elect to apply a mark-to-market accounting
method; (d) U.S. Holders that have a “functional currency” other than the U.S. dollar; (e) U.S. Holders
that are liable for the alternative minimum tax under the Code; (f) U.S. Holders that own Common Shares as part of a straddle,
hedging transaction, conversion transaction, constructive sale, or other arrangement involving more than one position; (g) U.S.
Holders that acquired Common Shares in connection with the exercise of employee stock options or otherwise as compensation for
services; (h) U.S. Holders that hold Common Shares other than as a capital asset within the meaning of Section 1221
of the Code; (i) U.S. Holders who are U.S. expatriates or former long-term residents of the United States.; or (j) U.S. Holders
that own (directly, indirectly, or by attribution) 10% or more of the total combined voting power of the outstanding shares of
the Company. U.S. Holders that are subject to special provisions under the Code, including U.S. Holders described immediately
above, should consult their own financial advisor, legal counsel or accountant regarding the U.S. federal income, U.S. state and
local, and foreign tax consequences of the acquisition, ownership, and disposition of Common Shares.



If an entity that is classified as a partnership
(or “pass-through” entity) for U.S. federal income tax purposes holds Common Shares, the U.S. federal income tax consequences
to such partnership (or “pass-through” entity) and the partners of such partnership (or owners of such “pass-through”
entity) generally will depend on the activities of the partnership (or “pass-through” entity) and the status of such
partners (or owners). Partners of entities that are classified as partnerships (or owners of “pass-through” entities)
for U.S. federal income tax purposes should consult their own financial advisor, legal counsel or accountant regarding the U.S.
federal income tax consequences of the acquisition, ownership, and disposition of Common Shares.



Tax Consequences Other than U.S. Federal
Income Tax Consequences Not Addressed



This summary does not address the U.S.
state and local, U.S. federal estate and gift, or foreign tax consequences to U.S. Holders of the acquisition, ownership, and
disposition of Common Shares. Each U.S. Holder should consult its own financial advisor, legal counsel, or accountant regarding
the U.S. state and local, U.S. federal estate and gift, and foreign tax consequences of the acquisition, ownership, and disposition
of Common Shares. (See “Taxation—Canadian Federal Income Tax Consequences” above).



U.S. Federal Income Tax Consequences
of the Acquisition, Ownership, and Disposition of Common Shares



Distributions on Common Shares



General Taxation of Distributions



A U.S. Holder that receives a distribution,
including a constructive distribution, with respect to the Common Shares will be required to include the amount of such distribution
in gross income as a dividend (without reduction for any Canadian income tax withheld from such distribution) to the extent of
the current or accumulated “earnings and profits” of the Company. To the extent that a distribution exceeds the current
and accumulated “earnings and profits” of the Company, such distribution will be treated (a) first, as a tax-free
return of capital to the extent of a U.S. Holder’s tax basis in the Common Shares and, (b) thereafter, as gain from
the sale or exchange of such Common Shares. (See more detailed discussion at “Disposition of Common Shares” below).



97







Reduced Tax Rates for Certain Dividends



For taxable years beginning before January
1, 2011, a dividend paid by the Company generally will be taxed at the preferential tax rates applicable to long-term capital
gains if (a) the Company is a “qualified foreign corporation” (as defined below), (b) the U.S. Holder receiving
such dividend is an individual, estate, or trust, and (c) such dividend is paid on Common Shares that have been held by such
U.S. Holder for at least 61 days during the 121-day period beginning 60 days before the “ex-dividend date.” The Company
generally will be a “qualified foreign corporation” under Section 1(h)(11) of the Code (a “QFC”)
if (a) the Company is eligible for the benefits of the Canada-U.S. Tax Convention, or (b) the Common Shares are readily tradable
on an established securities market in the U.S. However, even if the Company satisfies one or more of such requirements, the Company
will not be treated as a QFC if the Company is a “passive foreign investment Company” (as defined below) for the taxable
year during which the Company pays a dividend or for the preceding taxable year.



As discussed below,
the Company does not believe that it was a “passive foreign investment Company” for the taxable year ended December
31, 2016, and does not expect that it will be a “passive foreign investment Company” for the taxable year ending December
31, 2017. (See more detailed discussion at “Additional Rules that May Apply to U.S. Holders” below). However, there
can be no assurance that the IRS will not challenge the determination made by the Company concerning its “passive foreign
investment Company” status or that the Company will not be a “passive foreign investment Company” for the current
taxable year or any subsequent taxable year. Accordingly, although the Company expects that it may be a QFC for the taxable year
ending December 31, 2016, there can be no assurances that the IRS will not challenge the determination made by the Company concerning
its QFC status, that the Company will be a QFC for the taxable year ending December 31, 2016 or any subsequent taxable year, or
that the Company will be able to certify that it is a QFC in accordance with the certification procedures issued by the Treasury
and the IRS.



If the Company is not a QFC, a dividend
paid by the Company to a U.S. Holder, including a U.S. Holder that is an individual, estate, or trust, generally will be taxed
at ordinary income tax rates (and not at the preferential tax rates applicable to long-term capital gains). The dividend rules
are complex, and each U.S. Holder should consult its own financial advisor, legal counsel, or accountant regarding the dividend
rules.



Distributions Paid in Foreign Currency



The amount of a distribution paid to a
U.S. Holder in foreign currency generally will be equal to the U.S. dollar value of such distribution based on the exchange rate
applicable on the date of receipt. A U.S. Holder that does not convert foreign currency received as a distribution into U.S. dollars
on the date of receipt generally will have a tax basis in such foreign currency equal to the U.S. dollar value of such foreign
currency on the date of receipt. Such a U.S. Holder generally will recognize ordinary income or loss on the subsequent sale or
other taxable disposition of such foreign currency (including an exchange for U.S. dollars).



Dividends Received Deduction



Dividends paid on the Common Shares generally
will not be eligible for the “dividends received deduction.” The availability of the dividends received deduction
is subject to complex limitations that are beyond the scope of this discussion, and a U.S. Holder that is a corporation should
consult its own financial advisor, legal counsel, or accountant regarding the dividends received deduction.



Disposition of Common Shares



A U.S. Holder will recognize gain or loss
on the sale or other taxable disposition of Common Shares in an amount equal to the difference, if any, between (a) the amount
of cash plus the fair market value of any property received and (b) such U.S. Holder’s tax basis in the Common Shares
sold or otherwise disposed of. Any such gain or loss generally will be capital gain or loss, which will be long-term capital gain
or loss if the Common Shares are held for more than one year. Gain or loss recognized by a U.S. Holder on the sale or other taxable
disposition of Common Shares generally will be treated as “U.S. source” for purposes of applying the U.S. foreign
tax credit rules unless the gain is subject to tax in Canada and resourced as “foreign source” under the U.S.-Canada
Tax Convention and the U.S. Holder elects to treat such gain as “foreign source”.



98







Preferential tax rates apply to long-term capital gains of a U.S. Holder that is an individual, estate, or
trust. There are currently no preferential tax rates for long-term capital gains of a U.S. Holder that is a corporation. Deductions
for capital losses are subject to significant limitations under the Code.



The amount
realized on a sale or other disposition of Common Shares for an amount in foreign currency will generally be the U.S. dollar value
of this amount on the date of sale or disposition. On the settlement date, the U.S. Holder will recognize U.S. source foreign currency
gain or loss (taxable as ordinary income or loss) equal to the difference (if any) between the U.S. dollar value of the amount
received based on the exchange rates in effect on the date of sale or other disposition and the settlement date.



Foreign Tax Credit



A U.S. Holder that pays (whether directly or
through withholding) Canadian income tax with respect to dividends paid on the Common Shares generally will be entitled, at the
election of such U.S. Holder, to receive either a deduction or a credit for such Canadian income tax paid. Generally, a credit
will reduce a U.S. Holder’s U.S. federal income tax liability on a dollar-for-dollar basis, whereas a deduction will reduce
a U.S. Holder’s income subject to U.S. federal income tax. This election is made on a year-by-year basis and applies to all
foreign taxes paid (whether directly or through withholding) by a U.S. Holder during a year.



Complex limitations apply to the foreign tax
credit, including the general limitation that the credit cannot exceed the proportionate share of a U.S. Holder’s U.S. federal
income tax liability that such U.S. Holder’s “foreign source” taxable income bears to such U.S. Holder’s
worldwide taxable income. In applying this limitation, a U.S. Holder’s various items of income and deduction must be classified,
under complex rules, as either “foreign source” or “U.S. source.” In addition, this limitation is calculated
separately with respect to specific categories of income. Dividends paid by the Company generally will constitute “foreign
source” income and generally will be categorized as “passive income.” The foreign tax credit rules are complex,
and each U.S. Holder should consult its own financial advisor, legal counsel, or accountant regarding the foreign tax credit rules.



Information Reporting; Backup Withholding
Tax



Payments made within the U.S., or by a U.S.
payor or U.S. middleman, of dividends on, or proceeds arising from the sale or other taxable disposition of, Common Shares generally
will be subject to information reporting and backup withholding tax, at the rate of 28%, if a U.S. Holder (a) fails to furnish
such U.S. Holder’s correct U.S. taxpayer identification number (generally on Form W-9), (b) furnishes an incorrect U.S.
taxpayer identification number, (c) is notified by the IRS that such U.S. Holder has previously failed to properly report
items subject to backup withholding tax, or (d) fails to certify, under penalty of perjury, that such U.S. Holder has furnished
its correct U.S. taxpayer identification number and that the IRS has not notified such U.S. Holder that it is subject to backup
withholding tax. However, U.S. Holders that are corporations generally are excluded from these information reporting and backup
withholding tax rules. Any amounts withheld under the U.S. backup withholding tax rules will be allowed as a credit against a U.S.
Holder’s U.S. federal income tax liability, if any, or will be refunded, if such U.S. Holder furnishes required information
to the IRS. Each U.S. Holder should consult its own financial advisor, legal counsel, or accountant regarding the information reporting
and backup withholding tax rules.



99







Additional Rules that May Apply to U.S.
Holders



If the Company is a “passive foreign
investment Company” (as defined below), the preceding sections of this summary may not describe the U.S. federal income tax
consequences to U.S. Holders of the acquisition, ownership, and disposition of Common Shares.



Passive Foreign Investment Company



The Company generally will be a “passive
foreign investment Company” under Section 1297 of the Code (a “PFIC”) if, for a taxable year, (a) 75%
or more of the gross income of the Company for such taxable year is passive income or (b) 50% or more of the assets held by
the Company either produce passive income or are held for the production of passive income, based on the fair market value of such
assets (or on the adjusted tax basis of such assets, if the Company is not publicly traded and either is a “controlled foreign
corporation” or makes an election). “Passive income” includes, for example, dividends, interest, certain rents
and royalties, certain gains from the sale of stock and securities, and certain gains from commodities transactions.



For purposes of the PFIC income test and asset
test described above, if the Company owns, directly or indirectly, 25% or more of the total value of the outstanding shares of
another foreign corporation, the Company will be treated as if it (a) held a proportionate share of the assets of such other
foreign corporation and (b) received directly a proportionate share of the income of such other foreign corporation. In addition,
for purposes of the PFIC income test and asset test described above, “passive income” does not include any interest,
dividends, rents, or royalties that are received or accrued by the Company from a “related person” (as defined in Section 954(d)(3)
of the Code), to the extent such items are properly allocable to the income of such related person that is not passive income.



In addition, if the Company is a PFIC and owns
shares of another foreign corporation that also is a PFIC, under certain indirect ownership rules, a disposition of the shares
of such other foreign corporation or a distribution received from such other foreign corporation generally will be treated as an
indirect disposition by a U.S. Holder or an indirect distribution received by a U.S. Holder, subject to the rules of Section 1291
of the Code discussed below. To the extent that gain recognized on the actual disposition by a U.S. Holder of Common shares or
income recognized by a U.S. Holder on an actual distribution received on Common Shares was previously subject to U.S. federal income
tax under these indirect ownership rules, such amount generally should not be subject to U.S. federal income tax.



If the Company is a PFIC, the U.S. federal
income tax consequences to a U.S. Holder of the acquisition, ownership, and disposition of Common Shares will depend on whether
such U.S. Holder makes an election to treat the Company as a “qualified electing fund” or “QEF” under Section 1295
of the Code (a “QEF Election”) or a mark-to-market election under Section 1296 of the Code (a “Mark-to-Market
Election”). A U.S. Holder that does not make either a QEF Election or a Mark-to-Market Election will be referred to in this
summary as a “Non-Electing U.S. Holder.”



Under Section 1291 of the Code, any gain
recognized on the sale or other taxable disposition of Common Shares, and any “excess distribution” (as defined in
Section 1291(b) of the Code) paid on the Common Shares, must be ratably allocated to each day in a Non-Electing U.S. Holder’s
holding period for the Common Shares. The amount of any such gain or excess distribution allocated to prior years of such Non-Electing
U.S. Holder’s holding period for the Common Shares generally will be subject to U.S. federal income tax at the highest tax
applicable to ordinary income in each such prior year. A Non-Electing U.S. Holder will be required to pay interest on the resulting
tax liability for each such prior year, calculated as if such tax liability had been due in each such prior year.



100







A U.S. Holder that makes a QEF Election generally
will not be subject to the rules of Section 1291 of the Code discussed above. However, a U.S. Holder that makes a QEF Election
generally will be subject to U.S. federal income tax on such U.S. Holder’s pro rata share of (a) the “net capital
gain” of the Company, which will be taxed as long-term capital gain to such U.S. Holder, and (b) and the “ordinary
earnings” of the Company, which will be taxed as ordinary income to such U.S. Holder. A U.S. Holder that makes a QEF Election
will be subject to U.S. federal income tax on such amounts for each taxable year in which the Company is a PFIC, regardless of
whether such amounts are actually distributed to such U.S. Holder by the Company.



A U.S. Holder that makes a Mark-to-Market Election
generally will not be subject to the rules of Section 1291 of the Code discussed above. A U.S. Holder may make a Mark-to-Market
Election only if the Common Shares are “marketable stock” (as defined in Section 1296(e) of the Code). A U.S.
Holder that makes a Mark-to-Market Election will include in gross income, for each taxable year in which the Company is a PFIC,
an amount equal to the excess, if any, of (a) the fair market value of the Common Shares as of the close of such taxable year
over (b) such U.S. Holder’s tax basis in such Common Shares. A U.S. Holder that makes a Mark-to-Market Election will,
subject to certain limitations, be allowed a deduction in an amount equal to the excess, if any, of (a) such U.S. Holder’s
adjusted tax basis in the Common Shares over (b) the fair market value of such Common Shares as of the close of such taxable
year.



The Company does not believe that it was a
PFIC for the taxable year ended December 31, 2016, and, based on current operations and financial projections, does not expect
that it will be a PFIC for the taxable year ending December 31, 2017. The determination of whether the Company was, or will be,
a PFIC for a taxable year depends, in part, on the application of complex U.S. federal income tax rules, which are subject to differing
interpretations. In addition, whether the Company will be a PFIC for the taxable year ending December 31, 2016 and each subsequent
taxable year depends on the assets and income of the Company over the course of each such taxable year and, as a result, cannot
be predicted with certainty as of the date of this Annual Report. Accordingly, there can be no assurance that the IRS will not
challenge the determination made by the Company concerning its PFIC status or that the Company was not, or will not be, a PFIC
for any taxable year.



The PFIC rules are complex, and each U.S. Holder
should consult its own financial advisor, legal counsel, or accountant regarding the PFIC rules and how the PFIC rules may affect
the U.S. federal income tax consequences of the acquisition, ownership, and disposition of Common Shares.



Canadian Federal Income Tax Considerations for United States
Residents



The following, as of the date hereof, is a
summary of the principal Canadian federal income tax considerations generally applicable to the holding and disposition of Common
Shares by a holder, (a) who for the purposes of the Income Tax Act (Canada) (the “Tax Act”) at all relevant times,
is not resident, or deemed to be resident in Canada, deals at arm’s length and is not affiliated with the Company for the
purpose of the Tax Act, holds the Common Shares as capital property and does not use or hold, and is not deemed to use or hold,
the Common Shares in the course of carrying on, or otherwise in connection with, a business in Canada, and (b) who, for the purposes
of the Canada - United States Income Tax Convention(the “Convention”) at all relevant times, is a resident
of the United States, has never been a resident of Canada, has not held or used (and does not hold or use) Common Shares in connection
with a permanent establishment or fixed base in Canada, and who otherwise qualifies for the full benefits of the Convention. The
Canada Revenue Agency has introduced special forms to be used in order to substantiate eligibility for benefits under the Convention,
and affected holders should consult with their own advisers with respect to these forms and all relevant compliance matters.



101







Holders who meet all such criteria in clauses
(a) and (b) above are referred to herein as a “U.S. Holder” or “U.S. Holders” and this summary only addresses
such U.S. Holders. The summary does not deal with special situations, such as particular circumstances of traders or dealers, limited
liability companies, tax -exempt entities, insurers, financial institutions (including those to which the mark-to-market provisions
of the Tax Act apply), or entities considered fiscally transparent under applicable law, or otherwise.



This summary is based on the current provisions
of the Tax Act, and the regulations thereunder, all proposed amendments to the Tax Act and regulations publicly announced by the
Minister of Finance (Canada) to the date hereof, the current provisions of the Convention and our understanding of the current
administrative practices of the Canada Revenue Agency. It has been assumed that all currently proposed amendments to the Tax Act
and regulations will be enacted as proposed and that there will be no other relevant change in any governing law, the Convention
or administrative policy, although no assurance can be given in these respects. This summary does not take into account provincial,
U.S. or other foreign income tax considerations, which may differ significantly from those discussed herein.



This summary is not exhaustive of all possible
Canadian income tax consequences. It is not intended as legal or tax advice to any particular U.S. Holder and should not be so
construed. The tax consequences to a U.S. Holder will depend on that U.S. Holder's particular circumstances. Accordingly, all U.S.
Holders or prospective U.S. Holders should consult their own tax advisers with respect to the tax consequences applicable to them
having regard to their own particular circumstances. The discussion below is qualified accordingly.



For the purposes of the Tax Act, all amounts
relating to the acquisition, holding or disposition of the Common Shares must be converted into Canadian dollars based on the relevant
exchange rate applicable thereto.



Dividends



Dividends paid or deemed to be paid or credited
by the Company to a U.S. Holder are subject to Canadian withholding tax. Under the Convention, the rate of withholding tax on dividends
paid to a U.S. Holder is generally not subject to tax under the Tax Act in respect of a capital gain realized on the disposition
of a common share in the open market, unless the share is "taxable Canadian property" to the holder thereof and the U.S.
Holder is not entitled to relief under the Convention.



Dispositions



A U.S. Holder is generally not subject to tax
under the Tax Act in respect of a capital gain realized on the disposition of a common share in the open market, unless the share
is "taxable Canadian property" to the holder thereof and the U.S. Holder is not entitled to relief under the Convention.



Provided that the Company's common shares are
listed on a "designated stock exchange" for purposes of the Tax Act (which currently includes the TSX Venture) at the
time of disposition, a common share will generally not constitute taxable Canadian property to a U.S. Holder unless, at any time
during the 60 month period ending at the time of disposition, (i) the U.S. Holder or persons with whom the U.S. Holder did not
deal at arm's length (or the U.S. Holder together with such persons) owned 25% or more of the issued shares of any class or series
of the Company AND (ii) more than 50% of the fair market value of the share was derived directly or indirectly from certain types
of assets, including real or immoveable property situated in Canada, Canadian resource properties or timber resource properties,
and options, interests or rights in respect of any of the foregoing. Common shares may also be deemed to be taxable Canadian property
under the Tax Act in certain specific circumstances. A U.S. Holder holding Common shares as taxable Canadian property should consult
with the U.S. Holder's own tax advisers in advance of any disposition of Common shares or deemed disposition under the Tax Act
in order to determine whether any relief from tax under the Tax Act may be available by virtue of the Convention, and any related
compliance procedures.



102







While intended to address all material Canadian
Federal Income Tax considerations, this summary is for general information purposes only, and is not intended to be, nor should
it be construed to be, legal or tax advice to any holder or prospective holder of common shares. No opinion was requested by the
Company, or is provided by its legal counsel and/or auditors. Accordingly, holders and prospective holders of common shares should
consult their own tax advisors about the consequences of purchasing, owning, and disposing of common shares of the Company.



F. Dividends and Paying Agents



Not applicable



G. Statement by Experts



Not applicable



H. Documents on Display



Exhibits attached to this Annual Report are
available for viewing on EDGAR, or may be inspected at the head office of Company at 2 – 1250 Waverley Street, Winnipeg,
Manitoba, Canada R3T 6C6, during normal business hours. Copies of the Company’s financial statements and other continuous
disclosure documents required under Canadian securities legislation are available for viewing on the internet at www.sedar.com.



I. Subsidiary Information



Not applicable



ITEM 11. QUANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK



INTEREST RATE RISK



The primary objective of the Company’s
investment activities is to preserve principal by maximizing the income the Company receives from such activities without significantly
increasing risk. Securities that the Company invests in are generally highly liquid short-term investments such as term deposits
with terms to maturity of less than one year.



Interest rate risk is the risk that the future
cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company is exposed to interest
rate risk arising primarily from fluctuations in interest rates on its cash and cash equivalents, long-term debt and other long-term
liability.



An increase or decrease in interest rates of
1% during the year ended December 31, 2016, with all other variables held constant, would result in a corresponding increase or
decrease on the Company's net income (loss) of approximately $250,000 (year ended December 31, 2015 - $20,000, seven months ended
December 31, 2014 - $4,000, year ended May 31, 2014 - $2,000). An increase in the crown company borrowing rate of 1% during the
year ended December 31, 2016, with all other variables held constant, would result in a corresponding increase or decrease on the
Company's net income (loss) of approximately $26,000 (December 31, 2015 - $49,000, seven months ended December 31, 2014 - $52,000,
year ended May 31, 2014 - $52,000).



103







FOREIGN EXCHANGE RISK



The Company’s primary currency of operations
is the Canadian dollar. Its wholly-owned operating subsidiaries primary currency of operations is the US dollar. The Company has
expenditures and holds investments denominated in US dollars.  During the year ended December 31, 2016, it is estimated that
approximately 70% of the Company’s expenditures were denominated in a foreign currency, primarily being the US dollar and
100% of the Company’s product revenues were denominated in the US dollar. To date the Company has not entered into any future
or forward contracts, or other derivative instruments, for either hedging or speculative purposes, to mitigate the impact of foreign
exchange fluctuations on these costs, revenues or on U.S. dollar denominated debt. A 10% change in foreign exchange rates for the
year ended December 31, 2016 would have impacted loss for the year by 10%.



ITEM 12. DESCRIPTION OF SECURITIES OTHER
THAN EQUITY SECURITIES



Not applicable



PART II



ITEM 13. DEFAULTS, DIVIDEND ARREARAGES
AND DELINQUENCIES



Not applicable



ITEM 14. MATERIAL MODIFICATIONS TO THE
RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS



Not applicable



ITEM 15. CONTROLS AND PROCEDURES



Disclosure Controls and Procedures



The Company’s disclosure controls and
procedures, as such term is defined in Rules 13(a)-13(e) and 15(d)-15(e) of the Exchange Act are designed to provide reasonable
assurance that all relevant information is communicated to senior management, including the Chief Executive Officer (“CEO”)
and the Chief Financial Officer (“CFO”), to allow timely decisions regarding required disclosure. We carried out an
evaluation, under the supervision and with the participation of our management, including our CEO and CFO. Based on this evaluation
these officers concluded that as of the end of the period covered by this Annual Report on Form 20-F, our disclosure controls and
procedures were not effective to ensure that the information required to be disclosed by our company in reports it files or submits
under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms
of the Securities and Exchange Commission. These disclosure controls and procedures include controls and procedures designed to
ensure that such information is accumulated and communicated to the Company’s management, including our company’s principal
executive officer and principal financial officer, to allow timely decisions regarding required disclosure. The conclusion that
the disclosure controls and procedures were not effective was due to the presence of a material weakness in internal control over
financial reporting as identified below under the heading “Internal Controls over Financial Reporting Procedures”.
Management anticipates that such disclosure controls and procedures will not be effective until the material weakness is remediated.



104







Management’s Annual Report on Internal
Control over Financial Reporting



The management of the Company, including the
CEO and CFO, is responsible for establishing and maintaining adequate internal controls over financial reporting (as defined in
Rule 13a-15(f) under the Exchange Act). The Company’s internal control system was designed to provide reasonable assurance
to the Company’s management and the board of directors regarding the reliability of financial reporting and preparation and
fair presentation of published financial statements for external purposes in accordance with IFRS. Internal control over financial
reporting includes those policies and procedures that:



| | 1. | pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the
transactions and dispositions of the assets of the Company;
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 2. | provide reasonable assurance that transactions are recorded as necessary to permit preparation
of financial statements in accordance with IFRS, and that receipts and expenditures of the Company are being made only in accordance
with authorizations of management and directors of the Company; and
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 3. | provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition,
use or disposition of the Company’s assets that could have a material effect on the financial statements.
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



All internal control systems, no matter how
well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable
assurance with respect to financial statement preparation and presentation. Because of its inherent limitations, internal control
over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods
are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with
the policies or procedures may deteriorate.



Under the supervision and with the participation
of our management, including our CEO and CFO, we conducted an evaluation of the design and operation of internal control over financial
reporting as of December 31, 2014, based on the framework set forth in Internal Control – Integrated Framework, issued by
the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on this evaluation, management concluded that
the Company’s ICFR was not effective as at December 31, 2016 due to the following material weaknesses:



Due to the limited number of staff with an
appropriate level of technical accounting knowledge, experience and training and the inability to attract outside expert advice
on a cost effective basis, there is a risk of material misstatements related to the accounting and reporting for complex transactions.
This control deficiency creates a reasonable possibility that a material misstatement of the annual financial statements would
not have been prevented or detected in a timely manner.



Attestation Report of the Registered
Public Accounting Firm



This Annual Report does not include an attestation
report of the Company's registered public accounting firm regarding internal control over financial reporting. Management's report
is not subject to attestation by the Company's registered public accounting firm pursuant to rules of the Securities and Exchange
Commission that permit the Company to provide only management's report in this Annual Report.



105







Changes in Internal Control over Financial
Reporting and Planned Remediation Activities



There have been no changes in the Company's
internal controls identified in connection with the evaluation described in the preceding paragraph that occurred during the period
covered by this Annual Report on Form 20-F which have materially affected, or are reasonably likely to materially affect,
the Company's internal controls over financial reporting.



No remediation activities have been undertaken
to date in fiscal 2016. Due to resource constraints and the present stage of the Company’s development the Company does not
have sufficient size and scale to warrant the hiring of additional staff to correct this material weakness at this time.



ITEM 16. RESERVED



Not applicable



ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT



As of December 31, 2016, Mr. Brent Fawkes CA,
a non-employee director, was a member of the audit committee of the Company. The board of directors of the Company has determined
that Mr. Fawkes (i) qualifies as an audit committee financial expert pursuant to Items 16A(b) and (c) of Form 20-F and (ii) is
independent as defined in section 803 of the NYSE MKT Company Guide and Rule 10A-3 of the Exchange Act. In addition, all members
of the audit committee are considered financially literate under applicable Canadian laws.



ITEM 16B. CODE OF ETHICS



On August
23, 2004, the Company adopted a written Code of Business Conduct and Ethics (“Code of Ethics”) that applies to the
Company’s principal executive officer, principal financial officer and to all its other employees. These standards are a
guide to help ensure that all of the Company’s employees live up to high ethical standards. A copy of the Code of Ethics
is maintained on the Company’s website at www.medicure.com.



During the most recently completed fiscal year,
the Company has neither: (a) amended its Code of Ethics; nor (b) granted any waiver (including any implicit waiver) form any provision
of its Code of Ethics.



ITEM 16C.
PRINCIPAL ACCOUNTANT FEES AND SERVICES.



In accordance
with the requirements of the Sarbanes-Oxley Act of 2002 and the Audit Committee’s charter, all audit and audit-related work
and all non-audit work performed by the chartered accountants, Ernst & Young LLP, is approved in advance by the Audit Committee,
including the proposed fees for such work. The Audit Committee is informed of each service actually rendered that was approved
through its pre-approval process.



The Company
incurred the following fees to Ernst & Young LLP for the previous two fiscal years. As at December 31, 2016, the Company had
accrued $150,000 relating to Ernst & Young LLP audit fees.



|(a)  Audit fees |  | 2016 |        |  | 2015 |  
|--------------- |  | ---- | ------ |  | ---- | -
|                |  | $    | 90,000 |  |      | $



Audit fees consist
of fees billed for the audit of the Company’s annual financial statements.



106







|(b)  Audit-related fees |  | 2016 |   |  | 2015 |  
|----------------------- |  | ---- | - |  | ---- | -
|                        |  | $    | - |  |      | $



Audit-related
fees consist of fees billed for accounting consultations.



|(c)  Tax fees |  | 2016 |   |  | 2015 |  
|------------- |  | ---- | - |  | ---- | -
|              |  | $    | - |  |      | $



|(d)  All other fees |  | 2016 |   |  | 2015 |  
|------------------- |  | ---- | - |  | ---- | -
|                    |  | $    | - |  |      | $



(e) Audit Committee’s Pre-approval Policies



All Ernst & Young LLP services and fees are approved by the
Audit Committee.



ITEM
16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES



Not
applicable



ITEM
16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS



In
the year ended December 31, 2016, the Company did not purchase any of its issued and outstanding Common Shares pursuant to any
repurchase program or otherwise.



ITEM
16F. CHANGE IN REGISTRANT'S CERTIFYING ACCOUNTANT



Not applicable.



ITEM
16G. CORPORATE GOVERNANCE



Not applicable.



ITEM
16H.MINE SAFETY DISCLOSURE



Not applicable.



PART III



ITEM 17. FINANCIAL STATEMENTS



Not applicable. See “Item 18 –
Financial Statements”.



ITEM 18. FINANCIAL STATEMENTS



The consolidated financial statements were
prepared in accordance with IFRS, as issued by the IASB, and are presented in Canadian dollars.



The consolidated financial statements are in
the following order:



| | 1. | Report of Independent Registered Public Accounting Firm;
| | -- | --------------------------------------------------------

| | 2. | Consolidated Statements of Financial Position;
| | -- | ----------------------------------------------

| | 3. | Consolidated Statements of Net Income (Loss) and Comprehensive Income (Loss);
| | -- | -----------------------------------------------------------------------------

| | 4. | Consolidated Statements of Changes in Deficiency
| | -- | ------------------------------------------------

| | 5. | Consolidated Statements of Cash Flows; and
| | -- | ------------------------------------------

| | 6. | Notes to Consolidated Financial Statements.
| | -- | -------------------------------------------



107











Consolidated Financial Statements

(Expressed in Canadian Dollars)



MEDICURE INC.



Year ended December 31, 2016



108







MANAGEMENT REPORT



The accompanying financial statements have
been prepared by management and approved by the Board of Directors of Medicure Inc. (the “Company”). Management is
responsible for the information and representations contained in these financial statements.



These financial statements have been prepared
in accordance with International Financial Reporting Standards. The significant accounting policies, which management believes
are appropriate for the Company, are described in note 3 to these financial statements. The Company maintains a system of internal
control and processes intended to provide reasonable assurance that assets are safeguarded and to ensure that relevant and reliable
financial information is produced.



The Board of Directors is responsible for reviewing
and approving these financial statements and overseeing management’s performance of its financial reporting responsibilities.
An Audit Committee of non-management Directors is appointed by the Board. The Audit Committee reviews the financial statements,
audit process and financial reporting with management and with the external auditors and reports to the Board of Directors prior
to the approval of the audited consolidated financial statements for publication.



Ernst & Young LLP, the Company’s
external auditors, who are appointed by the shareholders, audited the financial statements in accordance with Canadian generally
accepted auditing standards and the standards of the Public Company Accounting Oversight Board (United States) to enable them to
express to the shareholders their opinion on these financial statements. Their report follows.



|/s/ Albert Friesen      |  | /s/ James Kinley       
|----------------------- |  | -----------------------
|                        |  |                        
|Dr. Albert D. Friesen   |  | Mr. James F. Kinley CA 
|Chief Executive Officer |  | Chief Financial Officer
|                        |  |                        
|April 26, 2017          |  |                        



109







Independent auditors’ report



To the Shareholders of

Medicure Inc.



We have audited the accompanying consolidated
financial statements of Medicure Inc., which comprise the consolidated statements of financial position as at December 31,
2016, December 31, 2015, and December 31, 2014, and the consolidated statements of net income (loss) and comprehensive income (loss),
changes in equity (deficiency) and cash flows for the years ended December 31, 2016 and December 31, 2015, the seven-month period
ended December 31, 2014, and the twelve-month period ended May 31, 2014, and a summary of significant accounting policies and other
explanatory information.



Management’s responsibility for the consolidated financial
statements



Management is responsible for the preparation
and fair presentation of these consolidated financial statements in accordance with International Financial Reporting Standards
as issued by the International Accounting Standards Board, and for such internal control as management determines is necessary
to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or
error.



Auditors’ responsibility



Our responsibility is to express an opinion
on these consolidated financial statements based on our audits. We conducted our audits in accordance with Canadian generally accepted
auditing standards and the standards of the Public Company Accounting Oversight Board (United States). Those standards require
that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated
financial statements are free from material misstatement. We were not engaged to perform an audit of the Company’s internal
control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for
designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness
of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.



An audit involves performing procedures to
obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend
on the auditors’ judgment, including the assessment of the risks of material misstatement of the consolidated financial statements,
whether due to fraud or error. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures
in the consolidated financial statements, evaluating the appropriateness of accounting policies used and the reasonableness of
accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.



We believe that the audit evidence we have
obtained in our audits is sufficient and appropriate to provide a basis for our audit opinion.



Opinion



In our opinion, the consolidated financial
statements present fairly, in all material respects, the financial position of Medicure Inc.as at December 31, 2016, December
31, 2015, and December 31, 2014, and its financial performance and its cash flows for the years ended December 31, 2016 and December
31, 2015, the seven-month period ended December 31, 2014, and the twelve-month period ended May 31, 2014 in accordance with International
Financial Reporting Standards as issued by the International Accounting Standards Board.



|Winnipeg, Canada | 
|---------------- | 
|April 26, 2017   | 



See accompanying notes to the consolidated financial
statements



110







|                                             
|---------------------------------------------
|Consolidated Statements of Financial Position
|(expressed in Canadian dollars)              



|As at December 31                                 |  | Note    |  | 2016 |             |  | 2015 |   |            | 2014 | 
|------------------------------------------------- |  | ------- |  | ---- | ----------- |  | ---- | - | ---------- | ---- | 
|                                                  |  |         |  |      |             |  |      |   |            |      | 
|Assets                                            |  |         |  |      |             |  |      |   |            |      | 
|Current assets:                                   |  |         |  |      |             |  |      |   |            |      | 
|Cash and cash equivalents                         |  |         |  | $    | 12,266,177  |  |      | $ | 3,568,592  |      | 
|Cash held in escrow                               |  | 11(b)   |  |      | 12,809,072  |  |      |   | -          |      | 
|Accounts receivable                               |  | 5       |  |      | 17,200,778  |  |      |   | 9,823,616  |      | 
|Inventories                                       |  | 6       |  |      | 12,176,644  |  |      |   | 2,289,275  |      | 
|Prepaid expenses                                  |  | 17      |  |      | 759,077     |  |      |   | 1,767,071  |      | 
|Total current assets                              |  |         |  |      | 55,211,748  |  |      |   | 17,448,554 |      | 
|Non-current assets:                               |  |         |  |      |             |  |      |   |            |      | 
|Property and equipment                            |  | 7       |  |      | 10,300,639  |  |      |   | 230,162    |      | 
|Goodwill                                          |  | 4       |  |      | 47,485,572  |  |      |   | -          |      | 
|Intangible assets                                 |  | 8       |  |      | 100,864,817 |  |      |   | 1,411,992  |      | 
|Other assets                                      |  |         |  |      | 161,891     |  |      |   | -          |      | 
|Investment in Apicore                             |  | 4       |  |      | -           |  |      |   | 1,559,599  |      | 
|Long-term derivative                              |  | 4       |  |      | -           |  |      |   | 227,571    |      | 
|Deferred tax assets                               |  | 15      |  |      | 701,000     |  |      |   | 379,000    |      | 
|Total non-current assets                          |  |         |  |      | 159,513,919 |  |      |   | 3,808,324  |      | 
|Total assets                                      |  |         |  | $    | 214,725,667 |  |      | $ | 21,256,878 |      | 
|                                                  |  |         |  |      |             |  |      |   |            |      | 
|Liabilities and Equity                            |  |         |  |      |             |  |      |   |            |      | 
|Current liabilities:                              |  |         |  |      |             |  |      |   |            |      | 
|Short-term borrowings                             |  | 9       |  | $    | 1,383,864   |  |      | $ | -          |      | 
|Accounts payable and accrued liabilities          |  | 13 & 18 |  |      | 17,242,366  |  |      |   | 7,079,091  |      | 
|Current income taxes payable                      |  | 15      |  |      | 504,586     |  |      |   | -          |      | 
|Deferred revenue                                  |  |         |  |      | 1,161,608   |  |      |   | -          |      | 
|Current portion of finance lease obligation       |  | 10      |  |      | 89,241      |  |      |   | -          |      | 
|Current portion of long-term debt                 |  | 11      |  |      | 2,883,752   |  |      |   | 1,625,191  |      | 
|Current portion of royalty obligation             |  | 12      |  |      | 2,019,243   |  |      |   | 1,648,180  |      | 
|Derivative option on Apicore Class C shares       |  | 4       |  |      | 32,901,006  |  |      |   | -          |      | 
|Liability to repurchase Apicore Class E shares    |  | 4       |  |      | 2,700,101   |  |      |   | -          |      | 
|Total current liabilities                         |  |         |  |      | 60,885,767  |  |      |   | 10,352,462 |      | 
|Non-current liabilities                           |  |         |  |      |             |  |      |   |            |      | 
|Long-term debt                                    |  | 11      |  |      | 68,180,424  |  |      |   | 2,617,593  |      | 
|Finance lease obligation                          |  | 10      |  |      | 242,449     |  |      |   | -          |      | 
|Royalty obligation                                |  | 12      |  |      | 3,666,479   |  |      |   | 3,725,272  |      | 
|Due to vendor                                     |  | 4       |  |      | 2,759,507   |  |      |   | -          |      | 
|Fair value of Apicore Series A-1 preferred shares |  | 4       |  |      | 1,755,530   |  |      |   | -          |      | 
|Other long-term liability                         |  | 13      |  |      | 133,999     |  |      |   | 100,000    |      | 
|Deferred tax liabilities                          |  | 15      |  |      | 38,142,775  |  |      |   | -          |      | 
|Total non-current liabilities                     |  |         |  |      | 114,881,163 |  |      |   | 6,442,865  |      | 
|Total liabilities                                 |  |         |  |      | 175,766,930 |  |      |   | 16,795,327 |      | 



(Continued on next page)



See accompanying notes to the consolidated financial statements



111









|                                                         
|---------------------------------------------------------
|Consolidated Statements of Financial Position (continued)
|(expressed in Canadian dollars)                          







|As at December 31                                                     |  | Note                          |  | 2016 |             |   | 2015 |   |              | 2014 | 
|--------------------------------------------------------------------- |  | ----------------------------- |  | ---- | ----------- | - | ---- | - | ------------ | ---- | 
|Equity (Deficiency):                                                  |  |                               |  |      |             |   |      |   |              |      | 
|Share capital                                                         |  | 14(b)                         |  |      | 124,700,345 |   |      |   | 121,413,777  |      | 
|Warrants                                                              |  | 14(d)                         |  |      | 2,020,152   |   |      |   | 101,618      |      | 
|Contributed surplus                                                   |  |                               |  |      | 6,756,201   |   |      |   | 6,789,195    |      | 
|Accumulated other comprehensive income                                |  |                               |  |      | 681,992     |   |      |   | 1,104,388    |      | 
|Deficit                                                               |  |                               |  |      | (97,289,953 | ) |      |   | (124,947,427 | )    | 
|Total equity (deficiency) attributable to shareholders of the company |  |                               |  |      | 36,868,737  |   |      |   | 39,661,280   |      | 
|Non-controlling interest                                              |  |                               |  |      | 2,090,000   |   |      |   | -            |      | 
|Total equity (Deficiency)                                             |  |                               |  |      | 38,958,737  |   |      |   | 4,461,551    |      | 
|Commitments and contingencies                                         |  | 17                            |  |      |             |   |      |   |              |      | 
|Subsequent events                                                     |  | 4,11, 13, 14(c), 14(d), 17(a) |  |      |             |   |      |   |              |      | 
|Total liabilities and equity                                          |  |                               |  | $    | 214,725,667 |   |      | $ | 21,256,878   |      | 



On behalf of the board



|"Dr. Albert D. Friesen" |  | "Mr. Brent Fawkes"
|----------------------- |  | ------------------
|Director                |  | Director          



See accompanying notes
to the consolidated financial statements



112







|                                                                                                        
|--------------------------------------------------------------------------------------------------------
|Consolidated Statements of Net Income (Loss) and Comprehensive Income (Loss)                            
|(expressed in Canadian dollars)                                                                         
|Years ended December 31, 2016 and 2015, seven months ended December 31, 2014 and year ended May 31, 2014



|                                     |  | Note       |  | Year ended December 31, 2016 |             |   | Year  ended December 31, 2015 |   |            | Seven months ended December 31, 2014 |  |   | Year ended May 31,  2014 |  
|------------------------------------ |  | ---------- |  | ---------------------------- | ----------- | - | ----------------------------- | - | ---------- | ------------------------------------ |  | - | ------------------------ | -
|Revenue, net                         |  |            |  |                              |             |   |                               |   |            |                                      |  |   |                          |  
|AGGRASTAT®                           |  |            |  | $                            | 29,979,633  |   |                               | $ | 22,083,128 |                                      |  | $ | 5,264,395                |  
|Active Pharmaceutical Ingredients    |  |            |  |                              | 7,798,838   |   |                               |   | -          |                                      |  |   | -                        |  
|Total Revenue, net                   |  |            |  |                              | 37,778,471  |   |                               |   | 22,083,128 |                                      |  |   | 5,264,395                |  
|Cost of goods sold                   |  | 6 & 8      |  |                              | 9,769,265   |   |                               |   | 2,259,867  |                                      |  |   | 600,574                  |  
|Gross Profit                         |  |            |  |                              | 28,009,206  |   |                               |   | 19,823,261 |                                      |  |   | 4,663,821                |  
|                                     |  |            |  |                              |             |   |                               |   |            |                                      |  |   |                          |  
|Expenses                             |  |            |  |                              |             |   |                               |   |            |                                      |  |   |                          |  
|Selling, general and administrative  |  |            |  |                              | 16,233,276  |   |                               |   | 10,237,116 |                                      |  |   | 3,231,392                |  
|Research and development             |  |            |  |                              | 5,092,495   |   |                               |   | 4,865,255  |                                      |  |   | 783,130                  |  
|                                     |  |            |  |                              | 21,325,771  |   |                               |   | 15,102,371 |                                      |  |   | 4,014,522                |  
|Income (loss) before the undernoted  |  |            |  |                              | 6,683,435   |   |                               |   | 4,720,890  |                                      |  |   | 649,299                  |  
|                                     |  |            |  |                              |             |   |                               |   |            |                                      |  |   |                          |  
|Other expense (income):              |  |            |  |                              |             |   |                               |   |            |                                      |  |   |                          |  
|Revaluation of long-term derivative  |  | 4          |  |                              | (20,560,440 | ) |                               |   | (33,080    | )                                    |  |   | 81,431                   |  
|Gain on step acquisition             |  | 4          |  |                              | (4,895,573  | ) |                               |   | -          |                                      |  |   | -                        |  
|Reversal of impairment loss          |  | 8          |  |                              | -           |   |                               |   | (788,305   | )                                    |  |   | -                        |  
|Investment structuring services      |  | 4          |  |                              | -           |   |                               |   | -          |                                      |  |   | (1,385,099               | )
|Loss on settlement of debt           |  | 14(b)      |  |                              | -           |   |                               |   | 60,595     |                                      |  |   | -                        |  
|                                     |  |            |  |                              | (25,456,013 | ) |                               |   | (760,790   | )                                    |  |   | (1,303,668               | )
|                                     |  |            |  |                              |             |   |                               |   |            |                                      |  |   |                          |  
|Finance costs (income):              |  |            |  |                              |             |   |                               |   |            |                                      |  |   |                          |  
|Finance expense, net                 |  | 14(d) & 16 |  |                              | 3,416,678   |   |                               |   | 4,123,452  |                                      |  |   | 729,657                  |  
|Foreign exchange loss (gain), net    |  |            |  |                              | 262,469     |   |                               |   | 68,799     |                                      |  |   | 27,714                   |  
|                                     |  |            |  |                              | 3,679,147   |   |                               |   | 4,192,251  |                                      |  |   | 757,371                  |  
|Net income (loss) before taxes       |  |            |  | $                            | 28,460,301  |   |                               | $ | 1,289,429  |                                      |  | $ | 1,195,596                |  
|Income taxes (expense) recovery      |  |            |  |                              |             |   |                               |   |            |                                      |  |   |                          |  
|Current                              |  | 15         |  |                              | (501,315    | ) |                               |   | -          |                                      |  |   | -                        |  
|Deferred                             |  | 15         |  |                              | (301,512    | ) |                               |   | 379,000    |                                      |  |   | -                        |  
|Net income (loss)                    |  |            |  | $                            | 27,657,474  |   |                               | $ | 1,668,429  |                                      |  | $ | 1,195,596                |  
|Translation adjustment               |  |            |  |                              | (422,396    | ) |                               |   | 806,059    |                                      |  |   | 143,538                  |  
|Comprehensive income (loss)          |  |            |  | $                            | 27,235,078  |   |                               | $ | 2,474,488  |                                      |  | $ | 1,339,134                |  
|Earnings (loss) per share:           |  |            |  |                              |             |   |                               |   |            |                                      |  |   |                          |  
|Basic                                |  | 14(e)      |  | $                            | 1.84        |   |                               | $ | 0.12       |                                      |  | $ | 0.10                     |  
|Diluted                              |  | 14(e)      |  | $                            | 1.60        |   |                               | $ | 0.11       |                                      |  | $ | 0.09                     |  
|                                     |  |            |  |                              |             |   |                               |   |            |                                      |  |   |                          |  
|Weighted average shares outstanding: |  |            |  |                              |             |   |                               |   |            |                                      |  |   |                          |  
|Basic                                |  |            |  |                              | 15,002,005  |   |                               |   | 13,461,609 |                                      |  |   | 12,204,827               |  
|Diluted                              |  |            |  |                              | 17,316,401  |   |                               |   | 15,765,570 |                                      |  |   | 13,843,126               |  



See accompanying notes
to the consolidated financial statements



113







|                                                                                                        
|--------------------------------------------------------------------------------------------------------
|Consolidated Statements of Changes in Equity (Deficiency)                                               
|(expressed in Canadian dollars)                                                                         
|Years ended December 31, 2016 and 2015, seven months ended December 31, 2014 and year ended May 31, 2014



|                                                                    |  |       |  | Attributable to shareholders of the Company |             |  |          |   |           |                         | 
|------------------------------------------------------------------- |  | ----- |  | ------------------------------------------- | ----------- |  | -------- | - | --------- | ----------------------- | 
|                                                                    |  | Note  |  | Share
    Capital                           |             |  | Warrants |   |           | Contributed
    Surplus | 
|Balance, December 31, 2015                                          |  |       |  | $                                           | 121,413,777 |  |          | $ | 101,618   |                         | 
|Net income for the year ended
    December 31, 2016                 |  |       |  |                                             | -           |  |          |   | -         |                         | 
|Other comprehensive income for the year ended
    December 31, 2016 |  |       |  |                                             | -           |  |          |   | -         |                         | 
|Acquisition of non-controlling interests                            |  | 4     |  |                                             | -           |  |          |   | -         |                         | 
|                                                                    |  |       |  |                                             |             |  |          |   |           |                         | 
|Transactions with owners, recorded directly in
    equity           |  |       |  |                                             |             |  |          |   |           |                         | 
|Issuance of warrants                                                |  | 14(d) |  |                                             | -           |  |          |   | 1,948,805 |                         | 
|Stock options exercised                                             |  | 14(c) |  |                                             | 3,217,125   |  |          |   | -         |                         | 
|Warrants exercised                                                  |  | 14(d) |  |                                             | 69,443      |  |          |   | (30,271   | )                       | 
|Share-based
    compensation                                        |  | 14(c) |  |                                             | -           |  |          |   | -         |                         | 
|Total transactions with
owners                                      |  |       |  |                                             | 3,286,568   |  |          |   | 1,918,534 |                         | 
|Balance, December 31, 2016                                          |  |       |  | $                                           | 124,700,345 |  |          | $ | 2,020,152 |                         | 
|                                                                    |  |       |  |                                             |             |  |          |   |           |                         | 
|Balance, December 31, 2014                                          |  |       |  | $                                           | 117,045,763 |  |          | $ | -         |                         | 
|Net income for the year ended
    December 31, 2015                 |  |       |  |                                             | -           |  |          |   | -         |                         | 
|Other comprehensive income for the year ended
    December 31, 2015 |  |       |  |                                             | -           |  |          |   | -         |                         | 
|                                                                    |  |       |  |                                             |             |  |          |   |           |                         | 
|Transactions with owners, recorded directly in equity               |  |       |  |                                             |             |  |          |   |           |                         | 
|Issuance of common shares                                           |  | 14(b) |  |                                             | 4,021,782   |  |          |   | -         |                         | 
|Issuance of warrants                                                |  | 14(d) |  |                                             | -           |  |          |   | 232,571   |                         | 
|Stock options exercised                                             |  | 14(c) |  |                                             | 65,034      |  |          |   | -         |                         | 
|Warrants exercised                                                  |  | 14(d) |  |                                             | 281,198     |  |          |   | (130,953  | )                       | 
|Share-based compensation                                            |  | 14(c) |  |                                             | -           |  |          |   | -         |                         | 
|Total transactions with owners                                      |  |       |  |                                             | 4,368,014   |  |          |   | 101,618   |                         | 
|Balance, December 31, 2015                                          |  |       |  | $                                           | 121,413,777 |  |          | $ | 101,618   |                         | 



See accompanying notes to the consolidated financial
statements



114







|                                                                                                        
|--------------------------------------------------------------------------------------------------------
|Consolidated Statements of Changes in Equity (Deficiency) (continued)                                   
|(expressed in Canadian dollars)                                                                         
|Years ended December 31, 2016 and 2015, seven months ended December 31, 2014 and year ended May 31, 2014



|                                                                            |  |       |  | Attributable to shareholders of the Company |             |  |          |   |   |                         | 
|--------------------------------------------------------------------------- |  | ----- |  | ------------------------------------------- | ----------- |  | -------- | - | - | ----------------------- | 
|                                                                            |  | Note  |  | Share Capital                               |             |  | Warrants |   |   | Contributed
    Surplus | 
|Balance, May 31, 2014                                                       |  |       |  | $                                           | 117,036,672 |  |          | $ | - |                         | 
|Net income for the seven months ended December 31, 2014                     |  |       |  |                                             | -           |  |          |   | - |                         | 
|Other comprehensive income for the seven months ended December
    31, 2014 |  |       |  |                                             | -           |  |          |   | - |                         | 
|                                                                            |  |       |  |                                             |             |  |          |   |   |                         | 
|Transactions with owners, recorded directly in equity                       |  |       |  |                                             |             |  |          |   |   |                         | 
|Stock options exercised                                                     |  | 14(c) |  |                                             | 9,091       |  |          |   | - |                         | 
|Share-based compensation                                                    |  | 14(c) |  |                                             | -           |  |          |   | - |                         | 
|Total transactions with owners                                              |  |       |  |                                             | 9,091       |  |          |   | - |                         | 
|Balance, December 31, 2014                                                  |  |       |  | $                                           | 117,045,763 |  |          | $ | - |                         | 
|                                                                            |  |       |  |                                             |             |  |          |   |   |                         | 
|Balance, May 31, 2013                                                       |  |       |  | $                                           | 117,033,258 |  |          | $ | - |                         | 
|Net loss for the year ended May
    31, 2014                                |  |       |  |                                             | -           |  |          |   | - |                         | 
|Other comprehensive income for the year ended
    May 31, 2014              |  |       |  |                                             | -           |  |          |   | - |                         | 
|                                                                            |  |       |  |                                             |             |  |          |   |   |                         | 
|Transactions with owners, recorded directly in equity                       |  |       |  |                                             |             |  |          |   |   |                         | 
|Stock options exercised                                                     |  | 14(c) |  |                                             | 3,414       |  |          |   | - |                         | 
|Share-based compensation                                                    |  | 14(c) |  |                                             | -           |  |          |   | - |                         | 
|Total transactions with owners                                              |  |       |  |                                             | 3,414       |  |          |   | - |                         | 
|Balance, May 31, 2014                                                       |  |       |  | $                                           | 117,036,672 |  |          | $ | - |                         | 



See accompanying notes to the consolidated financial
statements



115







|                                                                                                        
|--------------------------------------------------------------------------------------------------------
|Consolidated Statements of Cash Flows                                                                   
|(expressed in Canadian dollars)                                                                         
|Years ended December 31, 2016 and 2015, seven months ended December 31, 2014 and year ended May 31, 2014



|                                                                                |  | Note  |  | Year ended December 31, 2016 |             |   | Year ended December 31, 2015 |   |            | Seven Months ended December 31,  2014 |  |   | Year ended May 31,  2014 |  
|------------------------------------------------------------------------------- |  | ----- |  | ---------------------------- | ----------- | - | ---------------------------- | - | ---------- | ------------------------------------- |  | - | ------------------------ | -
|                                                                                |  |       |  |                              |             |   |                              |   |            |                                       |  |   |                          |  
|Cash (used in) provided by:                                                     |  |       |  |                              |             |   |                              |   |            |                                       |  |   |                          |  
|Operating activities:                                                           |  |       |  |                              |             |   |                              |   |            |                                       |  |   |                          |  
|Net income (loss) for the period                                                |  |       |  | $                            | 27,657,474  |   |                              | $ | 1,668,429  |                                       |  | $ | 1,195,596                |  
|Adjustments for:                                                                |  |       |  |                              |             |   |                              |   |            |                                       |  |   |                          |  
|Income tax (expense) recovery                                                   |  | 15    |  |                              |             |   |                              |   |            |                                       |  |   |                          |  
|Current                                                                         |  |       |  |                              | 504,586     |   |                              |   | -          |                                       |  |   | -                        |  
|Future                                                                          |  |       |  |                              | 301,512     |   |                              |   | (379,000   | )                                     |  |   | -                        |  
|Reversal of impairment loss                                                     |  | 8     |  |                              | -           |   |                              |   | (788,305   | )                                     |  |   | -                        |  
|Investment structuring services                                                 |  |       |  |                              | -           |   |                              |   | -          |                                       |  |   | (1,552,771               | )
|Revaluation of derivative                                                       |  | 4     |  |                              | (20,560,440 | ) |                              |   | (33,080    | )                                     |  |   | 81,431                   |  
|Gain on step acquisition                                                        |  | 4     |  |                              | (4,895,573  | ) |                              |   | -          |                                       |  |   | -                        |  
|Loss on settlement of debt                                                      |  | 14(b) |  |                              | -           |   |                              |   | 60,595     |                                       |  |   | -                        |  
|Amortization of property and equipment                                          |  | 7     |  |                              | 189,008     |   |                              |   | 31,544     |                                       |  |   | 5,033                    |  
|Amortization of intangible assets                                               |  | 8     |  |                              | 2,192,024   |   |                              |   | 659,390    |                                       |  |   | 428,116                  |  
|Share-based compensation                                                        |  | 14(c) |  |                              | 1,400,241   |   |                              |   | 1,460,316  |                                       |  |   | 620,705                  |  
|Write-up (write-down) of inventory                                              |  | 6     |  |                              | (108,817    | ) |                              |   | 40,920     |                                       |  |   | (80,874                  | )
|Finance expense, net                                                            |  | 16    |  |                              | 3,416,678   |   |                              |   | 4,123,452  |                                       |  |   | 729,657                  |  
|Difference between fair value of other long-term liability and funding received |  | 11    |  |                              | -           |   |                              |   | 47,222     |                                       |  |   | -                        |  
|Unrealized foreign exchange (gain) loss                                         |  |       |  |                              | 215,386     |   |                              |   | 111,817    |                                       |  |   | (27,892                  | )
|Change in the following:                                                        |  |       |  |                              |             |   |                              |   |            |                                       |  |   |                          |  
|Accounts receivable                                                             |  |       |  |                              | (4,174,691  | ) |                              |   | (8,185,940 | )                                     |  |   | (690,074                 | )
|Inventories                                                                     |  |       |  |                              | 2,520,499   |   |                              |   | (1,230,619 | )                                     |  |   | (253,049                 | )
|Prepaid expenses                                                                |  |       |  |                              | 1,706,109   |   |                              |   | (1,124,095 | )                                     |  |   | (436,788                 | )
|Accounts payable and accrued liabilities                                        |  |       |  |                              | (531,576    | ) |                              |   | 4,637,217  |                                       |  |   | 639,573                  |  
|Deferred revenue                                                                |  |       |  |                              | (382,727    | ) |                              |   | -          |                                       |  |   | -                        |  
|Other long-term liability                                                       |  |       |  |                              | (102,828    | ) |                              |   | -          |                                       |  |   | -                        |  
|Interest paid                                                                   |  | 16    |  |                              | (1,223,664  | ) |                              |   | (314,300   | )                                     |  |   | (225,459                 | )
|Royalties paid                                                                  |  | 12    |  |                              | (1,712,390  | ) |                              |   | (642,768   | )                                     |  |   | (156,722                 | )
|Cash flows from operating activities                                            |  |       |  |                              | 6,410,811   |   |                              |   | 142,795    |                                       |  |   | 276,482                  |  
|Investing activities:                                                           |  |       |  |                              |             |   |                              |   |            |                                       |  |   |                          |  
|Acquisition of property and equipment                                           |  | 7     |  |                              | (464,208    | ) |                              |   | (226,570   | )                                     |  |   | (16,713                  | )
|Other assets                                                                    |  |       |  |                              | (1,229      | ) |                              |   | -          |                                       |  |   | -                        |  
|Acquisition of Apicore, net of cash acquired                                    |  | 4     |  |                              | (41,711,546 | ) |                              |   | -          |                                       |  |   | -                        |  
|Acquisition of intangible assets                                                |  | 8     |  |                              | -           |   |                              |   | -          |                                       |  |   | (7,206                   | )
|Cash flows used in investing activities                                         |  |       |  |                              | (42,176,983 | ) |                              |   | (226,570   | )                                     |  |   | (23,919                  | )



(Continued on next page)



See accompanying notes to the consolidated financial
statements



116







|                                                                                                        
|--------------------------------------------------------------------------------------------------------
|Consolidated Statements of Cash Flows (continued)                                                       
|(expressed in Canadian dollars)                                                                         
|Years ended December 31, 2016 and 2015, seven months ended December 31, 2014 and year ended May 31, 2014



|Financing activities:                                  |  |       |  |   |             |   |  |   |           |   |  |   |           |  |  |   |         | 
|------------------------------------------------------ |  | ----- |  | - | ----------- | - |  | - | --------- | - |  | - | --------- |  |  | - | ------- | 
|Issuance of common shares, net of share issue costs    |  | 14(b) |  |   | -           |   |  |   | 3,630,324 |   |  |   | -         |  |  |   | -       | 
|Exercise of stock options                              |  | 14(c) |  |   | 1,844,130   |   |  |   | 33,165    |   |  |   | 6,099     |  |  |   | 2,000   | 
|Exercise of warrants                                   |  | 14(b) |  |   | 39,172      |   |  |   | 150,245   |   |  |   | -         |  |  |   | -       | 
|Increase in cash held in escrow                        |  |       |  |   | (12,809,072 | ) |  |   | -         |   |  |   | -         |  |  |   | -       | 
|Issuance of long-term debt                             |  | 11    |  |   | 55,114,518  |   |  |   | -         |   |  |   | -         |  |  |   | -       | 
|Increase in short-term borrowings                      |  |       |  |   | 332,555     |   |  |   | -         |   |  |   | -         |  |  |   | -       | 
|Repayment of long-term debt                            |  | 11    |  |   | -           |   |  |   | (694,444  | ) |  |   | -         |  |  |   | -       | 
|Finance lease payments                                 |  | 10    |  |   | (10,463     | ) |  |   | -         |   |  |   | -         |  |  |   | -       | 
|Cash flows from financing activities                   |  |       |  |   | 44,510,840  |   |  |   | 3,119,290 |   |  |   | 6,099     |  |  |   | 2,000   | 
|Foreign exchange gain on cash held in foreign currency |  |       |  |   | (47,083     | ) |  |   | 39,208    |   |  |   | 910       |  |  |   | 315     | 
|Increase in cash                                       |  |       |  |   | 8,697,585   |   |  |   | 3,074,723 |   |  |   | 259,572   |  |  |   | 107,682 | 
|Cash, beginning of period                              |  |       |  |   | 3,568,592   |   |  |   | 493,869   |   |  |   | 234,297   |  |  |   | 126,615 | 
|Cash, end of period                                    |  |       |  | $ | 12,266,177  |   |  | $ | 3,568,592 |   |  | $ | 493,869   |  |  | $ | 234,297 | 
|                                                       |  |       |  |   |             |   |  |   |           |   |  |   |           |  |  |   |         | 
|Supplementary information:                             |  |       |  |   |             |   |  |   |           |   |  |   |           |  |  |   |         | 
|Non-cash investing activities                          |  |       |  |   |             |   |  |   |           |   |  |   |           |  |  |   |         | 
|Investment structuring services                        |  |       |  | $ | -           |   |  | $ | -         |   |  | $ | 1,552,711 |  |  | $ | -       | 
|Non-cash financing activities:                         |  |       |  |   |             |   |  |   |           |   |  |   |           |  |  |   |         | 
|Shares issued on debt settlement                       |  | 14(b) |  | $ | -           |   |  | $ | 624,029   |   |  | $ | -         |  |  | $ | -       | 
|Warrants issued as share issue costs                   |  | 14(b) |  | $ | 1,948,805   |   |  | $ | 232,571   |   |  | $ | -         |  |  | $ | -       | 



See accompanying notes to the consolidated financial
statements



117







|                                                                                                     
|-----------------------------------------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                                                       
|(expressed in Canadian dollars)                                                                      
|Years ended December 31, 2016 and 2015, seven months ended December 31, 2014, year ended May 31, 2014



| | 1. | Reporting entity
| | -- | ----------------



Medicure
Inc. (the "Company") is a company domiciled and incorporated in Canada and as of October 24, 2011, its Common Shares
are listed on the TSX Venture Exchange. Prior to October 24, 2011 and beginning on March 29, 2010, the Company's Common Shares
were listed on the NEX board of the TSX Venture Exchange. Prior to March 29, 2010, the Company's Common Shares were listed on the
Toronto Stock Exchange. Additionally, the Company's shares were listed on the American Stock Exchange (later called NYSE Amex and
now called NYSE MKT) on February 17, 2004 and the shares ceased trading on the NYSE Amex effective July 3, 2008. The Company remains
a U.S. Securities and Exchange Commission registrant. The address of the Company's registered office is 2-1250 Waverley Street,
Winnipeg, Manitoba, Canada. The Company is a biopharmaceutical company engaged in the research, development and commercialization
of human therapeutics. Through its subsidiary Medicure International, Inc., the Company has rights to the commercial product AGGRASTAT®
Injection (tirofiban hydrochloride) in the United States and its territories (Puerto Rico, U.S. Virgin Islands, and Guam). AGGRASTAT®,
a glycoprotein GP IIb/IIIa receptor antagonist, is used for the treatment of acute coronary syndrome including unstable angina,
which is characterized by chest pain when one is at rest, and non-Q-wave myocardial infarction. The Company’s ongoing research
and development activities include the development and further implementation of a new regulatory, brand and life cycle management
strategy for AGGRASTAT® and the development of additional generic cardiovascular products.



The Company, through its recently
acquired subsidiaries (Note 4) is also involved in the manufacturing, development, marketing, and selling of Active Pharmaceutical
Ingredients(“API”) to generic pharmaceutical customers and provides customs synthesis for early phase pharmaceutical
research of branded products. Through these subsidiaries, the Company also participates in collaborations with other parties in
the research and development stages of specific products.



| | 2. | Basis of preparation of financial statements:
| | -- | ---------------------------------------------



| | (a) | Statement of compliance
| | --- | -----------------------



These consolidated financial statements
of the Company and its subsidiaries were prepared in accordance with International Financial Reporting Standards ("IFRS")
as issued by the International Accounting Standards Board ("IASB").



The consolidated financial statements
were authorized for issue by the Board of Directors on April 26, 2017.



| | (b) | Basis of presentation
| | --- | ---------------------



The consolidated financial statements
have been prepared on the historical cost basis except for the following items:



| | · | Derivative
financial instruments are measured at fair value.
| | - | ------------------------------------------------------------



| | · | Liability
to repurchase Apicore Class E shares
| | - | ----------------------------------------------



| | · | Derivative
option on Apicore Class C shares
| | - | -------------------------------------------



| | · | Fair
value of Apicore Series A-1 preferred shares
| | - | -------------------------------------------------



| | · | Financial
instruments at fair value through profit and loss are measured at fair value.
| | - | ---------------------------------------------------------------------------------------



In December 2014, the Company received
approval from securities regulators to change its financial year end from May 31 to December 31. The change of year end enabled
the Company to align its year end with industry peers and with most other companies trading on the TSX Venture Exchange. The change
in year end results in the current and immediately preceding period reflecting twelve months of operations ending December 31,
2016 and 2015, while the next comparative period ended December 31, 2014 only reflects seven months of operations. An additional
comparable period reflects the twelve months ended May 31, 2014.



Certain of the comparative figures
have been reclassified to conform with the presentation in the current year.



| | (c) | Functional and presentation currency
| | --- | ------------------------------------



The consolidated financial statements
are presented in Canadian dollars, which is the Company's functional currency. All financial information presented has been rounded
to the nearest dollar except where indicated otherwise.



118









|                                                                                                     
|-----------------------------------------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                                                       
|(expressed in Canadian dollars)                                                                      
|Years ended December 31, 2016 and 2015, seven months ended December 31, 2014, year ended May 31, 2014





| | 2. | Basis of preparation of financial statements (continued):
| | -- | ---------------------------------------------------------



| | (d) | Use of estimates and judgments
| | --- | ------------------------------



The preparation of these consolidated
financial statements in conformity with IFRS requires management to make estimates and assumptions that affect the application
of accounting policies and the reported amounts of assets, liabilities, revenue and expenses. Actual results may differ from these
estimates.



Estimates and underlying assumptions
are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised
and in any future periods affected.



Areas where management has made critical
judgments in the process of applying accounting policies and that have the most significant effect on the amounts recognized in
the consolidated financial statements include the determination of the Company and its subsidiaries’ functional currency
and the determination of the Company's cash generating units ("CGU") for the purposes of impairment testing.



Information about key assumptions
and estimation uncertainties that have a significant risk of resulting in a material adjustment to the carrying amount of assets
and liabilities within the next financial year are included in the following notes:



| | · | Note
3(c)(ii): Valuation of the royalty obligation
| | - | --------------------------------------------------



| | · | Note
3(e): Provisions for returns, chargebacks and discounts
| | - | ------------------------------------------------------------



| | · | Note
3(g) The measurement and valuation of inventory
| | - | ----------------------------------------------------



| | · | Note
3(j): The measurement and period of use of intangible assets
| | - | -----------------------------------------------------------------



| | · | Note
3(k): The estimation of accruals for research and development costs
| | - | ------------------------------------------------------------------------



| | · | Note
3(p): The measurement of the amount and assessment of the recoverability of income tax assets
| | - | --------------------------------------------------------------------------------------------------



| | · | Note
4: Allocation of purchase consideration to the fair value of assets acquired and liabilities assumed.
| | - | ----------------------------------------------------------------------------------------------------------



| | · | Note
4: Valuation of acquired intangible assets.
| | - | ------------------------------------------------



| | · | Note
3(n)(ii): The assumptions and model used to estimate the value of share-based payment transactions and warrants
| | - | --------------------------------------------------------------------------------------------------------------------



| | 3. | Significant accounting policies:
| | -- | --------------------------------



The accounting policies set out
below have been applied consistently to all periods presented in these consolidated financial statements, unless otherwise indicated.



| | (a) | Basis of consolidation
| | --- | ----------------------



These consolidated financial statements
include the accounts of the Company and its subsidiaries. Subsidiaries are entities controlled by the Company. Control exists when
the Company has power over the investee, when the Company is exposed, or has the rights, to variable returns from the investee.
Subsidiaries are included in the consolidated financial results of the Company from the effective date of acquisition up to the
effective date of disposition or loss of control and include wholly owned subsidiaries, Medicure International Inc., Medicure Pharma
Inc., Medicure U.S.A. Inc. and Medicure Mauritius Limited. Additionally consolidated in these financial
statements from the date of acquisition (Note 4) are the accounts of subsidiaries which are controlled by the Company including,
Apicore Inc., Apicore US LLC., Apigen Investments Limited, Apicore LLC. And Apicore Pharmaceuticals Private Limited. The financial
statements of the subsidiaries are prepared for the same reporting period as the parent company, using consistent accounting policies.
All intercompany transactions and balances and unrealized gains and losses from intercompany transactions have been eliminated.



119









|                                                                                                     
|-----------------------------------------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                                                       
|(expressed in Canadian dollars)                                                                      
|Years ended December 31, 2016 and 2015, seven months ended December 31, 2014, year ended May 31, 2014



| | 3. | Significant accounting policies (continued):
| | -- | --------------------------------------------



| | (b) | Foreign currency
| | --- | ----------------



Items
included in the financial statements of each of the Company's consolidated subsidiaries are measured using the currency of the
primary economic environment in which the subsidiary operates (the functional currency). The consolidated financial statements
are presented inCanadian dollars, which is the Company's functional and presentation currency.



Foreign currency transactions are
translated into the respective functional currencies of the Company and its subsidiaries using the exchange rates prevailing at
the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the
translation at period-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognized in
profit and loss. Non-monetary items that are not carried at fair value are translated using the exchange rates as at the date of
the initial transaction. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates
at the date when the fair value is determined.



The results and financial position
of the Company's foreign operations that have a functional currency different from the Company’s functional and presentation
currency are translated into Canadian dollars as follows:



(i) assets and liabilities
of foreign operations are translated at the closing rate at the date of the consolidated statement of financial position;



(ii) revenue and expenses
of foreign operations for each year are translated at average exchange rates (unless this is not a reasonable approximation of
the cumulative effect of the rates prevailing on the transaction dates, in which case revenue and expenses are translated at the
dates of the transactions); and



(iii) all resulting exchange
differences for foreign operations are recognized in other comprehensive income (loss) in the cumulative translation account.



When a foreign operation is disposed
of, the component of other comprehensive income relating to that particular foreign operation is recognized in the consolidated
statements of net income, as part of the gain or loss on sale where applicable.



| | (c) | Financial instruments
| | --- | ---------------------



| | (i) | Financial assets
| | --- | ----------------



The Company initially recognizes
loans and receivables and deposits on the date that they are originated. All other financial assets are recognized initially on
the trade date at which the Company becomes a party to the contractual provisions of the instrument.



The Company derecognizes a financial
asset when the contractual rights to the cash flows from the asset expire, or it transfers the rights to receive the contractual
cash flows on the financial asset in a transaction in which substantially all the risks and rewards of ownership of the financial
asset are transferred.



Financial assets and liabilities
are offset and the net amount presented in the consolidated statements of financial position when, and only when, the Company has
a legal right to offset the amounts and intends either to settle on a net basis or to realize the asset and settle the liability
simultaneously.



The Company classifies non-derivative
financial assets into the following category: loans and receivables. The Company has not classified any assets or liabilities as
available-for-sale or designated any financial assets upon initial recognition as fair value through profit and loss.



Derivatives embedded in host contracts
are accounted for as separate derivatives and recorded at fair value if their economic characteristics and risks are not closely
related to those of the host contracts and the host contracts are not held-for-trading. These embedded derivatives are measured
at fair value with changes in fair value recognized in the consolidated statements of income. Reassessment only occurs if there
is a change in the terms of the contract that significantly modifies the cash flows that would otherwise be required.



120









|                                                                                                     
|-----------------------------------------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                                                       
|(expressed in Canadian dollars)                                                                      
|Years ended December 31, 2016 and 2015, seven months ended December 31, 2014, year ended May 31, 2014



| | 3. | Significant accounting policies (continued):
| | -- | --------------------------------------------



| | (c) | Financial instruments (continued)
| | --- | ---------------------------------



| | (i) | Financial assets (continued)
| | --- | ----------------------------



Loans and receivables



Loans and receivables are non-derivative
financial assets with fixed or determinable payments that are not quoted in an active market. Such assets are recognized initially
at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, loans and receivables are measured
at amortized cost using the effective interest method less any impairment. Loans and receivables are comprised of accounts receivable.



| | (ii) | Financial liabilities
| | ---- | ---------------------



The
Company has the following non-derivativefinancial liabilities which are classified as other financial liabilities: short-term
borrowings, accounts payable and accrued liabilities, income taxes payable, deferred revenue, finance lease obligations and long-term
debt.



All other financial liabilities
are recognized initially on the trade date at which the Company becomes a party to the contractual provisions of the instrument.
Such financial liabilities are recognized initially at fair value plus any directly attributable transaction costs. Subsequent
to initial recognition, these financial liabilities are measured at amortized cost using the effective interest method. Costs incurred
to obtain financing are deferred and amortized over the term of the associated debt using the effective interest rate method. Amortization
is a non-cash charge to finance expense.



The Company derecognizes a financial
liability when its contractual obligations are discharged or cancelled, or when they expire.



The royalty obligation was recorded
at its fair value at the date at which the liability was incurred and subsequently measured at amortized cost using the effective
interest rate method at each reporting date. Estimating fair value for this liability required determining the most appropriate
valuation model which is dependent on its underlying terms and conditions. This estimate also requires determining expected revenue
from AGGRASTAT® sales and an appropriate discount rate and making assumptions about them.



The other long-term liability was
recorded at its fair value at the date at which the liability was incurred and subsequently measured at amortized cost using the
effective interest rate method at each reporting date. Estimating fair value for this liability requires determining the most appropriate
valuation model which is dependent on its underlying terms and conditions. This estimate also requires determining the time frame
when certain sales targets are expected to be met and an appropriate discount rate and making assumptions about them.



Warrants with an exercise price
denominated in a foreign currency are recorded as a liability and classified as fair value through profit and loss. The warrant
liability was included within accounts payable and accrued liabilities and the change in the fair value of the warrants was recorded
as a gain or loss in the consolidated statement of net income and comprehensive income within finance expense. These warrants have
not been listed on an exchange and therefore do not trade on an active market.



The warrant liability was recorded
at the fair value of the warrants at the date at which they were granted and subsequently revalued at each reporting date. Estimating
fair value for these warrants required determining the most appropriate valuation model which is dependent on the terms and conditions
of the grant. This estimate also required determining the most appropriate inputs to the valuation model including the expected
life of the warrants, volatility and dividend yield and making assumptions about them. These warrants expired, unexercised, on
December 31, 2016.



The liability to repurchase Apicore
Class E shares was recorded at its fair value based on the fixed price of the employees’s put option net of the option’s
exercise price.



The derivative option on Apicore
Class C shares was recorded at the fixed purchase price in accordance with the terms and conditions of the grant.



121









|                                                                                                     
|-----------------------------------------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                                                       
|(expressed in Canadian dollars)                                                                      
|Years ended December 31, 2016 and 2015, seven months ended December 31, 2014, year ended May 31, 2014



| | 3. | Significant accounting policies (continued):
| | -- | --------------------------------------------



| | (c) | Financial instruments (continued)
| | --- | ---------------------------------



| | (ii) | Financial liabilities (continued)
| | ---- | ---------------------------------



The Apicore Series A-1 preferred
shares were valued at their fair value in relation to the valuation of Apicore conducted to value the Company’s business
combination.



Estimating fair value required
using the most appropriate valuation model which is dependent on management’s assumptions on future cash flows and an appropriate
discount rate.



| | (d) | Impairment of financial assets
| | --- | ------------------------------



At each reporting date, the Company
assesses whether there is objective evidence that a financial asset or a group of financial assets is impaired. If such evidence
exists, the Company recognizes an impairment loss for financial assets carried at amortized cost. The loss is the difference between
the amortized cost of the loan or receivable and the present value of the estimated future cash flows, discounted using the instrument’s
original effective interest rate. The carrying amount of the asset is reduced by this amount through the use of an allowance account
and the amount of the loss is recognized in profit and loss.



Impairment losses on financial assets
carried at amortized cost are reversed in subsequent periods if the amount of the loss decreases and the decrease can be related
objectively to an event occurring after the impairment was recognized.



| | (e) | Revenue recognition
| | --- | -------------------



Revenuefrom the sale of AGGRASTAT® generally comprises finished commercial product, in the course of ordinary activities, is
measured at the fair value of the consideration received or receivable, net of estimated returns, chargebacks, trade discounts
and volume rebates. Revenue is recognized when persuasive evidence exists, usually in the form of an executed sales agreement,
that the significant risks and rewards of ownership have been transferred to the buyer, recovery of the consideration is probable,
the associated costs and possible return of goods can be estimated reliably, there is no continuing management involvement with
the goods, and the amount of revenue can be measured reliably. If it is probable that discounts will be granted and the amount
can be measured reliably, then the discount is recognized as a reduction of revenue as the sales are recognized.



Revenue from the sale of APIs, in
the course of ordinary activities is measured at the fair value of the consideration received or receivable, net of estimated returns,
trade discounts and volume rebates, if any. Revenue is recognized when persuasive evidence exists, usually
upon shipment of the product, that the significant risks and rewards of ownership have been transferred to the buyer, recovery
of the consideration is probable, the associated costs and possible return of goods can be estimated reliably, there is no continuing
management involvement with the goods, and the amount of revenue can be measured reliably. If it is probable that discounts will
be granted and the amount can be measured reliably, then the discount is recognized as a reduction of revenue as the sales are
recognized.



The Company may enter into collaboration
agreements for product development for its APIs and product pipeline. The terms of the agreements may include nonrefundablesigning fees, milestone payments and profit sharing arrangements on any profits derived from product sales fromthesecollaborations. These multiple element arrangements are analyzed to determine whether the deliverables can beseparated or whether they must be accounted for as a single unit of accounting. Up-front fees are recognized asrevenue when persuasive evidence of an arrangement exists, the fee is fixed or determinable, delivery orperformance has been substantially completed and collection is reasonably assured. If there are no substantiveperformance obligations over the life of the contract, the up-front non-refundable payment is recognized when theunderlying performance obligation is satisfied. If substantive contractual obligations are satisfied over time or overthe life of the contract, revenue may be deferred and recognized over the performance. The term over which upfrontfees are recognized is revised if the period over which the Company maintains substantive contractual obligationschanges.



Milestone payments are recognized
as revenue when the condition is met, if the milestone isnot a condition to future deliverables
and collectability is reasonably assured. Otherwise, they are recognized overthe remaining term
of the agreement or the performance period.



122









|                                                                                                     
|-----------------------------------------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                                                       
|(expressed in Canadian dollars)                                                                      
|Years ended December 31, 2016 and 2015, seven months ended December 31, 2014, year ended May 31, 2014



| | 3. | Significant accounting policies (continued):
| | -- | --------------------------------------------



| | (f) | Cash equivalents
| | --- | ----------------



The Company considers all liquid investments purchased
with a maturity of three months or less at acquisition to be cash and cash equivalents, which are carried at amortized cost and
are classified as loans and receivables.



| | (g) | Inventories
| | --- | -----------



AGGRASTAT®inventories consist of unfinished product (raw materials in the formof API) and finished commercial
product which are available for sale and are measured at the lower of cost and net realizable value.



AGGRASTAT®
pre-launch inventory represents inventory for which regulatory approval is being sought, but has not
yet been received and therefore is not available for sale. Pre-launch inventory is capitalized when the likelihood of obtaining
regulatory approval is high. Should the likelihood of obtaining regulatory approval decline, any capitalized costs will be written-off
in cost of goods sold. If regulatory approval is subsequently obtained, any write-down would be reversed, to the extent that the
assigned cost is realizable.



Additionally, inventory includes
raw materials, work in process and finished goods (APIs) which are manufactured and sold within the Apicore business and are measured
at the lower of cost and net realizable value.



The cost of inventories is based
on the first-in first-out principle, and includes expenditures incurred in acquiring the inventories, production or conversion
costs and other costs incurred in bringing them to their existing location and condition.



Inventories are written down to net
realizable value when the cost of inventories is estimated to be unrecoverable due to obsolescence, damage, or declining selling
prices.  Net realizable value is the estimated selling price in the ordinary course of business, less the estimated costs
of completion and selling expenses. When the circumstances that previously caused inventories to be written down below cost no
longer exist, or when there is clear evidence of an increase in selling prices, the amount of the write-down previously recorded
is reversed.



| | (h) | Property and equipment
| | --- | ----------------------



| | (i) | Recognition and measurement
| | --- | ---------------------------



Items of property and equipment
are measured at cost less accumulated amortization and accumulated impairment losses. When parts of an item of property and equipment
have different useful lives, they are accounted for as separate items (major components) of property and equipment. The costs of
the day-to-day servicing of property and equipment are recognized in the consolidated statements of net income and comprehensive
income in the period in which they are incurred.



| | (ii) | Amortization
| | ---- | ------------



Amortization is recognized in profit
or loss over the estimated useful lives of each part of an item of property and equipment in a manner which most closely reflects
the expected pattern of consumption of the future economic benefits embodied in the asset. The estimated useful lives for the current
and comparative periods are as follows:



|Asset                                               |               | Basis                             |            | Rate         
|--------------------------------------------------- | ------------- | --------------------------------- | ---------- | -------------
|Buildings                                           |               | Straight-line                     |            | 3% to 4%     
|Computers, office equipment, furniture and fixtures |               | Straight-line/Diminishing balance |            | 20 to 25%    
|Machinery and equipment                             | Straight-line |                                   | 20% to 25%
|Leasehold improvements                              |               | Straight-line                     |            | Term of lease



Amortization methods, useful lives
and residual values are reviewed at each period end and adjusted if appropriate.



123









|                                                                                                     
|-----------------------------------------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                                                       
|(expressed in Canadian dollars)                                                                      
|Years ended December 31, 2016 and 2015, seven months ended December 31, 2014, year ended May 31, 2014



| | 3. | Significant accounting policies (continued):
| | -- | --------------------------------------------



| | (i) | Leases
| | --- | ------



The determination of whether an arrangement
is a lease is based on the substance of the arrangement at the inception of the lease. The arrangement is, or contains, a lease
if fulfillment of the arrangement is dependent on the use of specific assets and the arrangement conveys a right to use the assets,
even if those assets are not explicitly specified in an arrangement.



A lease is classified at inception
date as a finance or operating lease. A lease that transfers substantially all the risks and rewards incidental to ownership to
the Company is classified as a finance lease.



Finance leases are capitalized at
the commencement of the lease at the inception date fair value of the leased property or, if lower, at the present value of the
minimum lease payments. Lease payments are apportioned between finance expense and reduction of the lease liability so as to achieve
a constant rate of interest on the remaining balance of the liability. Finance charges are recognized in finance costs in the statement
of Net Income (loss) and Comprehensive income (loss).



Leased assets are depreciated over
the useful life of each asset. However, if there is no reasonable certainty that the Company will obtain ownership by the end of
the lease term, the asset is depreciated over the shorter of the estimated useful life of the asset and the lease term.



An operating lease is a lease other
than a finance lease. Operating lease payments are recognized as an operating expense in the statement of net income (loss) on
a straight-line basis over the lease term.



| | (j) | Intangible assets
| | --- | -----------------



Intangible
assets that areacquired separately are measured at cost less accumulated amortization and accumulated impairment losses.
The cost of intangible assets acquired in a business combination is their fair value at the date of acquisition. Subsequent expenditures
are capitalized only when they increase the future economic benefits embodied in the specific asset to which they relate. All other
expenditures are recognized in profit or loss as incurred.



The cost of intangible assets acquired
in a business combination is its fair value at the date of acquisition. Patents are amortized on a straight-line basis over the
legal life of the respective patent, ranging from five to twenty years, or its economic life, if shorter. Trademarks are amortized
on a straight-line basis over the legal life of the respective trademark, being ten years, or its economic life, if shorter. Customer
lists are amortized on a straight-line basis over approximately twelve years, or its economic life,
if shorter.



Following initial recognition,
intangible assets are carried at cost less accumulated amortization and accumulated impairment losses. The cost of servicing the
Company's patents and trademarks are expensed as incurred.



The amortization method and amortization
period of an intangible asset with a finite useful life are reviewed at least annually. Changes in the expected useful life or
the expected pattern of consumption of future economic benefits embodied in the asset are accounted for by changing the amortization
period or method, as appropriate, and ae treated as changes in accounting estimates in the consolidated statements of income.



| | (k) | Research and development
| | --- | ------------------------



Expenditure on research activities,
undertaken with the prospect of gaining new scientific or technical knowledge and understanding, is recognized in profit or loss
as incurred.



Development activities involve
a plan or design for the production of new or substantially improved products and processes. Development expenditures are capitalized
only if development costs can be measured reliably, the product or process is technically and commercially feasible, future economic
benefits are probable, and the Company intends to and has sufficient resources to complete development and to use or sell the asset.
No development costs have been capitalized to date.



Research and development expenses
include all direct and indirect operating expenses supporting the products in development.



124









|                                                                                                     
|-----------------------------------------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                                                       
|(expressed in Canadian dollars)                                                                      
|Years ended December 31, 2016 and 2015, seven months ended December 31, 2014, year ended May 31, 2014



| | 3. | Significant accounting policies (continued):
| | -- | --------------------------------------------



| | (k) | Research and development (continued)
| | --- | ------------------------------------



Clinical trial expenses are a component
of the Company’s research and development costs. These expenses include fees paid to contract research organizations, clinical
sites, and other organizations who conduct research and development activities on the Company’s behalf. The amount of clinical
trial expenses recognized in a period related to clinical agreements are based on estimates of the work performed using an accrual
basis of accounting. These estimates incorporate factors such as patient enrolment, services provided, contractual terms, and prior
experience with similar contracts.



| | (l) | Government assistance
| | --- | ---------------------



Government assistance is recognized
at fair value where there is reasonable assurance that the grant will be received and all attaching conditions will be complied
with. Government assistance toward current expenses is recorded as a reduction of the related expenses in the period the expenses
are incurred. Government assistance towards property and equipment is deducted from the cost of the related property and equipment.
The benefits of investment tax credits for scientific research and experimental development expenditures ("SR&ED")
incurred directly by the Company are recognized in the period the qualifying expenditure is made, providing there is reasonable
assurance of recoverability. SR&ED investment tax credits receivable are recorded at their net realizable value.



| | (m) | Impairment of non-financial assets
| | --- | ----------------------------------



The Company assesses at each reporting
period whether there is an indication that a non-financial asset may be impaired. An impairment loss is recognized when the carrying
amount of an asset, or its CGU, exceeds its recoverable amount. Impairment losses are recognized in net income and comprehensive
income and included in research and development expense if they relate to patents. A CGU is the smallest identifiable group of
assets that generates cash inflows that are largely independent of the cash inflows from other assets or groups of assets. The
recoverable amount is the greater of the asset's or CGU's fair value less costs to sell and value in use. In assessing value in
use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current
market assessments of the time value of money and the risks specific to the asset or CGU. In determining fair value less cost to
sell, an appropriate valuation model is used. For an asset that does not generate largely independent cash inflows, the recoverable
amount is determined for the CGU to which the asset belongs.



For assets other than goodwill impairment
losses recognized in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer
exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An
impairment loss is reversed only to the extent that the asset's carrying amount does not exceed the carrying amount that would
have been determined, net of amortization, if no impairment loss had been recognized.



Goodwill is tested for impairment
annually as at November 30, 2016 and when circumstances indicate that the carrying value may be impaired. Impairment is determined
for goodwill by assessing the recoverable amount of each CGU to which the goodwill relates. When the recoverable amount of the
CGU is less that its carrying amount, an impairment loss is recognized. Impairment losses relating to goodwill cannot be reversed
in future periods.



125









|                                                                                                     
|-----------------------------------------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                                                       
|(expressed in Canadian dollars)                                                                      
|Years ended December 31, 2016 and 2015, seven months ended December 31, 2014, year ended May 31, 2014



| | 3. | Significant accounting policies (continued):
| | -- | --------------------------------------------



| | (n) | Employee benefits
| | --- | -----------------



| | (i) | Short-term employee benefits
| | --- | ----------------------------



Short-term employee benefit obligations
are measured on an undiscounted basis and are expensed as the related service is provided.



| | (ii) | Share-based payment transactions
| | ---- | --------------------------------



The grant date fair value of share-based
payment awards granted to employees is recognized as a personnel expense, with a corresponding increase in equity, over the period
that the employees unconditionally become entitled to the awards. The amount recognized as an expense is adjusted to reflect the
number of awards for which the related service and non-market vesting conditions are expected to be met, such that the amount ultimately
recognized as an expense is based on the number of awards that do meet the related service and non-market performance conditions
at the vesting date. For share-based payment awards with non-vesting conditions, the grant date fair value of the share-based payment
is measured to reflect such conditions and there is no true-up for differences between expected and actual outcomes.



Share-based payment arrangements
in which the Company receives goods or services as consideration for its own equity instruments are accounted for as equity-settled
share-based payment transactions. In situations where equity instruments are issued and some or all of the goods or services received
by the entity as consideration cannot be specifically identified, they are measured at fair value of the share-based payment.



For share-based payment arrangements
with non-employees, the expense is recorded over the service period until the options vest. Once the options vest, services are
deemed to have been received.



Where the terms of an equity-settled
transaction award are modified, the minimum expense recognized is the expense as if the terms had not been modified, if the original
terms of the award are met. An additional expense is recognized for any modification that increases the total fair value of the
share-based payment transaction, or is otherwise beneficial to the employee as measured at the date of modification.



Where an equity-settled award is
cancelled, it is treated as if it vested on the date of the cancellation and any expense not yet recognized for the award [being
the total expense as calculated at the grant date] is recognized immediately. This includes any awards where vesting conditions
within the control of either the Company or the employee are not met. However, if a new award is substituted for the cancelled
award, and designated as a replacement award on the date that it is granted, the cancelled award and new awards are treated as
if they were a modification of the original



| | (o) | Finance income and finance costs
| | --- | --------------------------------



Finance costs comprise interest expense
on borrowings which are recognized in net income (loss) using the effective interest method, changes in the fair value of the warrant
liability, accretion on the royalty obligation and amortization of deferred debt issue costs using the effective interest rate
method, offset by any finance income which is comprised of interest income on funds invested which is recognized as it accrues
in net income (loss), using the effective interest method rate.



Foreign currency gains and losses
are reported on a net basis.



| | (p) | Income taxes
| | --- | ------------



The Company and its subsidiaries
are generally taxable under the statutes of their country of incorporation.



Income tax expense comprises current
and deferred taxes. Current taxes and deferred taxes are recognized in profit or loss except to the extent that it relates to a
business combination, or items recognized directly in equity or in other comprehensive income (loss).



Current taxes are the expected tax
receivable or payable on the taxable income or loss for the year, using tax rates enacted or substantively enacted at the reporting
date, and any adjustment to tax receivable or payable in respect of previous years.



126









|                                                                                                     
|-----------------------------------------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                                                       
|(expressed in Canadian dollars)                                                                      
|Years ended December 31, 2016 and 2015, seven months ended December 31, 2014, year ended May 31, 2014



| | 3. | Significant accounting policies (continued):
| | -- | --------------------------------------------



| | (p) | Income taxes (continued)
| | --- | ------------------------



The Company follows the liability
method of accounting for deferred taxes. Under this method, deferred taxes are recognized in respect of temporary differences between
the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred
taxes are not recognized for the following temporary differences: the initial recognition of assets or liabilities in a transaction
that is not a business combination and that affects neither accounting nor taxable profit or loss, and differences relating to
investments in subsidiaries and jointly controlled entities to the extent that it is probable that they will not reverse in the
foreseeable future. In addition, deferred taxes are not recognized for taxable temporary differences arising on the initial recognition
of goodwill. Deferred taxes are measured at the tax rates that are expected to be applied to temporary differences when they reverse,
based on the tax laws that have been enacted or substantively enacted by the reporting date. Deferred tax assets and liabilities
are offset if there is a legally enforceable right to offset current tax assets and liabilities, and they relate to income taxes
levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax
assets and liabilities on a net basis or their tax assets and liabilities will be realized simultaneously.



A deferred tax asset is recognized
for unused tax losses, tax credits and deductible temporary differences, to the extent that it is probable that future taxable
profits will be available against which they can be utilized. Deferred tax assets are reviewed at each reporting date and are reduced
to the extent that it is no longer probable that the related tax benefit will be realized.



Tax benefits acquired as part of
a business combination, but not satisfying the criteria for separate recognition at that date, would be recognized subsequently
if information about facts and circumstances changed. The adjustment would either be treated as a reduction to goodwill if it occurred
during the measurement period or in profit or loss, when it occurs subsequent to the measurement period.



| | (q) | Earnings per share
| | --- | ------------------



The Company presents basic earnings
per share ("EPS") data for its common voting shares. Basic EPS is calculated by dividing the profit or loss attributable
to common voting shareholders of the Company by the weighted average number of common voting shares outstanding during the period,
adjusted for the Company's own shares held. Diluted EPS is computed similar to basic EPS except that the weighted average shares
outstanding are increased to include additional shares for the assumed exercise of stock options and warrants, if dilutive. The
number of additional shares is calculated by assuming that outstanding stock options and warrants were exercised and that the proceeds
from such exercise were used to acquire common shares at the average market price during the reporting periods.



| | (r) | Business combinations and goodwill
| | --- | ----------------------------------



Business combinations are accounted
for using the acquisition method. The consideration for an acquisition is measured at the fair values of the assets transferred,
the liabilities assumed and the equity interests issued at the acquisition date. Transaction costs that are incurred in connection
with a business combination, other than costs associated with the issuance of debt or equity securities, are expensed as incurred.
Identified assets acquired and liabilities and contingent liabilities assumed are measured initially at fair values at the date
of acquisition. On an acquisition-by-acquisition basis, any non-controlling interest is measured either at fair value of the non-controlling
interest or at the fair value of the proportionate share of the net assets acquired.



Contingent consideration is measured
at fair value on acquisition date and is included as part of the consideration transferred. The fair value of the contingent consideration
liability is remeasured at each reporting date with the corresponding gain or loss being recognized in earnings.



Goodwill is initially measured at
cost, being the excess of fair value of the cost of the business combinations over the Company’s share in the net fair value
of the acquiree’s identifiable assets, liabilities and contingent liabilities. Any negative difference is recognized directly
in the consolidated statements of income. If the fair values of the assets, liabilities and contingent liabilities can only be
calculated on a provisional basis, the business combination is recognized using provisional values. Any adjustments resulting from
the completion of the measurement process are recognized within 12 months of the date of the acquisition.



127









|                                                                                                     
|-----------------------------------------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                                                       
|(expressed in Canadian dollars)                                                                      
|Years ended December 31, 2016 and 2015, seven months ended December 31, 2014, year ended May 31, 2014



| | 3. | Significant accounting policies (continued):
| | -- | --------------------------------------------



| | (s) | New standards and interpretations not yet adopted
| | --- | -------------------------------------------------



IFRS 9 Financial Instruments:
Classification and Measurement ("IFRS 9")



IFRS 9 replaces the guidance in IAS
39, Financial Instruments: Recognition and Measurement, and brings together the classification and measurement, impairment
and hedge accounting phases of the IASB’s project. The standard eliminates the existing IAS 39 categories of held-to-maturity,
available-for-sale and loans and receivables.



Financial assets will be classified into one of two categories
on initial recognition:



| | · | financial
assets measured at amortized cost; or
| | - | -----------------------------------------------



| | · | financial
assets measured at fair value.
| | - | ----------------------------------------



Under IFRS 9, for financial liabilities
measured at fair value under the fair value option, changes in fair value attributable to changes in credit risk will be recognized
in other comprehensive income, with the remainder of the change recognized in profit and loss. IFRS 9 is effective for annual periods
beginning on or after January 1, 2018 and is to be applied retrospectively with some exemptions. The Company is currently evaluating
the impact of the above standard on its financial statements.



IFRS 15 Revenue from Contracts
with Customers ("IFRS 15")



IFRS 15, issued by the IASB in May
2014, is applicable to all revenue contracts and provides a model for the recognition and measurement of gains or losses from sales
of some non-financial assets. The core principle is that revenue is recognized to depict the transfer of promised goods or services
to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods
or services. The standard will also result in enhanced disclosures about revenue, provide guidance for transactions that were not
previously addressed comprehensively (for example, service revenue and contract modifications) and improve guidance for multiple-element
arrangements. IFRS 15 is effective for annual periods beginning on or after January 1, 2018, and is to be applied retrospectively,
with earlier adoption permitted. Entities will transition following either a full or modified retrospective approach. The Company
is currently evaluating the impact of the above standard on its financial statements.



IFRS 16, Leases ("IFRS
16")



In January 2016, the IASB issued
IFRS 16 which requires lessees to recognize assets and liabilities for most leases. Lessees will have a single accounting model
for all leases, with certain exemptions. The new standard is effective January 1, 2019, with limited early application permitted.
The new standard permits lessees to use either a full retrospective or a modified retrospective approach on transition for leases
existing at the date of transition, with options to use certain transition reliefs. The Company is currently evaluating the impact
of the above amendments on its financial statements.



IAS 7, Statements of Cash Flows(“IAS 7”)



Amendments to IAS 7 require entities
to provide disclosures that enable users of financial statements to evaluate changes in liabilities arising from financing activities,
including both changes arising from cash flows and non-cash changes. The application of the standard does not require disclosure
for comparative periods. The new standard is effective for annual periods beginning on or after January 1, 2017 with early application
permitted. The Company is currently evaluating the impact of the above amendments on its financial statements.



IFRS 2, Share-based Payment



In June 2016, the IASB issued amendments
to IFRS 2, Share-based Payment, clarifying how to account for certain types of share-based payment transactions. The amendments
will apply on after January 1, 2018 for the Company. The Company is currently evaluating the impact of the amendments to IFRS 2
on its consolidated financial statements.



128









|                                                                                                     
|-----------------------------------------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                                                       
|(expressed in Canadian dollars)                                                                      
|Years ended December 31, 2016 and 2015, seven months ended December 31, 2014, year ended May 31, 2014



| | 3. | Significant accounting policies (continued):
| | -- | --------------------------------------------



| | (s) | New standards and interpretations not yet adopted
(continued)
| | --- | -------------------------------------------------------------



IAS 12, Recognition of Deferred
Tax Assets for Unrealized Losses(“IAS 12”)



Amendments to IAS 12 require entities
to consider whether tax law restricts the sources of taxable profits against which it may make deductions on the reversal of that
deductible temporary difference. Additional guidance is provided on estimation of future taxable profits and the circumstances
in which taxable profit may reduce the recovery of some assets for more than their carrying amount. The new standard is effective
for annual periods beginning on or after January 1, 2017 to be applied retrospectively. Early adoption of the standard is permitted.
The Company is currently evaluating the impact of the above amendments on its financial statements.



| | 4. | Business combinations:
| | -- | ----------------------



On July 3, 2014, the Company entered
into an arrangement whereby it acquired a minority interest in a pharmaceutical manufacturing business known as Apicore, along
with an option to acquire all of the remaining issued shares prior to July 3, 2017. Specifically, the Company acquired a 6.09%
equity interest (5.33% on a fully-diluted basis) in two newly formed holding companies of which Apicore LLC. and Apicore US LLC
(together “Apicore”) will be wholly owned operating subsidiaries. The Company's equity interest and certain other rights,
including the option rights, were obtained by the Company for services provided in its lead role in structuring a US$22.5 million
majority interest purchase and financing of Apicore. There was no cash consideration in connection with the acquisition of the
minority interest in Apicore, with the exception of costs incurred by the Company in relation to the transaction which totaled
$167,672.



Subsequent to July 3, 2014, Apicore
granted stock options to certain members of its management team and board of directors, as well as certain of its employees and
25,000 of these stock options were exercised prior to December 1, 2016. This resulted in the Company’s ownership being diluted
to 6.07% (4.95% fully diluted).



The Company had a contractual obligation
to assist in funding the resolution of certain specified damages if they were encountered before July 3, 2016, not to exceed US$5
million. The specified mechanism for the Company to fulfill this obligation is through the purchase of a portion of the equity
of Apicore at a specified, discounted price per share. The occurrence of any of the specified damages that would precipitate such
a purchase was not anticipated by the Company nor did any obligation arise prior to July 3, 2016, therefore no amount had been
recorded in the consolidated financial statements.



As at July 3, 2014, the investment
in Apicore was initially valued at $1,276,849 and subsequently measured at amortized cost and the option rights received were recorded
at a value of $275,922 and subsequently revalued at each reporting date to fair value. Immediately prior to the Company exercising
certain options to acquire a controlling interest in Apicore, the investment in Apicore was recorded at $6,418,867 (2015 - $1,559,599).
The increase in value of $4,895,573 was recorded on the statement of net income (loss). In addition, immediately prior to the exercise
of certain options to acquire a controlling interest in Apicore, the derivative representing the value associated to the option
rights was revalued to its fair value of $20,788,011 (2015 - $227,571). The change in the value of the option rights of $20,560,440
was recorded in the statement of net income (loss) for the year ended December 31, 2016 as a revaluation of the derivative (2015
- $33,080).



On December 1, 2016, the Company
exercised certain option rights that resulted in the Company acquiring a majority interest in Apicore Inc. The transaction was
accounted for as a business combination achieved in stages. Apicore is a private, New Jersey based developer and manufacturer of
specialty Active Pharmaceutical Ingredients (“API”) and pharmaceuticals specializing in the manufacturing of difficult
to synthesize and other niche APIs for many United States and international generic and branded pharmaceutical companies. The exercise
of certain options resulted in the Company acquiring 4,717,000 Series A Preferred Shares and 1,250,000 Class D Warrants in Apicore
in exchange for US$33,750,000 cash, increasing the Company’s ownership in Apicore to 64% (approximately 60% on a fully diluted
basis). The Company retains option rights to purchase the issued Class C common shares in Apicore until July 3, 2017, which represent
39% of the outstanding Apicore shares. In addition, Apicore has issued and outstanding Series A-1 preferred shares representing
2% of the outstanding shares which are redeemable at the option of the holder after December 31, 2019. Finally, Apicore’s
Class E shares are reserved for the exercise of employee stock options. At December 1, 2016, 25,000 Class E shares, were issued
and outstanding and 447,500 options became fully vested on the change in control with the employees holding a right to put the
outstanding Apicore Class E shares and options to the Company upon the change in control. Remaining Apicore stock options outstanding
of 400,000 were unaffected by the change of control and will fully vest in 2017.



129









|                                                                                                     
|-----------------------------------------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                                                       
|(expressed in Canadian dollars)                                                                      
|Years ended December 31, 2016 and 2015, seven months ended December 31, 2014, year ended May 31, 2014



| | 4. | Business combinations (continued):
| | -- | ----------------------------------



As the transaction was accounted
for as a business combination achieved in steps, on acquiring control of Apicore, the Company revalued its previous interest in
Apicore at fair value on the date of control and recognized a gain on step acquisition.



Determination of the gain was as
follows:



|Fair value of 6.07% interest on December 1, 2016  |  | $ | 6,418,867 | 
|------------------------------------------------- |  | - | --------- | 
|Carrying value of 6.07% interest prior to control |  |   | 1,523,294 | 
|Gain on step acquisition                          |  | $ | 4,895,573 | 



For purposes of assessing the assets
acquired and liabilities assumed, the Apicore Series A-1 preferred shares have been classified as a liability on the basis of the
holder’s redemption right. The Apicore Series A-1 preferred shares are redeemable by the holder after December 31, 2019 in
three annual instalments at the greater of the fair value of the shares at the redemption date and the net assets of the Company.
The Class E common shares issued and the outstanding 497,500 Apicore options over Apicore Class E common shares with an employee
put feature have been classified as a liability to repurchase Apicore Class E shares based on the fixed redemption price upon the
change in control. The remaining Apicore options outstanding have been recorded in equity as a non-controlling interest. The Company’s
call option over Apicore’s Class C common shares provides Medicure with present access to the returns associated with the
related ownership interest as the option price is fixed with an exercise price below fair value and the parties have agreed that
no dividends will be paid to other shareholders until July 3, 2017. Therefore the Company has accounted for the acquisition as
if it has acquired all the outstanding interests of Apicore and recognized a derivative option on Apicore Class C sahres under
the call option. As a result, 100% of the financial results of Apicore have been included in the Company’s financial statements
from the date of acquisition.



The fair
value of the assets acquired and the liabilities assumed have been determined on a provisional basis and are based on information
that is currently available to the Company.Additional information is being gathered to finalize
these provisional measurements, particularly with respect to intangible assets, property and equipment, inventory, deferred revenue
and deferred taxes. Accordingly, the measurement of the assets acquired and liabilities assumed may change upon finalization of
the Company’s valuations and completion of the purchase price allocation, both of which are expected to occur no later than
one year from the acquisition date.The following table summarizes the provisional fair
values of the identifiable assets and liabilities of as at the date of the acquisition



130









|                                                                                                     
|-----------------------------------------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                                                       
|(expressed in Canadian dollars)                                                                      
|Years ended December 31, 2016 and 2015, seven months ended December 31, 2014, year ended May 31, 2014



| | 4. | Business combinations (continued):
| | -- | ----------------------------------



|Net Assets Acquired                               |  |   |             |  
|------------------------------------------------- |  | - | ----------- | -
|Cash                                              |  | $ | 3,611,307   |  
|Accounts receivable                               |  |   | 3,202,471   |  
|Inventory                                         |  |   | 12,299,051  |  
|Prepaid expenses                                  |  |   | 698,115     |  
|Property and equipment                            |  |   | 9,795,629   |  
|Intangible assets                                 |  |   | 101,712,420 |  
|Goodwill                                          |  |   | 47,485,572  |  
|Other assets                                      |  |   | 160,662     |  
|Accounts payable and accrued liabilities          |  |   | (9,831,337  | )
|Short-term borrowings                             |  |   | (1,051,309  | )
|Advances on development arrangements              |  |   | (1,544,335  | )
|Long-term debt                                    |  |   | (13,655,679 | )
|Finance lease obligations                         |  |   | (342,153    | )
|Fair value of Apicore Series A-1 preferred shares |  |   | (1,755,530  | )
|Other liabilities                                 |  |   | (136,827    | )
|Deferred tax liabilities                          |  |   | (37,749,605 | )
|Net assets acquired                               |  | $ | 112,898,452 |  
|                                                  |  |   |             |  
|Summary of purchase consideration                 |  |   |             |  
|Cash paid                                         |  | $ | 45,322,853  |  
|Due to vendor                                     |  |   | 2,759,507   |  
|Exercise of Apicore derivative                    |  |   | 20,788,011  |  
|Fair value of 6.07% interest held                 |  |   | 6,418,867   |  
|Non-controlling interest                          |  |   | 2,069,409   |  
|Derivative option on Apicore Class C shares       |  |   | 32,901,006  |  
|Liability to repurchase Apicore Class E shares    |  |   | 2,638,799   |  
|Purchase consideration                            |  | $ | 112,898,452 |  



Transaction costs related to the
Apicore acquisition in the year ended December 31, 2016 were $126,923 and are included in selling, general and administrative expenses.



From the date of acquisition, Apicore
contributed to the 2016 results $7.8 million of revenue and $0.6 million of net loss before income taxes. If the acquisition had
taken place as at January 1, 2016, revenue in 2016 would have increased by an additional $31.6 million and net income before taxes
in 2016 would have been reduced by approximately $2.0 million.



Subsequent to December 31, 2016,
the Company acquired 145,000 Class E Common Shares for a total cost to the Company of $810,732, upon employees exercising their
put right to the Company.



131









|                                                                                                     
|-----------------------------------------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                                                       
|(expressed in Canadian dollars)                                                                      
|Years ended December 31, 2016 and 2015, seven months ended December 31, 2014, year ended May 31, 2014



| | 5. | Accounts receivable:
| | -- | --------------------



|                          |  | December 31, 2016 |            |  | December 31, 2015 |   |           | December 31, 2014 | 
|------------------------- |  | ----------------- | ---------- |  | ----------------- | - | --------- | ----------------- | 
|Trade accounts receivable |  | $                 | 17,023,089 |  |                   | $ | 9,797,312 |                   | 
|Other accounts receivable |  |                   | 177,689    |  |                   |   | 26,304    |                   | 
|                          |  | $                 | 17,200,778 |  |                   | $ | 9,823,616 |                   | 



Subsequent to the business combination
completed and described in note 4, the Company’s customer base has diversified when compared to previous periods. As at December
31, 2016 there were three customers with amounts owing greater than 10% of the Company’s accounts receivable which totaled
46% in aggregate (Customer one – 22%, Customer two -12% and Customer three – 12%).



As at December 31, 2015 and 2014,
the trade accounts receivable consisted of amounts owing from four and five customers, respectively, which represent approximately
100% and 99%, respectively, of trade accounts receivable.



| | 6. | Inventories:
| | -- | ------------



|                                                |  | December 31, 2016 |            |  | December 31, 2015 |   |           | December 31, 2014 | 
|----------------------------------------------- |  | ----------------- | ---------- |  | ----------------- | - | --------- | ----------------- | 
|AGGRASTAT®: Finished product available-for-sale |  | $                 | 3,418,652  |  |                   | $ | 1,008,773 |                   | 
|AGGRASTAT®: Unfinished product                  |  |                   | 697,767    |  |                   |   | 110,330   |                   | 
|AGGRASTAT®: Pre-launch inventory                |  |                   | -          |  |                   |   | 1,170,172 |                   | 
|API: Finished product available-for-sale        |  |                   | 4,693,448  |  |                   |   | -         |                   | 
|API: Work-in-progress                           |  |                   | 1,914,910  |  |                   |   | -         |                   | 
|API: Raw material and packaging material        |  |                   | 1,451,867  |  |                   |   | -         |                   | 
|                                                |  | $                 | 12,176,644 |  |                   | $ | 2,289,275 |                   | 



During the year ended December
31, 2016, the Company recorded a recovery of $108,817 relating to inventories that were previously written-off. During the year
ended December 31, 2015 the Company wrote-off $40,920 of inventory that had expired or was otherwise unusable. During the seven
months ended December 31, 2014, the Company recorded a recovery of $80,874 relating to inventories that were previously written-off.
During the year ended May 31, 2014, the Company wrote-off $22,209 of inventories that had expired or were otherwise unusable. Inventories
expensed as part of cost of goods sold during the year ended December 31, 2016 amounted to $8,531,060 (year ended December 31,
2015 - $1,563,344, seven months ended December 31, 2014 - $349,901, year ended May 31, 2014 - $300,378).



132









|                                                                                                     
|-----------------------------------------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                                                       
|(expressed in Canadian dollars)                                                                      
|Years ended December 31, 2016 and 2015, seven months ended December 31, 2014, year ended May 31, 2014



| | 7. | Property and equipment:
| | -- | -----------------------



|Cost                                              |  | Land |           |  | Building |   |           | Computer
    and office equipment |  |   | Machinery and
     equipment |   |  | Leasehold
    improvements |           |  | Total |  
|------------------------------------------------- |  | ---- | --------- |  | -------- | - | --------- | --------------------------------- |  | - | ---------------------------- | - |  | -------------------------- | --------- |  | ----- | -
|Balance, May 31, 2014                             |  | $    | -         |  |          | $ | -         |                                   |  | $ | 170,906                      |   |  | $                          | -         |  |       | $
|Additions                                         |  |      | -         |  |          |   | -         |                                   |  |   | 16,713                       |   |  |                            | -         |  |       |  
|Effect of movements in exchange rates             |  |      | -         |  |          |   | -         |                                   |  |   | 8,357                        |   |  |                            | -         |  |       |  
|Balance, December 31, 2014                        |  | $    | -         |  |          | $ | -         |                                   |  | $ | 195,976                      |   |  | $                          | -         |  |       | $
|Additions                                         |  |      | -         |  |          |   | -         |                                   |  |   | 129,804                      |   |  |                            |           |  |       |  
|Disposals                                         |  |      | -         |  |          |   | -         |                                   |  |   | (21,654                      | ) |  |                            |           |  |       |  
|Effect of movements in exchange rates             |  |      |           |  |          |   |           |                                   |  |   | 24,652                       |   |  |                            |           |  |       |  
|Balance, December 31, 2015                        |  | $    | -         |  |          | $ | -         |                                   |  | $ | 328,778                      |   |  | $                          | -         |  |       | $
|Acquisitions under business combinations (note 4) |  |      | 2,316,979 |  |          |   | 2,066,616 |                                   |  |   | 1,966,628                    |   |  |                            | 2,598,259 |  |       |  
|Additions                                         |  |      | -         |  |          |   | 56,071    |                                   |  |   | 148,337                      |   |  |                            | 200,223   |  |       |  
|Disposals                                         |  |      | -         |  |          |   | -         |                                   |  |   | -                            |   |  |                            | -         |  |       |  
|Effect of movements in exchange rates             |  |      | -         |  |          |   | -         |                                   |  |   | (4,672                       | ) |  |                            | -         |  |       |  
|Balance, December 31, 2016                        |  | $    | 2,316,979 |  |          | $ | 2,122,687 |                                   |  | $ | 2,439,070                    |   |  | $                          | 2,798,482 |  |       | $



|Accumulated amortization and 
    impairment losses |  | Land |   |  | Building |   |        | Computer
    and office equipment |  |   | Machinery and 
    equipment |   |  | Leasehold
    improvements |        |  | Total |  
|--------------------------------------------------- |  | ---- | - |  | -------- | - | ------ | --------------------------------- |  | - | ---------------------------- | - |  | -------------------------- | ------ |  | ----- | -
|Balance, May 31, 2014                               |  | $    | - |  |          | $ | -      |                                   |  | $ | 150,225                      |   |  | $                          | -      |  |       | $
|Additions                                           |  |      | - |  |          |   | -      |                                   |  |   | 5,033                        |   |  |                            | -      |  |       |  
|Effect of movements in exchange rates               |  |      | - |  |          |   | -      |                                   |  |   | 7,557                        |   |  |                            | -      |  |       |  
|Balance, December 31, 2014                          |  | $    | - |  |          | $ | -      |                                   |  | $ | 162,815                      |   |  | $                          | -      |  |       | $
|Amortization                                        |  |      | - |  |          |   | -      |                                   |  |   | 23,803                       |   |  |                            | -      |  |       |  
|Disposals                                           |  |      | - |  |          |   | -      |                                   |  |   | (21,654                      | ) |  |                            | -      |  |       |  
|Effect of movements in exchange rates               |  |      | - |  |          |   | -      |                                   |  |   | 22,677                       |   |  |                            | -      |  |       |  
|Balance, December 31, 2015                          |  | $    | - |  |          | $ | -      |                                   |  | $ | 187,641                      |   |  | $                          | -      |  |       | $
|Amortization                                        |  |      | - |  |          |   | 21,408 |                                   |  |   | 66,940                       |   |  |                            | 67,540 |  |       |  
|Effect of movements in exchange rates               |  |      | - |  |          |   | -      |                                   |  |   | (4,320                       | ) |  |                            | -      |  |       |  
|Balance, December 31, 2016                          |  | $    | - |  |          | $ | 21,408 |                                   |  | $ | 250,261                      |   |  | $                          | 67,540 |  |       | $



|Carrying amounts     |  | Land |           |  | Building |   |           | Computer
    and office equipment |  |   | Machinery
    and  equipment |  |  | Leasehold
    improvements |           |  | Total |  
|-------------------- |  | ---- | --------- |  | -------- | - | --------- | --------------------------------- |  | - | ---------------------------- |  |  | -------------------------- | --------- |  | ----- | -
|At December 31, 2014 |  | $    | -         |  |          | $ | -         |                                   |  | $ | 33,161                       |  |  | $                          | -         |  |       | $
|At December 31, 2015 |  | $    | -         |  |          | $ | -         |                                   |  | $ | 141,137                      |  |  | $                          | -         |  |       | $
|At December 31, 2016 |  | $    | 2,316,979 |  |          | $ | 2,101,279 |                                   |  | $ | 2,188,809                    |  |  | $                          | 2,730,942 |  |       | $



133









|                                                                                                     
|-----------------------------------------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                                                       
|(expressed in Canadian dollars)                                                                      
|Years ended December 31, 2016 and 2015, seven months ended December 31, 2014, year ended May 31, 2014



| | 8. | Intangible assets:
| | -- | ------------------



|Cost                                              |  | Patents |            |   | Trademarks |   |           | Customer
    List |  |   | Acquired
    intangible assets |   |  | Total |            
|------------------------------------------------- |  | ------- | ---------- | - | ---------- | - | --------- | ----------------- |  | - | ------------------------------ | - |  | ----- | -----------
|Balance, May 31, 2014                             |  | $       | 9,238,151  |   |            | $ | 1,717,216 |                   |  | $ | 303,038                        |   |  | $     | -          
|Additions                                         |  |         | 7,206      |   |            |   | -         |                   |  |   | -                              |   |  |       | -          
|Effect of movements in exchange rates             |  |         | 647,266    |   |            |   | 120,215   |                   |  |   | 21,215                         |   |  |       | -          
|Balance, December 31, 2014                        |  | $       | 9,892,623  |   |            | $ | 1,837,431 |                   |  | $ | 324,253                        |   |  | $     | -          
|Reversal of impairment loss                       |  |         | 3,995,617  |   |            |   | 2,226,434 |                   |  |   | 392,900                        |   |  |       | -          
|Effect of movements in exchange rates             |  |         | 1,820,309  |   |            |   | 364,473   |                   |  |   | 64,319                         |   |  |       | -          
|Balance, December 31, 2015                        |  | $       | 15,708,549 |   |            | $ | 4,428,338 |                   |  | $ | 781,472                        |   |  | $     | -          
|Acquisitions under business combinations (Note 4) |  |         | -          |   |            |   | -         |                   |  |   | -                              |   |  |       | 101,712,420
|Effect of movements in exchange rates             |  |         | (468,759   | ) |            |   | (132,146  | )                 |  |   | (23,320                        | ) |  |       | -          
|Balance, December 31, 2016                        |  | $       | 15,239,790 |   |            | $ | 4,296,192 |                   |  | $ | 758,152                        |   |  | $     | 101,712,420



|Accumulated amortization and
    impairment losses |  | Patents |            |   | Trademarks |   |           | Customer
    List |  |   | Acquired
    intangible  assets |   |  | Total |        
|-------------------------------------------------- |  | ------- | ---------- | - | ---------- | - | --------- | ----------------- |  | - | ------------------------------- | - |  | ----- | -------
|Balance, May 31, 2014                              |  | $       | 8,161,810  |   |            | $ | 1,413,917 |                   |  | $ | 249,520                         |   |  | $     | -      
|Amortization                                       |  |         | 340,076    |   |            |   | 74,834    |                   |  |   | 13,206                          |   |  |       | -      
|Effect of movements in exchange rates              |  |         | 583,406    |   |            |   | 102,508   |                   |  |   | 18,084                          |   |  |       | -      
|Balance, December 31, 2014                         |  | $       | 9,085,292  |   |            | $ | 1,591,259 |                   |  | $ | 280,810                         |   |  | $     | -      
|Amortization                                       |  |         | 485,298    |   |            |   | 147,978   |                   |  |   | 26,114                          |   |  |       | -      
|Reversal of impairment loss                        |  |         | 3,523,955  |   |            |   | 1,957,288 |                   |  |   | 345,403                         |   |  |       | -      
|Effect of movements in exchange rates              |  |         | 1,687,291  |   |            |   | 319,327   |                   |  |   | 56,352                          |   |  |       | -      
|Balance, December 31, 2015                         |  | $       | 14,781,836 |   |            | $ | 4,015,852 |                   |  | $ | 708,679                         |   |  | $     | -      
|Amortization                                       |  |         | 886,217    |   |            |   | 394,461   |                   |  |   | 69,612                          |   |  |       | 841,734
|Effect of movements in exchange rates              |  |         | (428,263   | ) |            |   | (114,121  | )                 |  |   | (20,139                         | ) |  |       | 5,869  
|Balance, December 31, 2016                         |  | $       | 15,239,790 |   |            | $ | 4,296,192 |                   |  | $ | 758,152                         |   |  | $     | 847,603



|Carrying amounts     |  | Patents |         |  | Trademarks |   |         | Customer List |  |   | Acquired intangible  assets |  |  | Total |            
|-------------------- |  | ------- | ------- |  | ---------- | - | ------- | ------------- |  | - | --------------------------- |  |  | ----- | -----------
|At December 31, 2014 |  | $       | 807,331 |  |            | $ | 246,172 |               |  | $ | 43,443                      |  |  | $     | -          
|At December 31, 2015 |  | $       | 926,713 |  |            | $ | 412,486 |               |  | $ | 72,793                      |  |  | $     | -          
|At December 31, 2016 |  | $       | -       |  |            | $ | -       |               |  | $ | -                           |  |  | $     | 100,864,817



The Company has considered indicators
of impairment as at December 31, 2016, December 31, 2015 and December 31, 2014. To December 31, 2016, the Company has recorded
an aggregate impairment loss of $16,136,325 primarily resulting from a previous write-down of AGGRASTAT® intangible assets
and from patent applications no longer being pursued or patents being abandoned. The Company recorded a reversal of the impairment
loss relating to AGGRASTAT® intangible assets, originally written down during the year ended May 31, 2008, totalling $788,305
for the year ended December 31, 2015 as a result of sustained improvements in the AGGRASTAT® business. The Company did not
record a write-down of intangible assets during the seven months ended December 31, 2014 or the year ended May 31, 2014.



The Company acquired intangible
assets during the year ended December 31, 2016 as described in note 4. The average remaining amortization period of the Company’s
intangible assets is approximately 10 years.



134









|                                                                                                     
|-----------------------------------------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                                                       
|(expressed in Canadian dollars)                                                                      
|Years ended December 31, 2016 and 2015, seven months ended December 31, 2014, year ended May 31, 2014



| | 8. | Intangible assets (continued):
| | -- | ------------------------------



For the year ended December 31,
2016, amortization of intangible assets relating to AGGRASTAT® totalling $1,347,022 (year ended December 31, 2015 - $655,603,
seven months ended December 31, 2014 - $331,547, year ended May 31, 2014 - $545,535) is recognized in cost of goods sold and amortization
of other intangible assets totalling $875,016 (year ended December 31, 2015 - $3,787, seven months ended December 31, 2014 - $96,569,
year ended May 31, 2014 - $8,007) is recognized in research and development expenses.



As described in note 11, intangible
assets were pledged as security against long-term debt.



| | 9. | Short-term borrowings:
| | -- | ----------------------



|                             |  | December 31, 2016 |          
|---------------------------- |  | ----------------- | ---------
|Working capital facility     |  | $                 | 424,714  
|Pre-shipment credit facility |  |                   | 959,150  
|                             |  | $                 | 1,383,864



The Company, through the acquisition
of a subsidiary (note 4) has entered into a credit facility with Dena Bank, headquartered in India. The facility provides
a USD denominated pre-shipment credit facility “Pre-shipment credit facility” and an Indian Rupee (INR) denominated
working capital facility “Working capital facility”. The available credit facility is an aggregate amount of
the Dena facility and pre-shipment credit facility to a maximum of INR 75,000,000 (CAD $1,480,547). Interest rates and security
on each credit classification are as follows:



|Facility type            |  | Interest rate          |  | Security                                                                                                                                               
|------------------------ |  | ---------------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------
|Working capital facility |  | Bank Base Rate + 2.55% |  | 25% of raw materials and finished goods inventories33 1/3% of work-in-progress50% of net accounts receivable <90 days, 100% > 90 days                  
|Pre-shipment credit      |  | LIBOR + 3.50%          |  | 25% of raw materials and finished goods inventories
        33 1/3% of work-in-progress
        50% of net accounts receivable <90 days, 100% > 90 days



| | 10. | Finance lease obligations:
| | --- | --------------------------



The Company, through the acquisition
of a subsidiary (Note 4) has entered into three capital lease arrangements to finance the acquisition of certain equipment. The
Company’s obligations under finance leases are secured by the associated equipment. Future minimum lease payments under finance
leases, together with the present value of the net minimum lease payments are as follows:



|2017                                        |  | $ | 107,283 |  
|------------------------------------------- |  | - | ------- | -
|2018                                        |  |   | 96,696  |  
|2019                                        |  |   | 81,871  |  
|2020                                        |  |   | 81,871  |  
|Total minimum lease payments                |  |   | 367,721 |  
|Less: Amounts representing finance expense  |  |   | (36,031 | )
|Present value of minimum lease payments     |  |   | 331,690 |  
|Current portion of finance lease obligation |  |   | (89,241 | )
|                                            |  | $ | 242,449 |  



135









|                                                                                                     
|-----------------------------------------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                                                       
|(expressed in Canadian dollars)                                                                      
|Years ended December 31, 2016 and 2015, seven months ended December 31, 2014, year ended May 31, 2014



| | 11. | Long-term debt:
| | --- | ---------------



|                                               |  | December 31, 2016 |            |   | December 31, 2015 |   |            | December 31,  2014 | 
|---------------------------------------------- |  | ----------------- | ---------- | - | ----------------- | - | ---------- | ------------------ | 
|Crown Capital Fund IV LP term loan             |  | $                 | 54,808,473 |   |                   | $ | -          |                    | 
|Knight Therapeutics Inc. loan                  |  |                   | 12,721,292 |   |                   |   | -          |                    | 
|Dena Bank Loan                                 |  |                   | 918,567    |   |                   |   | -          |                    | 
|Manitoba Industrial Opportunities Program loan |  |                   | 2,615,844  |   |                   |   | 4,242,784  |                    | 
|                                               |  |                   | 71,064,176 |   |                   |   | 4,242,784  |                    | 
|Current portion of long-term debt              |  |                   | (2,883,752 | ) |                   |   | (1,625,191 | )                  | 
|                                               |  | $                 | 68,180,424 |   |                   | $ | 2,617,593  |                    | 



Principal repayments to maturity
by fiscal year are as follows:



|2017                                                                             |  | $ | 2,906,797  |  
|-------------------------------------------------------------------------------- |  | - | ---------- | -
|2018                                                                             |  |   | 267,908    |  
|2019                                                                             |  |   | 267,908    |  
|2020                                                                             |  |   | 60,114,843 |  
|                                                                                 |  |   | 63,557,456 |  
|Less: deferred debt issue expenses (net of accumulated amortization of $594,317) |  |   | (5,447,962 | )
|                                                                                 |  | $ | 58,109,494 |  



| | (a) | Crown Capital Fund IV LP Term Loan (“Crown
Loan”)
| | --- | -------------------------------------------------



On November 17, 2016, in connection
with the exercise of the Company’s acquisition of the controlling ownership in Apicore, described in Note 4, the Company
received a term loan from Crown Capital Fund IV LP, an investment fund managed by Crown Capital Partners Inc. (“Crown”),
in which Crown holds a 40% interest for $60,000,000 of which $30,000,000 was syndicated to the Ontario Pension Board (“OPB”)
a limited partner in Crown’s funds. Under the terms of the loan agreement, the Crown Loan bears interest at a fixed rate
of 9.5% per annum, compounded monthly and payable on an interest only basis, maturing in 48 months, and is repayable in full upon
maturity.



The Company has granted 450,000 warrants
to each of Crown and OPB. Each warrant entitles the holder to purchase one Medicure common share at an exercise price of $6.50
for a period of four years. The Company presents and discloses its financial instruments in accordance with the substance of its
contractual arrangement. Accordingly, the Company recorded a liability of $58,200,000 less related debt issuance costs of $3,538,648.
The liability component has been accreted using the effective interest rate method, and during the year ended December 31, 2016,
the Company recorded accretion of $36,884, non-cash interest expense related to financing costs of $110,237 and interest expense
of $702,574 on the Crown Loan. The fair value assigned to the warrants issued of $2,065,500 has been separated from the fair value
of the liability and is included in shareholder’s equity, net of its pro rata share of financing costs of $116,695.



The effective interest rate on the
Crown Loan for the year ended December 31, 2016 was 12%.



Beginning in 2017, the Company will
be required to maintain certain financial covenants under the terms of the Crown Loan.



| | (b) | Knight Therapeutics Inc. Loan (“Knight Loan”)
| | --- | ---------------------------------------------



The Company, through the acquisition
of a subsidiary as described in Note 4 has a debt agreement with Knight Therapeutics Inc. The Knight Loan bears interest at 12%
per annum, with interest paid quarterly at the end of each quarter with unpaid interest and principal due June 30, 2018. The Knight
Loan is secured by a security interest in substantially all of the acquired subsidiary’s assets.



The effective rate of interest on
the Knight Loan for the year ended December 31, 2016 was 12%.



136









|                                                                                                     
|-----------------------------------------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                                                       
|(expressed in Canadian dollars)                                                                      
|Years ended December 31, 2016 and 2015, seven months ended December 31, 2014, year ended May 31, 2014



| | 11. | Long-term debt (continued):
| | --- | ---------------------------



| | (b) | Knight Therapeutics Inc. Loan (“Knight Loan”)
(continued)
| | --- | ---------------------------------------------------------



The subsidiary is required to maintain
certain financial covenants, based on results of the subsidiary, under the terms of the Knight Loan. As at December 31, 2016, the
Company was in compliance with the terms of the Knight Loan.



Subsequent to December 31, 2016,
on January 6, 2017, the interest and principal outstanding on the Knight Loan were repaid in full from the remaining funds provided
under the Crown Loan, which was recorded on the statement of financial position at December 31, 2016 as cash held in escrow. As
a result, the repayments relating to the Knight Loan have not been included in the principal repayments to maturity by fiscal year
table.



| | (c) | Dena Bank Loan
| | --- | --------------



The Company, through the acquisition
of a subsidiary as described in Note 4 has a debt agreement with Dena Bank. The loan bears interest at LIBOR plus 4%, with equal
monthly payments of principal and interest, maturing June 30, 2020. The loan is secured by the land, building, and machinery of
a subsidiary, a pledge of 778,440 equity shares of Apicore LLC. with a value each of $0.15 USD, and a guarantee by directors of
Apicore LLC.



The effective rate of the loan for
the year ended December 31, 2016 was 9%.



| | (d) | Manitoba Industrial Opportunities Loan (“MIOP
Loan”)
| | --- | ----------------------------------------------------



On July 18, 2011, the Company borrowed
$5,000,000 from the Government of Manitoba, under the Manitoba Industrial Opportunities Program ("MIOP"), to assist in
the settlement of its then existing long-term debt. The loan bears interest annually at 5.25% and originally matured on July 1,
2016. The loan was payable interest only for the first 24 months, with blended principal and interest payments made monthly thereafter
until maturity. Effective August 1, 2013, the Company renegotiated its long-term debt and received an additional two-year deferral
of principal repayments. Under the renegotiated terms, the loan continued to be interest only until August 1, 2015, at which point
blended principal and interest payments began. The loan matures on July 1, 2018 and is secured by the Company's assets and guaranteed
by the Chief Executive Officer of the Company and entities controlled by the Chief Executive Officer. The Company issued 1,333,333
common shares (20,000,000 pre-consolidated common shares) of the Company with a fair value of $371,834, net of share issue costs
of $28,166, in consideration for the guarantee to the Company's Chief Executive Officer and entities controlled by the Chief Executive
Officer. In connection with the guarantee, the Company entered into an indemnification agreement with the Chief Executive Officer
under which the Company shall pay the Guarantor on demand all amounts paid by the Guarantor pursuant to the guarantee. In addition,
under the indemnity agreement, the Company agreed to provide certain compensation upon a change in control of the Company. The
Company relied on the financial hardship exemption from the minority approval requirement of Multilateral Instrument ("MI")
61-101. Specifically, pursuant to MI 61-101, minority approval is not required for a related party transaction in the event of
financial hardship in specified circumstances.



The Company is required to maintain
certain non-financial covenants under the terms of the MIOP loan. In connection with the business combination described in note
4, the Company did not obtain required approvals from MIOP prior to completing the transaction due to the timing of the closing
of the transaction. As a result, $969,413, net of deferred debt issue costs has been included within current liabilities on the
statement of financial position as at December 31, 2016 and has been included within the 2017 repayments on the principal repayments
to maturity by fiscal year table. The Company has subsequently received a waiver from MIOP waiving any right to call the loan and
the long-term portion of the MIOP loan will no longer be included within current liabilities going forward. Aside from this approval,
the Company was in compliance with the terms of the loan as at December 31, 2016.



The effective interest rate on the
MIOP loan for the year ended December 31, 2016 was 7% (year ended December 31, 2015 – 7%, seven
months ended December 31, 2014 – 7%, year ended May 31, 2014 – 7%).



137









|                                                                                                     
|-----------------------------------------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                                                       
|(expressed in Canadian dollars)                                                                      
|Years ended December 31, 2016 and 2015, seven months ended December 31, 2014, year ended May 31, 2014



| | 12. | Royalty obligation:
| | --- | -------------------



On July 18, 2011, the Company settled
its then existing long-term debt with Birmingham Associates Ltd. ("Birmingham"), an affiliate of Elliott Associates L.P.,
in exchange for i) $4,750,000 in cash; ii) 2,176,003 common shares (32,640,043 pre-consolidation common shares) of the Company;
and iii) a royalty on future AGGRASTAT® sales until May 1, 2023. The royalty is based on 4% of the first $2,000,000
of quarterly AGGRASTAT® sales, 6% on the portion of quarterly sales between $2,000,000 and $4,000,000 and 8% on
the portion of quarterly sales exceeding $4,000,000 payable within 60 days of the end of the preceding three month periods ended
February 28, May 31, August 31 and November 30. The previous lender has a one-time option to switch the royalty payment from AGGRASTAT®
to a royalty on MC-1 sales. Management has determined there is no value to the option to switch the royalty to MC-1 as the product
is not commercially available for sale and development of the product is on hold.



In accordance with the terms of
the agreement, if the Company were to dispose of its AGGRASTAT® rights, the acquirer would be required to assume
the obligations under the royalty agreement.



The initial fair value assigned
to the royalty obligation, based on an expected value approach, was estimated to be $901,915. The royalty obligation is subsequently
measured at amortized cost using the effective interest rate method, with the associated cash flows being revised each period resulting
in a carrying value at December 31, 2016 of $5,685,722 (December 31, 2015 - $5,373,452 and December 31, 2014 - $2,189,054) of which
$2,019,243 (December 31, 2015 - $1,648,180, December 31, 2014 - $473,744) represents the current portion of the royalty obligation.
The change in the royalty obligation for the year ended December 31, 2016 of $2,271,436 (year ended December 31, 2015 - $3,791,282,
seven months ended December 31, 2014 - $492,722, year ended May 31, 2014 - $1,349,372) is recorded within finance expense on the
consolidated statements of net income and comprehensive income. Royalties recorded for the year ended December 31, 2016 totalled
$1,795,089, (year ended December 31, 2015 - $1,207,772, seven months ended December 31, 2014 - $210,576, year ended May 31, 2014
- $201,131) with payments made during the year ended December 31, 2016 of $1,712,389 (year ended December 31, 2015 - $642,768,
seven months ended December 31, 2014 - $156,722, year ended May 31, 2014 - $165,291).



| | 13. | Other long-term liabilities:
| | --- | ----------------------------



The Company received $200,000 of
funding from the Province of Manitoba's Commercialization Support for Business program to assist the Company with the completion
of a study evaluating AGGRASTAT® in patients with impaired kidney function. The study was completed and the funding was received
during the year ended May 31, 2013. The funding is repayable when certain sales targets are met and the repayment requirement remains
in effect for a period not less than eight fiscal years. The Company repaid $100,000 of this funding during the year ended December
31, 2016. Subsequent to December 31, 2016, the remaining $100,000 relating to this funding was repaid by the Company resulting
in no further repayment requirements in regards to this government funding.



The funding was originally recorded
as other long-term liability and was initially recorded at a fair value of $167,261 with the difference between the fair value
of the liability and the funding received being recorded as a reduction in research and development expenses. The liability subsequently
was measured at amortized cost using the effective interest method, with the associated cash flows being revised each period, which
resulted in a carrying value at December 31, 2016 of $100,000 (December 31, 2015 - $200,000 and December 31, 2014 - 152,778) which
represents the current portion and is included within accounts payable and accrued liabilities on the consolidated statements of
financial position. There was no net change in the fair value of this liability for the year ended December 31, 2016. The net change
in the other long-term liability for the year ended December 31, 2015 of $ 47,222, for seven months ended December 31, 2014 of
nil and for the year ended May 31, 2014 of $14,483 was recorded as a research and development expense on the consolidated statements
of net income (loss) and comprehensive income (loss).



In additional the Company had other
long-term liabilities of $33,999 (December 31, 2015 and 2014 – nil).



138









|                                                                                                     
|-----------------------------------------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                                                       
|(expressed in Canadian dollars)                                                                      
|Years ended December 31, 2016 and 2015, seven months ended December 31, 2014, year ended May 31, 2014



| | 14. | Capital stock:
| | --- | --------------



| | (a) | Authorized
| | --- | ----------



The Company has authorized share
capital of an unlimited number of common voting shares, an unlimited number of class A common shares and an unlimited number of
preferred shares. The preferred shares may be issued in one or more series, and the directors may fix prior to each series issued,
the designation, rights, privileges, restrictions and conditions attached to each series of preferred shares.



| | (b) | Shares issued and outstanding
| | --- | -----------------------------



Shares issued and outstanding are
as follows:



|                                                         |  | Number of Common Shares |            |  | Amount |  
|-------------------------------------------------------- |  | ----------------------- | ---------- |  | ------ | -
|Balance, May 31, 2013                                    |  |                         | 12,196,508 |  |        | $
|Shares issued upon exercise of stock options (note 14c)  |  |                         | 3,333      |  |        |  
|Balance, May 31, 2014                                    |  |                         | 12,199,841 |  |        | $
|Shares issued upon exercise of stock options (note 14c)  |  |                         | 10,066     |  |        |  
|Balance, December 31, 2014                               |  |                         | 12,209,907 |  |        | $
|Shares issued for cash net of issue costs of $627,247(1) |  |                         | 1,829,545  |  |        |  
|Shares issued on settlement of debt (2) (3)              |  |                         | 314,073    |  |        |  
|Shares issued upon exercise of stock options (note 14c)  |  |                         | 23,350     |  |        |  
|Shares issued upon exercise of warrants (note 14d)       |  |                         | 68,293     |  |        |  
|Balance, December 31, 2015                               |  |                         | 14,445,168 |  |        | $
|Shares issued upon exercise of stock options (note 14c)  |  |                         | 1,069,434  |  |        |  
|Shares issued upon exercise of warrants (note 14d)       |  |                         | 17,806     |  |        |  
|Balance, December 31, 2016                               |  |                         | 15,532,408 |  |        | $



(1) On June 26, 2015,
the Company closed a private placement offering with a syndicate of underwriters (the "Offering") of 1,829,545 common
shares at a price of $2.20 per share with aggregate gross proceeds to the Company of $4,024,999. Share issue costs totalled $627,247
pertaining to the Offering. The underwriters received a cash commission equal to 7.0% of the gross proceeds raised in the Offering.
In addition, the underwriters were granted warrants to purchase common shares of Medicure equal to 7.0% of the total number of
common shares issued pursuant to the Offering, exercisable for a 24-month period from the closing of the Offering at a price of
$2.20 per common share. There were 128,068 warrants issued in connection with offering with a fair value of $232,571, which is
included in the share issue costs of $627,247.



(2) On July 11, 2014,
the Company announced that, subject to all necessary regulatory approvals, it had entered into shares for debt agreements with
its Chief Executive Officer, Dr. Albert Friesen, and certain members of the Board of Directors, pursuant to which the Company will
issue 205,867 of its common shares with a fair value of $1.98 per common share to satisfy $407,617 of outstanding amounts owing
to the Chief Executive Officer and members of the Company’s Board of Directors. The shares were issued on January 9, 2015.



(3) On January 27, 2015,
the Company announced that, subject to all necessary regulatory approvals, it had entered into shares for debt agreements with
certain members of the Board of Directors and a consultant, pursuant to which the Company will issue 108,206 of its common shares
with a fair value of $1.44 per common share to satisfy $155,817 of outstanding amounts owing to these individuals. The shares were
issued on March 20, 2015 and resulted in a loss of $60,595 due to increases in the share price between the date of the debt settlements
and the issuance of the shares. This loss is recorded on the consolidated statements of income and comprehensive income as a loss
on settlement of debt.



139









|                                                                                                     
|-----------------------------------------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                                                       
|(expressed in Canadian dollars)                                                                      
|Years ended December 31, 2016 and 2015, seven months ended December 31, 2014, year ended May 31, 2014



| | 14. | Capital stock (continued):
| | --- | --------------------------



| | (c) | Stock option plan
| | --- | -----------------



The Company has a stock option plan
which is administered by the Board of Directors of the Company with stock options granted to directors, management, employees and
consultants as a form of compensation. The number of common shares reserved for issuance of stock options is limited to a maximum
of 2,441,981 common shares of the Company at any time. The stock options generally have a maximum term of ten years.



On July 7, 2014, the Company granted
an aggregate of 332,300 options to certain directors, officers, employees, management company employees and consultants of the
Company. Of these options, 92,300 are set to expire on the tenth anniversary of the date of grant, and 240,000 are set to expire
on the fifth anniversary of the date of grant. All 332,300 options were issued at an exercise price of $1.90 per share and vested
immediately.



On March 27, 2015, the Company granted
an aggregate of 236,070 options to certain directors, officers, employees, management company employees and consultants of the
Company pursuant to the Company’s stock option plan. Of these options, 181,070 are set to expire on the tenth anniversary
of the date of grant, 5,000 are set to expire on the third anniversary of the date of grant and 50,000 are set to expire on the
first anniversary of the date of grant. All of the options were issued at an exercise price of $1.90 per share. Of the 236,070
options granted on March 27, 2015, 183,570 vested immediately, 25,000 vested on July 1, 2015 and 27,500 vested on October 1, 2015.



On July 7, 2015, the Company granted
an aggregate of 240,000 options to a consultant of the Company. These options are set to expire on the fifth anniversary of the
date of grant and were issued at an exercise price of $2.50 per share and vested immediately.



On November 25, 2015, the Company
granted an aggregate of 168,000 options to certain employees and consultants of the Company pursuant to the Company’s stock
option plan. These options are set to expire on the fifth anniversary of the date of grant and were issued at an exercise price
of $3.90 per share and vested immediately.



On April 6, 2016, the Company granted
an aggregate of 265,025 options to certain directors, officers, employees, management company employees and consultants of the
Company pursuant to the Company’s Stock Option Plan. Of these options, 225,025 are set to expire on the fifth anniversary
of the date of grant and 40,000 are set to expire on the first anniversary of the date of grant. All of the options were issued
at an exercise price of $6.16 per share. Of the 265,025 options granted on April 6, 2016, 235,025 vested immediately, 10,000 vested
on June 30, 2016, 10,000 vested on September 30, 2016 and 10,000 vest on December 31, 2016. The options vesting on June 30, 2016,
September 30, 2016 and December 31, 2016 were forfeited and terminated during the year ended December 31, 2016.



140









|                                                                                                     
|-----------------------------------------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                                                       
|(expressed in Canadian dollars)                                                                      
|Years ended December 31, 2016 and 2015, seven months ended December 31, 2014, year ended May 31, 2014



| | 14. | Capital stock (continued):
| | --- | --------------------------



| | (c) | Stock option plan (continued)
| | --- | -----------------------------



Changes in the number of options
outstanding during the years ended December 31, 2016 and 2015, seven months ended December 31, 2014 and year ended May 31, 2014
are as follows:



|                                   |  | December 31, 2016 |            |   | December 31, 2015               |  
|---------------------------------- |  | ----------------- | ---------- | - | ------------------------------- | -
|                                   |  | Shares            |            |   | Weighted average exercise price |  
|Balance, beginning of period       |  |                   | 2,277,126  |   |                                 | $
|Granted                            |  |                   | 265,025    |   |                                 |  
|Exercised                          |  |                   | (1,069,434 | ) |                                 |  
|Forfeited, cancelled or expired    |  |                   | (85,717    | ) |                                 |  
|Balance, end of period             |  |                   | 1,387,000  |   |                                 | $
|Options exercisable, end of period |  |                   | 1,387,000  |   |                                 | $



|                                   |  | December 31, 2014 |           |   | May 31, 2014                    |  
|---------------------------------- |  | ----------------- | --------- | - | ------------------------------- | -
|                                   |  | Shares            |           |   | Weighted average exercise price |  
|Balance, beginning of period       |  |                   | 1,418,019 |   |                                 | $
|Granted                            |  |                   | 332,300   |   |                                 |  
|Exercised                          |  |                   | (10,066   | ) |                                 |  
|Forfeited, cancelled or expired    |  |                   | (20,000   | ) |                                 |  
|Balance, end of period             |  |                   | 1,720,253 |   |                                 | $
|Options exercisable, end of period |  |                   | 1,720,253 |   |                                 | $



Options outstanding at December 31,
2016 consist of the following:



|Range of exercise prices |  | Number  outstanding |           |  | Weighted average remaining contractual life |            | Options outstanding weighted average exercise price |   |       | Number exercisable | 
|------------------------ |  | ------------------- | --------- |  | ------------------------------------------- | ---------- | --------------------------------------------------- | - | ----- | ------------------ | 
|$0.30                    |  |                     | 270,000   |  |                                             | 6.35 years |                                                     | $ | 0.30  |                    | 
|$0.31 - $1.00            |  |                     | 35,332    |  |                                             | 1.88 years |                                                     | $ | 0.60  |                    | 
|$1.01 - $3.00            |  |                     | 737,420   |  |                                             | 5.42 years |                                                     | $ | 1.61  |                    | 
|$3.01 - $5.00            |  |                     | 119,500   |  |                                             | 3.90 years |                                                     | $ | 3.90  |                    | 
|$5.01 - $10.00           |  |                     | 210,175   |  |                                             | 4.26 years |                                                     | $ | 6.16  |                    | 
|$10.01 - $15.00          |  |                     | 11,240    |  |                                             | 0.95 years |                                                     | $ | 14.55 |                    | 
|$20.01 - $23.10          |  |                     | 3,333     |  |                                             | 0.04 years |                                                     | $ | 23.10 |                    | 
|$0.30 - $23.10           |  |                     | 1,387,000 |  |                                             | 5.16 years |                                                     | $ | 2.37  |                    | 



141









|                                                                                                     
|-----------------------------------------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                                                       
|(expressed in Canadian dollars)                                                                      
|Years ended December 31, 2016 and 2015, seven months ended December 31, 2014, year ended May 31, 2014



| | 14. | Capital stock (continued):
| | --- | --------------------------



| | (c) | Stock option plan (continued)
| | --- | -----------------------------



Compensation expense related to stock
options granted during the year or from previous periods under the stock option plan for the year ended December 31, 2016 is $1,340,001
(year ended December 31, 2015 - $1,460,316, seven months ended December 31, 2014 - $620,705, year ended May 31, 2014 - $295,144).
The compensation expense was determined based on the fair value of the options at the date of measurement using the Black-Scholes
option pricing model. The expected life of share options is based on historical data and current expectations and is not necessarily
indicative of exercise patterns that may occur. The expected volatility reflects the assumption that the historical volatility
over a period similar to the life of the options is indicative of future trends, which may not necessarily be the actual outcome.



The compensation expense was determined
based on the fair value of the options at the date of measurement using the Black-Scholes option pricing model:



|                        |  | Year endedDecember 31,2016 |  | Year endedDecember 31, 2015 |  | Seven monthsendedDecember 31, 2014
|----------------------- |  | -------------------------- |  | --------------------------- |  | ----------------------------------
|Expected option life    |  | 4.8 - 5.0 years            |  | 1.0 - 5.3 years             |  | 5.0 – 5.4 years                   
|Risk free interest rate |  | 0.52% - 0.67%              |  | 0.57% - 0.92%               |  | 1.01% – 1.66%                     
|Dividend yield          |  | nil                        |  | nil                         |  | Nil                               
|Expected volatility     |  | 115.59% - 117.56%          |  | 135.03% - 171.07%           |  | 142.68% - 166.39                  



Subsequent to December 31, 2016,
50,950 stock options were exercised, 1,400 at an exercise price of $1.90 per common share and 35,500 at an exercise price of $3.90
per common share and 14,050 at an exercise price of $6.16 per common share for total gross proceeds to the Company of $227,658.



Additionally,
Apicore has a stock option plan and at the acquisition date, there were 897,500 options to purchase Class E common stock of Apicore
Inc. outstanding.497,500 options became fully vested on the change in control with the employee’s right to put the
outstanding Apicore Class E shares and options to the Company upon the change in control. The remaining Apicore stock options outstanding
of 400,000 were unaffected by the change of control and will fully vest in 2017. The value of the put option recorded as a liability
to repurchase Apicore Class E shares on the statement of financial position and the value of the remaining options is recorded
as non-controlling interest within equity. During the period from December 1, 2016 to December 31, 2016, the Company recorded $60,240
of stock-based compensation expense within selling, general and administration expenses on the statement of net income.



| | (d) | Warrants
| | --- | --------



On June 26, 2015, the Company closed
a private placement offering with a syndicate of underwriters as described in note 14(b). The underwriters were granted warrants
to purchase common shares of Medicure equal to 7.0% of the total number of Shares issued pursuant to the Offering, exercisable
for a 24 month period from the closing of the Offering at a price of $2.20 per Share. There were 128,068 warrants issued in connection
with offering with a fair value of $232,571, which is included in the share issue costs of $627,247.



On November 17, 2016 as part of Crown
Loan (Note 11), the Company issued 900,000 warrants to the loan holders, exercisable for a 48-month period following the issuance
of the loan at a price of $6.50 per share. The fair value of the warrants issued in connection with the loan was $2,065,500 net
of its pro-rata share of financing costs of $116,695 and were recorded in equity with a corresponding balance recorded as deferred
financing costs which is netted against the associated long-term debt on the Statements of Financial Position.



142









|                                                                                                     
|-----------------------------------------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                                                       
|(expressed in Canadian dollars)                                                                      
|Years ended December 31, 2016 and 2015, seven months ended December 31, 2014, year ended May 31, 2014



| | 14. | Capital stock (continued):
| | --- | --------------------------



| | (d) | Warrants (continued)
| | --- | --------------------



Changes in the number of Canadian
dollar denominated warrants outstanding during the years ended December 31, 2016 and 2015 are as follows:



|                                   |  | December 31, 2016 |         |   | December 31, 2015               |  
|---------------------------------- |  | ----------------- | ------- | - | ------------------------------- | -
|                                   |  | Shares            |         |   | Weighted average exercise price |  
|Balance, beginning of period       |  |                   | 59,775  |   |                                 | $
|Granted                            |  |                   | 900,000 |   |                                 |  
|Exercised                          |  |                   | (17,806 | ) |                                 |  
|Balance, end of period             |  |                   | 941,969 |   |                                 | $
|Options exercisable, end of period |  |                   | 941,969 |   |                                 | $



There were no Canadian dollar denominated warrants outstanding
during the seven months ended December 31, 2014 or the year ended May 31, 2014.



The fair value of the warrants issued during the years
ending December 31, 2016 and 2015 were determined at the date of measurement using a Black-Scholes pricing model with the following
assumptions:



|                        |  | December 31, 2016 |  | December 31, 2015
|----------------------- |  | ----------------- |  | -----------------
|Expected warrant life   |  | 4.0 years         |  | 2.0 years        
|Risk-free interest rate |  | 0.85%             |  | 0.63%            
|Dividend yield          |  | nil               |  | nil              
|Expected volatility     |  | 120.40%           |  | 133.93%          



Subsequent to December 31, 2016,
5,000 warrants were exercised at a price of $2.20 for gross proceeds to the Company of $11,000.



IFRS require warrants with an exercise
price denominated in a currency other the entity's functional currency to be treated as a liability measured at fair value. The
warrants, all with U.S. dollar exercise prices, which expired on December 31, 2016 were recorded at fair value within accounts
payable and accrued liabilities as at December 31, 2015 and totalled $1,161 and December 31, 2014 and totalled $36,259. Changes
in fair value of the warrants for the year ended December 31, 2016 resulted in a recovery of $1,161 (year ended December 31, 2015
– recovery of $35,098, seven months ended December 31, 2014 - recovery of $18,085 and year ended May 31, 2014 – expense
of $43,820) are recorded within finance expense (income).



Changes in the number of warrants
with an exercise price denominated in a currency other than the Company's functional currency outstanding during the years ended
December 31, 2016 and 2015, seven months ended December 31, 2014 and year ended May 31, 2014 are as follows:



|Issue (Expiry date)                      |  | Original 
    granted |        |  | Exercise  price
    per share |                | December
    31, 2014 |  |        | Granted
    (expired) |  |  | December
    31, 2015 |  |  | Granted
    (expired) |        |  | December
    31, 2016 | 
|---------------------------------------- |  | --------------------- | ------ |  | ----------------------------- | -------------- | --------------------- |  | ------ | --------------------- |  |  | --------------------- |  |  | --------------------- | ------ |  | --------------------- | 
|66,667 units (expiry - December 31, 2016 |  |                       | 66,667 |  |                               | USD
    $18.90 |                       |  | 66,667 |                       |  |  | -                     |  |  |                       | 66,667 |  |                       | 



|Issue (Expiry date)                          |  | Original 
    granted |        |  | Exercise  price
    per share |            | May 31,
    2013 |  |        | Granted
    (expired) |  |  | May 31,
    2014 |  |  | Granted
    (expired) |        |  | December
    31, 2014 | 
|-------------------------------------------- |  | --------------------- | ------ |  | ----------------------------- | ---------- | ---------------- |  | ------ | --------------------- |  |  | ---------------- |  |  | --------------------- | ------ |  | --------------------- | 
|66,667 units (expiry - December 31,
    2016 |  |                       | 66,667 |  |                               | USD $18.90 |                  |  | 66,667 |                       |  |  | -                |  |  |                       | 66,667 |  |                       | 



The warrants that expired on December
31, 2016 were issued with a debt financing agreement in September 2007, were denominated in U.S. dollars and may have been exercised,
upon certain conditions being met, on a cashless basis based on a formula described in the warrant agreements.



143









|                                                                                                     
|-----------------------------------------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                                                       
|(expressed in Canadian dollars)                                                                      
|Years ended December 31, 2016 and 2015, seven months ended December 31, 2014, year ended May 31, 2014



| | 14. | Capital stock (continued):
| | --- | --------------------------



| | (e) | Per share amounts
| | --- | -----------------



The weighted average number of common
voting shares outstanding for the years ended December 31, 2016 and 2015, seven months ended December 31, 2014 and year ended May
31, 2014 was 15,002,005, 13,461,609, 12,204,827 and 12,196,745, respectively. For the years ended December 31, 2016 and 2015 and
the seven months ended December 31, 2014, the dilution created by options and warrants has been reflected in the per share amounts.
For the year ended May 31, 2014, the dilution created by options and warrants has not been reflected in the per share amount as
the effect would be anti-dilutive.



The following table reflects the
income and share data used in the basic earnings per share computations:



|                                                                 |  | Year  ended December 31, 2016 |            |  | Year  ended  December 31,  2015 |   |            | Seven months Ended December 31,  2014 |  |   | Year Ended May 31, 2014 | 
|---------------------------------------------------------------- |  | ----------------------------- | ---------- |  | ------------------------------- | - | ---------- | ------------------------------------- |  | - | ----------------------- | 
|Net income (loss)                                                |  | $                             | 27,657,474 |  |                                 | $ | 1,668,429  |                                       |  | $ | 1,195,596               | 
|Weighted average shares outstanding for basic earnings per share |  |                               | 15,002,005 |  |                                 |   | 13,461,609 |                                       |  |   | 12,204,827              | 
|Basic earnings (loss) per share                                  |  | $                             | 1.84       |  |                                 |   | 0.12       |                                       |  |   | 0.10                    | 



The following table reflects the
income and share data used in the diluted earnings per share computations:



|                                                                   |  | Year  ended
    December 31, 2016 |            |  | Year  ended  December 31,  2015 |   |            | Seven months Ended December 31,  2014 |  |   | Year Ended May 31, 2014 | 
|------------------------------------------------------------------ |  | --------------------------------- | ---------- |  | ------------------------------- | - | ---------- | ------------------------------------- |  | - | ----------------------- | 
|Net income (loss)                                                  |  | $                                 | 27,657,474 |  |                                 | $ | 1,668,429  |                                       |  | $ | 1,195,596               | 
|Weighted average shares outstanding for basic earnings per share   |  |                                   | 15,002,005 |  |                                 |   | 13,461,609 |                                       |  |   | 12,204,827              | 
|Effects of dilution from:                                          |  |                                   |            |  |                                 |   |            |                                       |  |   |                         | 
|Stock options                                                      |  |                                   | 1,372,427  |  |                                 |   | 2,244,186  |                                       |  |   | 1,638,299               | 
|Warrants                                                           |  |                                   | 941,969    |  |                                 |   | 59,775     |                                       |  |   | -                       | 
|Weighted average shares outstanding for diluted earnings per share |  |                                   | 17,316,401 |  |                                 |   | 15,765,570 |                                       |  |   | 13,843,126              | 
|Basic earnings (loss) per share                                    |  | $                                 | 1.60       |  |                                 |   | 0.11       |                                       |  |   | 0.09                    | 



Effects of dilution from 14,573 stock
options were excluded in the calculation of weighted average shares outstanding for diluted earnings per share for the year ended
December 31, 2016 as their exercise price exceeds the Company’s share price on the TSX Venture Exchange at December 31, 2016
(year ended December 31, 2015 – 32,940, seven months ended December 31, 2014 – 81,954 stock options). Effects of 1,418,019
stock options were excluded from the calculation of weighted average shares outstanding for diluted earnings per share for the
year ended May 31, 2014 as their effect is anti-dilutive. There were no warrants excluded from the calculation of the weighted
average shares outstanding for diluted earnings per share for the year ended December 31, 2016 as their exercise price exceeds
the Company’s share price on the TSX Venture Exchange at December 31, 2016 (year ended December 31, 2016 – 66,667,
seven months ended December 31, 2014 – 66,667, year ended May 31, 2014 – 66,667)



144









|                                                                                                     
|-----------------------------------------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                                                       
|(expressed in Canadian dollars)                                                                      
|Years ended December 31, 2016 and 2015, seven months ended December 31, 2014, year ended May 31, 2014



| | 15. | Income taxes:
| | --- | -------------



The Company recognized a current
income tax expense of $501,315 for the year ended December 31, 2016 (year ended December 31, 2015 - nil, seven months ended December
31, 2014 – nil, year ended May 31, 2014 - nil).



The Company recognized a deferred
income tax expense of $301,512 for the year ended December 31, 2016 (year ended December 31, 2015 – recovery of $379,000,
seven months ended December 31, 2014 – nil, year ended May 31, 2014 – nil).



As at December 31, 2016, 2015 and
2014, deferred tax assets and liabilities have been recognized with respect to the following items:



|                                  |  | December 31, 2016 |             |   | December 31, 2015 |   |         | December 31, 2014 | 
|--------------------------------- |  | ----------------- | ----------- | - | ----------------- | - | ------- | ----------------- | 
|Deferred tax assets               |  |                   |             |   |                   |   |         |                   | 
|Non-capital loss carryforwards    |  | $                 | 701,000     |   |                   | $ | 356,000 |                   | 
|Other                             |  |                   | -           |   |                   |   | 23,000  |                   | 
|Total deferred tax assets         |  | $                 | 701,000     |   |                   | $ | 379,000 |                   | 
|                                  |  |                   |             |   |                   |   |         |                   | 
|Deferred tax assets/(liabilities) |  |                   |             |   |                   |   |         |                   | 
|Non-capital loss carryforwards    |  |                   | 1,101,000   |   |                   |   | -       |                   | 
|Research and development credits  |  |                   | 922,000     |   |                   |   | -       |                   | 
|Intangible assets                 |  |                   | (38,720,000 | ) |                   |   | -       |                   | 
|Other                             |  |                   | (1,446,000  | ) |                   |   | -       |                   | 
|Total deferred tax liabilities    |  | $                 | 38,143,000  |   |                   | $ | -       |                   | 



As at December 31, 2016, 2015 and
2014, deferred tax assets have not been recognized with respect to the following items:



|                                                 |  | December 31, 2016 |            |  | December 31, 2015 |   |            | December 31, 2014 | 
|------------------------------------------------ |  | ----------------- | ---------- |  | ----------------- | - | ---------- | ----------------- | 
|Deferred tax assets                              |  |                   |            |  |                   |   |            |                   | 
|Non-capital loss carryforwards                   |  | $                 | 6,449,000  |  |                   | $ | 7,086,000  |                   | 
|Scientific research and experimental development |  |                   | 3,793,000  |  |                   |   | 3,793,000  |                   | 
|Other                                            |  |                   | 256,000    |  |                   |   | 235,000    |                   | 
|Deferred tax liability                           |  |                   |            |  |                   |   |            |                   | 
|Investment in Apicore                            |  |                   | -          |  |                   |   | (70,000    | )                 | 
|Total                                            |  | $                 | 10,498,000 |  |                   | $ | 11,044,000 |                   | 



145







|                                                                                                     
|-----------------------------------------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                                                       
|(expressed in Canadian dollars)                                                                      
|Years ended December 31, 2016 and 2015, seven months ended December 31, 2014, year ended May 31, 2014





| | 15. | Income taxes (continued):
| | --- | -------------------------



The reconciliation of the Canadian
statutory rate to the income tax rate applied to the net income (loss) for the years ended December 31, 2016 and 2015, seven months
ended December 31, 2014 and year ended May 31, 2014 to the income tax expense is as follows:



|                           |  | December 31, 2016 |            |  | December 31 2015 |   |            | December 31, 2014 |  |   | May 31 2014 |  
|-------------------------- |  | ----------------- | ---------- |  | ---------------- | - | ---------- | ----------------- |  | - | ----------- | -
|Income (loss) for the year |  |                   |            |  |                  |   |            |                   |  |   |             |  
|Canadian                   |  | $                 | 20,593,613 |  |                  | $ | (2,972,573 | )                 |  | $ | (283,456    | )
|Foreign                    |  |                   | 7,866,688  |  |                  |   | 4,262,002  |                   |  |   | 1,479,052   |  
|                           |  | $                 | 28,460,301 |  |                  | $ | 1,289,429  |                   |  | $ | 1,195,596   |  



|                                                                                                                           |  | December 31, 2016 |            |   | December 31 2015 |   |          | December 31, 2014 |  |   | May 31 2014 |  
|-------------------------------------------------------------------------------------------------------------------------- |  | ----------------- | ---------- | - | ---------------- | - | -------- | ----------------- |  | - | ----------- | -
|Canadian federal and provincial income taxes at 27% (December 31, 2015 – 27%, December 31, 2014 – 27%, May 31, 2014 = 27%) |  | $                 | (7,684,000 | ) |                  | $ | (348,000 | )                 |  | $ | (323,000    | )
|Gain on revaluation of option                                                                                              |  |                   | 5,551,000  |   |                  |   | -        |                   |  |   | -           |  
|Permanent differences and other items                                                                                      |  |                   | (758,000   | ) |                  |   | (537,000 | )                 |  |   | (170,000    | )
|Foreign tax rate in foreign jurisdiction                                                                                   |  |                   | 1,542,000  |   |                  |   | 652,000  |                   |  |   | 252,000     |  
|Change in unrecognized deferred tax assets                                                                                 |  |                   | 546,000    |   |                  |   | 612,000  |                   |  |   | 241,000     |  
|                                                                                                                           |  | $                 | (803,000   | ) |                  | $ | 379,000  |                   |  | $ | -           |  



The foreign tax rate differential
is the difference between the Canadian federal and provincial statutory income tax rate and the tax rates in Barbados (2.50%),
India (33.06%) and the United States (38.00%) that is applicable to income or losses incurred by the Company's subsidiaries.



146









|                                                                                                     
|-----------------------------------------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                                                       
|(expressed in Canadian dollars)                                                                      
|Years ended December 31, 2016 and 2015, seven months ended December 31, 2014, year ended May 31, 2014



| | 15. | Income taxes (continued):
| | --- | -------------------------



At December 31, 2016, the Company
has the following Canadian non-capital losses available for application in future years:



|2026 |  | $ | 939,620    | 
|---- |  | - | ---------- | 
|2027 |  |   | 1,111,169  | 
|2029 |  |   | 5,215,484  | 
|2030 |  |   | 2,711,291  | 
|2031 |  |   | 1,893,976  | 
|2032 |  |   | 1,485,583  | 
|2033 |  |   | 928,119    | 
|2034 |  |   | 1,425,224  | 
|2035 |  |   | 1,692,771  | 
|2036 |  |   | 3,324,853  | 
|     |  | $ | 20,728,090 | 



Scientific research and development
tax credits of $3,826,000 (December 31, 2015 - $3,826,000, December 31, 2014 - $3,826,000 and May 31, 2014 - $3,826,000), which
can be applied against Canadian income taxes otherwise payable, will expiry by 2028. No asset has been recorded in relation to
these credits.



At December 31, 2016, the Company
has the following United States net operating losses available for application in future years:



|2029 |  | $ | -         | 
|---- |  | - | --------- | 
|2031 |  |   | -         | 
|2034 |  |   | 7,577     | 
|2035 |  |   | 875       | 
|2036 |  |   | 2,897,368 | 
|     |  | $ | 2,905,620 | 



At December 31, 2016, the Company
has the following Barbados losses available for application in future years:



|2017 |  | $ | 48,218,773 | 
|---- |  | - | ---------- | 
|2018 |  |   | 8,912,592  | 
|2019 |  |   | 2,427,029  | 
|2020 |  |   | 1,244,865  | 
|2023 |  |   | 1,311,466  | 
|     |  | $ | 62,114,725 | 



147









|                                                                                                     
|-----------------------------------------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                                                       
|(expressed in Canadian dollars)                                                                      
|Years ended December 31, 2016 and 2015, seven months ended December 31, 2014, year ended May 31, 2014



| | 16. | Finance expense:
| | --- | ----------------



During the years ended December
31, 2016 and 2015, seven months ended December 31, 2014 and year ended May 31, 2014 the Company incurred finance expense as follows:



|                                           |  | December 31, 2016 |           |   | December 31, 2015 |   |           | December 31, 2014 |  |   | May 31, 2014 |  
|------------------------------------------ |  | ----------------- | --------- | - | ----------------- | - | --------- | ----------------- |  | - | ------------ | -
|Interest on MIOP loan                      |  | $                 | 218,867   |   |                   | $ | 309,733   |                   |  | $ | 187,451      |  
|Interest on Crown loan                     |  |                   | 849,694   |   |                   |   | -         |                   |  |   | -            |  
|Interest on Knight loan                    |  |                   | 130,724   |   |                   |   | -         |                   |  |   | -            |  
|Interest on other debt and borrowings      |  |                   | 9,631     |   |                   |   | -         |                   |  |   | -            |  
|Change in fair value of royalty obligation |  |                   | 2,271,436 |   |                   |   | 3,791,282 |                   |  |   | 492,722      |  
|Change in fair value of warrant liability  |  |                   | (1,161    | ) |                   |   | (35,098   | )                 |  |   | (18,085      | )
|Other interest, net and banking fees       |  |                   | (62,512   | ) |                   |   | 57,535    |                   |  |   | 67,569       |  
|                                           |  | $                 | 3,416,678 |   |                   | $ | 4,123,452 |                   |  | $ | 729,657      |  



During the years ended December
31, 2016 and 2015, seven months ended December 31, 2014 and year ended May 31, 2014, the Company paid finance expense as follows:



|                                           |  | December 31, 2016 |           |   | December 31, 2015 |   |         | December 31, 2014 |  |   | May 31, 2014 | 
|------------------------------------------ |  | ----------------- | --------- | - | ----------------- | - | ------- | ----------------- |  | - | ------------ | 
|Interest paid on MIOP loan                 |  | $                 | 186,467   |   |                   | $ | 256,427 |                   |  | $ | 153,904      | 
|Interest paid on Crown loan                |  |                   | 702,574   |   |                   |   | -       |                   |  |   | -            | 
|Interest paid on Knight loan               |  |                   | 387,505   |   |                   |   | -       |                   |  |   | -            | 
|Interest paid on other debt and borrowings |  |                   | 9,631     |   |                   |   | -       |                   |  |   | -            | 
|Other interest, net and banking fees       |  |                   | (62,512   | ) |                   |   | 57,873  |                   |  |   | 71,555       | 
|                                           |  | $                 | 1,223,664 |   |                   | $ | 314,300 |                   |  | $ | 225,459      | 



| | 17. | Commitments and contingencies:
| | --- | ------------------------------



| | (a) | Commitments
| | --- | -----------



As at December 31, 2016, and in the
normal course of business, the Company has obligations to make future payments representing contracts and other commitments that
are known and committed as follows:



|2017       |  | $ | 1,940,383 | 
|---------- |  | - | --------- | 
|2018       |  |   | 764,276   | 
|2019       |  |   | 735,959   | 
|2020       |  |   | 566,450   | 
|2021       |  |   | 573,750   | 
|Thereafter |  |   | 1,567,019 | 
|           |  | $ | 6,147,837 | 



148









|                                                                                                     
|-----------------------------------------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                                                       
|(expressed in Canadian dollars)                                                                      
|Years ended December 31, 2016 and 2015, seven months ended December 31, 2014, year ended May 31, 2014



| | 17. | Commitments and contingencies (continued):
| | --- | ------------------------------------------



| | (a) | Commitments (continued)
| | --- | -----------------------



The Company has entered into a manufacturing
and supply agreement to purchase a minimum quantity of AGGRASTAT®unfinished product inventory totalling US$150,000
annually (based on current pricing) until 2024.



Effective November 1, 2014, the Company
entered into a sub-lease with GVI to lease office space at a rate of $170,000 per annum for three years ending October 31, 2017.
The lease was amended on May 1, 2016 and increased the leased area covered under lease agreement at a rate of $212,000 per annum
until October 31, 2019.



The Company, through the acquisition
of a subsidiary as described in Note 4, leases office and manufacturing facilities from a related part, under a non-cancelable
agreement expiring in 2024 at escalating rental rates throughout the term of the lease. The terms of the agreement specify that
the Company has the option to purchase the building and land at the then fair value, as well as the option to renew the lease for
an additional five year period



Effective January 1, 2016, the Company
entered into a new business and administration services agreement with GVI, under which the Company is committed to pay $7,083
per month or $85,000 per year for a one year term. Subsequent to December 31, 2016 and effective January 1, 2017, this agreement
was renewed for an additional year for $7,083 per month or $85,000 per year.



The Company had entered into manufacturing
and supply agreements, as amended, to purchase a minimum quantity of AGGRASTAT® from a third party and all remaining
committed payments relating to inventory purchases were completed prior to December 31, 2016. Effective January 1, 2014, the agreement
was amended and the amounts previously due during fiscal 2014 were deferred and bore interest at 3.25% per annum, with monthly
payments being made against this balance owing of US$45,000 until June 30, 2015. These payments were applied to inventory purchases
made during fiscal 2015 and prepayments for future manufacturing that were completed during fiscal 2016, and as at December 31,
2016, there is no amount owing or prepaid under this agreement. As at December 31, 2015 and 2014, there was $1,063,707 and $549,247,
respectively recorded within prepaid expenses in regards to this agreement. For the year ended December 31, 2016, no interest was
recorded relating to amounts owing under this agreement For the year ended December 31, 2015 and the seven months ended December
31, 2014, $22,675 and $18,738, respectively, was recorded within finance expense relating to this agreement. The Company signed
an amendment to this manufacturing and supply agreement which extended the agreement to October 31, 2017 however all purchase commitments
were fulfilled prior to December 31, 2016.



The Company, through the acquisition
of a subsidiary as described in Note 4, the Company has entered into various collaborative agreements with six parties for the
development of products which continue through 2025. The agreements include terms of renewal, ranging from one to three years,
subject to mutual approval. The total expected costs to be incurred under these agreements approximated US$8.7 million as at December
31, 2016.



Contracts with contract research
organizations are payable over the terms of the associated agreements and clinical trials and timing of payments is largely dependent
on various milestones being met, such as the number of patients recruited, number of monitoring visits conducted, the completion
of certain data management activities, trial completion, and other trial related activities.



Subsequent to December 31, 2016,
a subsidiary of the Company entered into a purchase arrangement with a vendor to purchase software in the next year with an estimated
cost of US$149,000.



149









|                                                                                                     
|-----------------------------------------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                                                       
|(expressed in Canadian dollars)                                                                      
|Years ended December 31, 2016 and 2015, seven months ended December 31, 2014, year ended May 31, 2014



| | 17. | Commitments and contingencies (continued):
| | --- | ------------------------------------------



| | (b) | Guarantees
| | --- | ----------



The Company periodically enters into
research agreements with third parties that include indemnification provisions customary in the industry. These guarantees generally
require the Company to compensate the other party for certain damages and costs incurred as a result of claims arising from research
and development activities undertaken on behalf of the Company. In some cases, the maximum potential amount of future payments
that could be required under these indemnification provisions could be unlimited. These indemnification provisions generally survive
termination of the underlying agreement. The nature of the indemnification obligations prevents the Company from making a reasonable
estimate of the maximum potential amount it could be required to pay. Historically, the Company has not made any indemnification
payments under such agreements and no amount has been accrued in the accompanying financial statements with respect to these indemnification
obligations.



| | (c) | Royalties
| | --- | ---------



As a part of the Birmingham debt
settlement described in note 10, beginning on July 18, 2011, the Company is obligated to pay a royalty to the previous lender based
on future commercial AGGRASTAT® sales until 2023. The royalty is based on 4% of the first $2,000,000 of quarterly
AGGRASTAT® sales, 6% on the portion of quarterly sales between $2,000,000 and $4,000,000 and 8% on the portion of
quarterly sales exceeding $4,000,000 payable within 60 days of the end of the preceding quarter. The previous lender has a one-time
option to switch the royalty payment from AGGRASTAT® to a royalty on MC-1 sales. Management has determined there
is no value to the option to switch the royalty to MC-1 as the product is not commercially available for sale and development of
the product is on hold. Royalties recorded for the year ended December 31, 2016 totalled $1,795,089, (year ended December 31, 2015
- $1,207,772, seven months ended December 31, 2014 - $210,576, year ended May 31, 2014 - $201,131) with payments made during the
year ended December 31, 2016 of $1,712,389 (year ended December 31, 2015 - $642,768, seven months ended December 31, 2014 - $156,722,
year ended May 31, 2014 - $165,291).



The Company is obligated to pay royalties
to third parties based on any future commercial sales of MC-1, aggregating up to 3.9% on net sales. To date, no royalties are due
and/or payable.



| | (d) | Contingencies
| | --- | -------------



In the normal course of business,
the Company may from time to time be subject to various claims or possible claims. Although management currently believes there
are no claims or possible claims that if resolved would either individually or collectively result in a material adverse impact
on the Company’s financial position, results of operations, or cash flows, these matters are inherently uncertain and management’s
view of these matters may change in the future.



On September 10, 2015, the Company
submitted a supplemental New Drug Application to the United States Food and Drug Administration ("FDA") to expand the
label for AGGRASTAT®. The label change is being reviewed and evaluated based substantially on data from published
studies. If the label change submission is successful, the Company will be obligated to pay 300,000 Euros over the course of a
three year period in equal quarterly instalments following approval. On July 7, 2016 the Company announced it has received a Complete
Response Letter stating the sNDA cannot be approved in its present form and requested additional information. The payments are
contingent upon the success of the filing and as such the Company has not recorded any amount in the consolidated statements of
net income and comprehensive income pertaining to this contingent liability.



The Company, through the acquisition
of a subsidiary as described in Note 4, is subject to a stringent regulatory environment. Any product designed and labeled for
use in humans requires regulatory approval by government agencies prior to commercialization. In particular, human therapeutic
products are subject to rigorous preclinical and clinical trials to demonstrate safety and efficacy and other approval procedures
of the FDA. Various Federal, state, local, and foreign statutes and regulations also govern testing, manufacturing, labeling, distribution,
storage, and record-keeping related to such products and their promotion and marketing. In addition, the current regulatory environment
at the FDA could lead to increased testing and data requirements which could impact regulatory timelines and costs to the Company
and its suppliers.



150









|                                                                                                     
|-----------------------------------------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                                                       
|(expressed in Canadian dollars)                                                                      
|Years ended December 31, 2016 and 2015, seven months ended December 31, 2014, year ended May 31, 2014



| | 17. | Commitments and contingencies (continued):
| | --- | ------------------------------------------



| | (d) | Contingencies (continued)
| | --- | -------------------------



The Company, through the acquisition
of a subsidiary as described in Note 4, the Company is involved in legal matters. In 2016, the Company and another pharmaceutical
company filed a complaint in the United States District Court for the Eastern District of Texas against a third party asserting
that the patents of two of the Company’s products were infringed and, in a later filing, sought monetary damages and injunctive
relief. The Court has not issued a final ruling or entered an order on the matter. The Company and the other pharmaceutical company
prevailed in a similar action filed in the United States District Court for the District of New Jersey. However, the defendant
has indicated that they will file a formal request for a review of the disputed patents with the United States Patent and Trademark
Office.



These related matters are in early stages of the legal
process; however, management does not believe that the ultimate resolution of this matter will have a material adverse impact on
the Company’s financial position, results of operations or cash flows.



| | 18. | Related party transactions:
| | --- | ---------------------------



| | (a) | Key management personnel compensation
| | --- | -------------------------------------



Key management personnel are those
persons having authority and responsibility for planning, directing and controlling the activities of the Company. The Board of
Directors, President and Chief Executive Officer, Chief Financial Officer, beginning in January 2016, the Vice-President, Commercial
Operations, and beginning in December 2016, the Chief Executive Officer of Apicore, are key management personnel. On May 9, 2016,
the Company announced that the employment agreement with the Company’s then President and Chief Operating Officer had been
terminated, effective immediately. For 2016, the President and Chief Operating Officer was included in key management personnel.



In addition to their salaries, the
Company also provides non-cash benefits and participation in the Stock Option Plan. The following table details the compensation
paid to key management personnel:



|                                       |  | December 31 2016 |           |  | December 31 2015 |   |           | December 31 2014 |  |   | May 31 2014 | 
|-------------------------------------- |  | ---------------- | --------- |  | ---------------- | - | --------- | ---------------- |  | - | ----------- | 
|Salaries, fees and short-term benefits |  | $                | 871,699   |  |                  | $ | 914,062   |                  |  | $ | 366,015     | 
|Termination benefits                   |  |                  | 221,624   |  |                  |   | -         |                  |  |   | -           | 
|Share-based payments                   |  |                  | 145,398   |  |                  |   | 107,554   |                  |  |   | 73,424      | 
|                                       |  | $                | 1,238,721 |  |                  | $ | 1,021,616 |                  |  | $ | 439,439     | 



As at December 31, 2016, the Company
has $13,279 (December 31, 2015 - $5,675 and December 31, 2014 - $336,766) recorded within accounts payable and accrued liabilities
relating to amounts payable to the members of the Company's Board of Directors for services provided. Beginning on February 22,
2013 and until June 30, 2015, these amounts bore interest at a rate of 5.5% per annum. For the year ended December 31, 2016, there
was no interest charged on amounts payable to the Company’s Board of Directors. For the year ended December 31, 2015, seven
months ended December 31, 2014 and the year ended May 31, 2014, $4,517, $10,127 and $14,918, respectively, was recorded within
finance expense in relation to these amounts payable to the members of the Company's Board of Directors.



On July 11, 2014 and as described
in note 12(b), the Company announced that, subject to all necessary regulatory approvals, it had entered into shares for debt agreements
with certain members of the Board of Directors, pursuant to which the Company will issue common shares with a fair value of $1.98
per common share to satisfy outstanding amounts owing to the Company’s Board of Directors. Of the amounts payable to the
Company's Board of Directors as at December 31, 2014, $109,809 was included in these shares for debt agreements. The shares were
issued on January 9, 2015.



On January 27, 2015 and as described
in note 12(b), the Company announced that, subject to all necessary regulatory approvals, it has entered into shares for debt agreements
with certain members of the Board of Directors, pursuant to which the Company will issue 75,472 of its common shares with a fair
value of $1.44 per common share to satisfy $108,680 of outstanding amounts owing to the these individuals. The shares were issued
on March 20, 2015.



151









|                                                                                                     
|-----------------------------------------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                                                       
|(expressed in Canadian dollars)                                                                      
|Years ended December 31, 2016 and 2015, seven months ended December 31, 2014, year ended May 31, 2014



| | 18. | Related party transactions (continued):
| | --- | ---------------------------------------



| | (a) | Key management personnel compensation (continued)
| | --- | -------------------------------------------------



On May 9, 2016, the Company announced
that the employment agreement with the Company’s President and Chief Operating Officer had been terminated, effective immediately.
Included within selling, general and administration expenses for the year ended December 31, 2016 is $221,624 pertaining to severance
for the former President and Chief Operating Officer. All amounts pertaining to this severance were paid during 2016 and there
is no additional liability in this regard.



| | (b) | Transactions with related parties
| | --- | ---------------------------------



Directors and key management personnel
control 17% of the voting shares of the Company as at December 31, 2016 (December 31, 2015 – 18%, December 31, 2014 –
19%).



During the year ended December 31,
2016, the Company paid GVI, a company controlled by the Chief Executive Officer, a total of $85,000 (year ended December 31, 2015
- $215,000, seven months ended December 31, 2014 - $115,000, year ended May 31, 2014 - $190,000) for business administration services,
$222,500 (year ended December 31, 2015 - $176,051, seven months ended December 31, 2014 - $36,500, year ended May 31, 2014 - $30,500)
in rental costs and $41,975 (year ended December 31, 2015 - $33,575, seven months ended December 31, 2014 - $25,115, year ended
May 31, 2014 - $33,735) for commercial and information technology support services. As described in note 15, the business administration
services summarized above are provided to the Company through a consulting agreement with GVI. Until December 31, 2015, the GVI
agreement included the Chief Financial Officer's services to the Company, as well as accounting, payroll, human resources and some
information technology services. The business and administration services agreement entered into effective January 1, 2016 no longer
includes the Chief Financial Officer's services, which effective January 1, 2016, will be paid directly by the Company through
a consulting agreement.



Clinical research services are provided
through a consulting agreement with GVI Clinical Development Solutions Inc. ("GVI CDS"), a company controlled by the
Chief Executive Officer. Pharmacovigilance and safety, regulatory support, quality control and clinical support are provided to
the Company through the GVI CDS agreement. During the year ended December 31, 2016, the Company paid GVI CDS $592,464, (year ended
December 31, 2015 - $330,764, seven months ended December 31, 2014 - $56,904, year ended May 31, 2014 - $125,583) for clinical
research services.



Research and development services
are provided through a consulting agreement with CanAm Bioresearch Inc. ("CanAm"), a company controlled by a close family
member of the Chief Executive Officer. During the year ended December 31, 2016, the Company paid CanAm $560,205 (year ended December
31, 2015 - $399,580, seven months ended December 31, 2014 - $233,938, year ended May 31, 2014 - $229,732) for research and development
services.



These transactions were in the normal
course of business and have been measured at the exchange amount, which is the amount of consideration established and agreed to
by the related parties. Beginning on February 22, 2013 and until June 30, 2015, these amounts bore interest at a rate of 5.5% per
annum. For the year ended December 31, 2016, there was no interest charged on these amounts payable to related. For the year ended
December 31, 2015, seven months ended December 31, 2014 and the year ended May 31, 2014, $4,517, $10,127 and $14,918, respectively,
was recorded within finance expense in relation to these amounts payable to related parties.



Beginning with the acquisition on
December 1, 2016 (Note 4), the Company incurred rental charges pertaining to leased manufacturing facilities and office space from
Dap Dhaduk II LLC (“Dap Dhaduk”), an entity controlled by a minority shareholder and member of the board of directors
of Apicore Inc. For the period from December 1, 2016 to December 31, 2016, rental expenses from Dap Dhaduk totalled $29,869.



Beginning with the acquisition on
December 1, 2016 (Note 4), the Company purchased inventory totalling of $217,382, from Aktinos Pharmaceuticals Private Limited
(“Aktinos”), an Indian based entity that is significantly influenced by a close family member of the Chief Executive
Officer of Apicore Inc.



As at December 31, 2016, included
in accounts payable and accrued liabilities is $100,493 (December 31, 2015 - $23,494 and December 31, 2014 - $120,962) payable
to GVI, $336,008 (December 31, 2015 - $64,539 and December 31, 2014 - $145,100) payable to GVI CDS, $80,582 (December 31, 2015
- $60,611 and December 31, 2014 - $247,752) payable to CanAm, and $467,250 payable to Aktinos which are unsecured, payable on demand
and bear interest as described above.



152









|                                                                                                     
|-----------------------------------------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                                                       
|(expressed in Canadian dollars)                                                                      
|Years ended December 31, 2016 and 2015, seven months ended December 31, 2014, year ended May 31, 2014



| | 18. | Related party transactions (continued):
| | --- | ---------------------------------------



| | (b) | Transactions with related parties (continued)
| | --- | ---------------------------------------------



Effective July 18, 2016, the Company
renewed its consulting agreement with its Chief Executive Officer, through A.D. Friesen Enterprises Ltd., a company owned by the
Chief Executive Officer. for a term of five years, at a rate of $300,000 annually. The Company may terminate this agreement at
any time upon 120 days written notice. During the year ended December 31, 2016 the Company recorded a bonus of $54,247 (year ended
December 31, 2015 - $100,000, seven months ended December 31, 2014 - $58,904, year ended May 31, 2014 - $286,849) to its Chief
Executive Officer which is recorded within selling, general and administrative expenses. As at December 31, 2016, included in accounts
payable and accrued liabilities is $54,380 (December 31, 2015 – $45,753 and December 31, 2014 - $345,753) payable to A. D.
Friesen Enterprises Ltd. as a result of this consulting agreement, which is unsecured, payable on demand and non-interest bearing.



Effective January 1, 2016, the business
and administration services agreement with GVI no longer included the Chief Financial Officer's services and the Company signed
a consulting agreement with its Chief Financial Officer, through JFK Enterprises Ltd., a company owned by the Chief Financial Officer,
for a one year term, at a rate of $135,000 annually. The agreement may be terminated by either party at any time upon 30 days written
notice. During the year ended December 31, 2016 the Company recorded a bonus of $10,000 to its Chief Financial Officer which is
recorded within selling, general and administrative expenses. As at December 31, 2016, included in accounts payable and accrued
liabilities is $22,313 payable to JFK Enterprises Ltd. as a result of this consulting agreement, which is unsecured, payable on
demand and non-interest bearing.



| | 19. | Expenses by nature:
| | --- | -------------------



Expenses incurred for the years
ended December 31, 2016 and 2015, seven months ended December 31, 2014 and year ended May 31, 2014 are as follows:



|                                       |  | December 31, 2016 |            |   | December 31, 2015 |   |            | December 31, 2014 |  |   | May 31, 2014 |  
|-------------------------------------- |  | ----------------- | ---------- | - | ----------------- | - | ---------- | ----------------- |  | - | ------------ | -
|Personnel expenses                     |  |                   |            |   |                   |   |            |                   |  |   |              |  
|Salaries, fees and short-term benefits |  | $                 | 6,731,824  |   |                   | $ | 3,908,579  |                   |  | $ | 1,079,085    |  
|Share-based payments                   |  |                   | 1,400,241  |   |                   |   | 1,460,316  |                   |  |   | 620,705      |  
|                                       |  |                   | 8,132,065  |   |                   |   | 5,368,895  |                   |  |   | 1,699,790    |  
|Amortization and derecognition         |  |                   | 2,412,170  |   |                   |   | 690,934    |                   |  |   | 433,149      |  
|Research and development               |  |                   | 2,611,467  |   |                   |   | 3,723,317  |                   |  |   | 584,991      |  
|Manufacturing                          |  |                   | 1,062,684  |   |                   |   | 916,939    |                   |  |   | -            |  
|Inventory material costs               |  |                   | 7,933,684  |   |                   |   | 1,563,344  |                   |  |   | 349,901      |  
|(Write-up) write-down of inventory     |  |                   | (108,817   | ) |                   |   | 40,920     |                   |  |   | (80,874      | )
|Medical affairs                        |  |                   | 1,040,755  |   |                   |   | 865,368    |                   |  |   | 260,861      |  
|Administration                         |  |                   | 1,915,639  |   |                   |   | 948,226    |                   |  |   | 362,483      |  
|Selling and logistics                  |  |                   | 5,355,876  |   |                   |   | 3,103,722  |                   |  |   | 854,664      |  
|Professional fees                      |  |                   | 739,513    |   |                   |   | 140,573    |                   |  |   | 150,131      |  
|                                       |  | $                 | 31,095,036 |   |                   | $ | 17,362,238 |                   |  | $ | 4,615,096    |  



153









|                                                                                                     
|-----------------------------------------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                                                       
|(expressed in Canadian dollars)                                                                      
|Years ended December 31, 2016 and 2015, seven months ended December 31, 2014, year ended May 31, 2014



| | 20. | Financial instruments:
| | --- | ----------------------



| | (a) | Financial assets and liabilities
| | --- | --------------------------------



Set out below is a comparison by
class of the carrying amounts and fair value of the Company's financial instruments that are carried in the consolidated financial
statements as at December 31, 2016:



|                                                |  | Carrying amount |            |  | Fair value |  
|----------------------------------------------- |  | --------------- | ---------- |  | ---------- | -
|Financial assets                                |  |                 |            |  |            |  
|Loans and receivables                           |  |                 |            |  |            |  
|Cash and cash equivalents                       |  | $               | 12,266,177 |  |            | $
|Cash held in escrow                             |  |                 | 12,809,072 |  |            |  
|Accounts receivable                             |  |                 | 17,200,778 |  |            |  
|                                                |  |                 |            |  |            |  
|Financial liabilities                           |  |                 |            |  |            |  
|Other financial liabilities:                    |  |                 |            |  |            |  
|Short-term borrowings                           |  | $               | 1,383,864  |  |            | $
|Accounts payable and accrued liabilities        |  |                 | 17,242,366 |  |            |  
|Current income taxes payable                    |  |                 | 504,586    |  |            |  
|Current portion of finance lease obligation     |  |                 | 89,241     |  |            |  
|Current portion of long-term debt               |  |                 | 2,883,752  |  |            |  
|Current portion of royalty obligation           |  |                 | 2,019,243  |  |            |  
|Finance lease obligation                        |  |                 | 242,449    |  |            |  
|Long-term debt                                  |  |                 | 67,947,034 |  |            |  
|Royalty obligation                              |  |                 | 3,666,479  |  |            |  
|Derivative option on Apicore Class C shares     |  |                 | 32,901,006 |  |            |  
|Liability to repurchase Apicore Class E shares  |  |                 | 2,700,101  |  |            |  
|Fair value of Apicore Series A preferred shares |  |                 | 1,755,530  |  |            |  
|Due to vendor                                   |  |                 | 2,759,507  |  |            |  



Included in accounts payable and
accrued liabilities as at December 31, 2016 is the current portion of the other long-term liability (Level 3) of $100,000.



154









|                                                                                                     
|-----------------------------------------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                                                       
|(expressed in Canadian dollars)                                                                      
|Years ended December 31, 2016 and 2015, seven months ended December 31, 2014, year ended May 31, 2014



| | 20. | Financial instruments (continued):
| | --- | ----------------------------------



| | (a) | Financial assets and liabilities (continued)
| | --- | --------------------------------------------



Set out below is a comparison by
class of the carrying amounts and fair value of the Company's financial instruments that are carried in the consolidated financial
statements as at December 31, 2015 and 2014:



|                                         |  | December 31, 2015 |           |  | December 31, 2014 |  
|---------------------------------------- |  | ----------------- | --------- |  | ----------------- | -
|                                         |  | Carrying amount   |           |  | Fair value        |  
|Financial assets                         |  |                   |           |  |                   |  
|Loans and receivables                    |  |                   |           |  |                   |  
|Cash                                     |  | $                 | 3,568,592 |  |                   | $
|Accounts receivable                      |  |                   | 9,823,616 |  |                   |  
|Long-term derivative                     |  |                   | 227,571   |  |                   |  
|                                         |  |                   |           |  |                   |  
|Financial liabilities                    |  |                   |           |  |                   |  
|Other financial liabilities              |  |                   |           |  |                   |  
|Accounts payable and accrued liabilities |  | $                 | 7,079,091 |  |                   | $
|Current portion of long-term debt        |  |                   | 1,625,191 |  |                   |  
|Current portion of royalty obligation    |  |                   | 1,648,180 |  |                   |  
|Long-term debt                           |  |                   | 2,617,593 |  |                   |  
|Royalty obligation                       |  |                   | 3,725,272 |  |                   |  
|Other long-term liability                |  |                   | 100,000   |  |                   |  



Included in accounts payable and
accrued liabilities as at December 31, 2015 is the fair value of warrants denominated in a foreign currency (Level 2) of $1,161
(December 31, 2014 - $36,259) and the current portion of the other long-term liability (Level 3) of $100,000 (December 31, 2014
– nil).



The Company has determined the estimated
fair values of its financial instruments based on appropriate valuation methodologies. The carrying values of current monetary
assets and liabilities approximate their fair values due to their relatively short periods to maturity. The fair value of the Company's
long-term debt is estimated to approximate its carrying value based on the terms of the long-term debt. The royalty obligation
and other long-term liability are carried at amortized cost (Level 3).



IFRS 13, Fair Value Measurement,
establishes a fair value hierarchy that reflects the significance of the inputs used in measuring fair value. The fair value hierarchy
has the following levels:



|• | Level 1 – Quoted prices (unadjusted) in active markets for identical assets or liabilities;                                                                                                                  
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                                                                                              
|• | Level 2 – Inputs other than quoted prices included within Level 1 that are either directly or indirectly observable;                                                                                         
|  |                                                                                                                                                                                                              
|• | Level 3 – Unobservable inputs in which little or no market activity exists, therefore requiring an entity to develop its own assumptions about the assumptions that market participants would use in pricing.



The fair value hierarchy of financial
instruments measured at fair value on the consolidated statements of financial position as at December 31, 2016 is as follows:



155











|                                                                                                     
|-----------------------------------------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                                                       
|(expressed in Canadian dollars)                                                                      
|Years ended December 31, 2016 and 2015, seven months ended December 31, 2014, year ended May 31, 2014





| | 20. | Financial instruments (continued):
| | --- | ----------------------------------



| | (a) | Financial assets and liabilities (continued)
| | --- | --------------------------------------------



|                                                  |  | Level 1 |   |  | Level 2 |   |            | Level 3 | 
|------------------------------------------------- |  | ------- | - |  | ------- | - | ---------- | ------- | 
|Financial liabilities                             |  |         |   |  |         |   |            |         | 
|Short-term borrowings                             |  | $       | - |  |         | $ | 1,383,864  |         | 
|Accounts payable and accrued liabilities          |  |         |   |  |         |   |            |         | 
|Current portion of finance lease obligation       |  |         | - |  |         |   | 89,241     |         | 
|Current portion of long-term debt                 |  |         | - |  |         |   | 2,883,752  |         | 
|Current portion of royalty obligation             |  |         | - |  |         |   | -          |         | 
|Finance lease obligation                          |  |         | - |  |         |   | 242,449    |         | 
|Long-term debt                                    |  |         | - |  |         |   | 67,947,034 |         | 
|Royalty obligation                                |  |         | - |  |         |   | -          |         | 
|Derivative option on Apicore Class C shares       |  |         | - |  |         |   | -          |         | 
|Liability to repurchase Apicore Class E shares    |  |         | - |  |         |   | -          |         | 
|Fair value of Apicore Series A-1 preferred shares |  |         | - |  |         |   | -          |         | 



Included in accounts payable and
accrued liabilities as at December 31, 2016 is the current portion of the other long-term liability (Level 3) of $100,000.



The fair value hierarchy of financial
instruments measured at fair value on the consolidated statements of financial position as at December 31, 2015 is as follows:



|                                         |  | Level 1 |   |  | Level 2 |   |           | Level 3 | 
|---------------------------------------- |  | ------- | - |  | ------- | - | --------- | ------- | 
|Financial assets                         |  |         |   |  |         |   |           |         | 
|Long-term derivative                     |  | $       | - |  |         | $ | -         |         | 
|                                         |  |         |   |  |         |   |           |         | 
|Financial liabilities                    |  |         |   |  |         |   |           |         | 
|Accounts payable and accrued liabilities |  | $       | - |  |         | $ | 1,161     |         | 
|Current portion of long-term debt        |  |         | - |  |         |   | 1,625,191 |         | 
|Current portion of royalty obligation    |  |         | - |  |         |   | -         |         | 
|Long-term debt                           |  |         | - |  |         |   | 2,617,593 |         | 
|Royalty obligation                       |  |         | - |  |         |   | -         |         | 
|Other long-term liability                |  |         | - |  |         |   | -         |         | 



Included in accounts payable and
accrued liabilities as at December 31, 2015 is the fair value of warrants denominated in a foreign currency (Level 2) of $1,161
and the current portion of the other long-term liability (Level 3) of $100,000.



156









|                                                                                                     
|-----------------------------------------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                                                       
|(expressed in Canadian dollars)                                                                      
|Years ended December 31, 2016 and 2015, seven months ended December 31, 2014, year ended May 31, 2014





| | 20. | Financial instruments (continued):
| | --- | ----------------------------------



| | (a) | Financial assets and liabilities (continued)
| | --- | --------------------------------------------



The fair value hierarchy of financial
instruments measured at fair value on the consolidated statements of financial position as at December 31, 2014 is as follows:



|                                         |  | Level 1 |   |  | Level 2 |   |           | Level 3 | 
|---------------------------------------- |  | ------- | - |  | ------- | - | --------- | ------- | 
|Financial assets                         |  |         |   |  |         |   |           |         | 
|Long-term derivative                     |  | $       | - |  |         | $ | -         |         | 
|                                         |  |         |   |  |         |   |           |         | 
|Financial liabilities                    |  |         |   |  |         |   |           |         | 
|Accounts payable and accrued liabilities |  | $       | - |  |         | $ | 36,259    |         | 
|Current portion of long-term debt        |  |         | - |  |         |   | 654,677   |         | 
|Current portion of royalty obligation    |  |         | - |  |         |   | -         |         | 
|Long-term debt                           |  |         | - |  |         |   | 4,225,949 |         | 
|Royalty obligation                       |  |         | - |  |         |   | -         |         | 
|Other long-term liability                |  |         | - |  |         |   | -         |         | 



Included in accounts payable and
accrued liabilities as at December 31, 2014 is the fair value of warrants denominated in a foreign currency (Level 2) of $36,259.



Royalty obligation:Estimating
fair value requires determining the most appropriate valuation model which is dependent on its underlying terms and conditions.
This estimate also requires determining expected revenue from AGGRASTAT® sales and an appropriate discount rate and making
assumptions about them. If the expected revenue from AGGRASTAT® sales were to change by 10%, then the royalty obligation liability
recorded as at December 31, 2016 would change by approximately $730,000. If the discount rate used in calculating the fair value
of the royalty obligation of 20% were to change by 1%, the royalty obligation liability recorded as at December 31, 2016 would
change by approximately $120,000.



For assets and liabilities that
are recognized in the consolidated financial statements on a recurring basis, the Company determines whether transfers have occurred
between levels in the hierarchy by reassessing categorization (based on the lowest level input that is significant to the fair
value measurement as a whole) at the end of each reporting period. During the years ended December 31, 2016 and 2015, seven months
ended December 31, 2014 and the year ended May 31, 2014 there were no transfers between Level 1 and Level 2 fair value measurements.



| | (b) | Risks arising from financial instruments
                                         and risk management
| | --- | -----------------------------------------------------------------------------------------------------



The Company's activities expose
it to a variety of financial risks; market risk (including foreign exchange and interest rate risks), credit risk and liquidity
risk. Risk management is the responsibility of the Company, which identifies, evaluates and, where appropriate, mitigates financial
risks.



157







|                                                                                                     
|-----------------------------------------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                                                       
|(expressed in Canadian dollars)                                                                      
|Years ended December 31, 2016 and 2015, seven months ended December 31, 2014, year ended May 31, 2014





| | 20. | Financial instruments (continued):
| | --- | ----------------------------------



| | (b) | Risks arising from financial instruments
                                         and risk management (continued)
| | --- | -----------------------------------------------------------------------------------------------------------------



| | (i) | Market risk
| | --- | -----------



(a) Foreign exchange risk
is the risk that the fair value of future cash flows for financial instruments will fluctuate because of changes in foreign exchange
rates. The Company is exposed to currency risks primarily due to its U.S dollar denominated cash, accounts receivable, accounts
payable and accrued liabilities, long-term debt and royalty obligation. The Company has not entered into any foreign exchange
hedging contracts.



The Company is exposed to U.S.
dollar currency risk through the following U.S. denominated financial assets and liabilities:



|(Expressed in U.S. Dollars)                        |  | December 31, 2016 |             |   | December 31, 2015 |   |            | December 31, 2014 | 
|-------------------------------------------------- |  | ----------------- | ----------- | - | ----------------- | - | ---------- | ----------------- | 
|Cash                                               |  | $                 | 8,895,641   |   |                   | $ | 2,391,230  |                   | 
|Cash held in escrow                                |  |                   | 9,538,366   |   |                   |   |            |                   | 
|Accounts receivable                                |  |                   | 12,083,028  |   |                   |   | 7,078,982  |                   | 
|Long-term derivative                               |  |                   | -           |   |                   |   | 164,430    |                   | 
|Accounts payable and accrued liabilities           |  |                   | (9,588,229  | ) |                   |   | (4,466,722 | )                 | 
|Income taxes payable                               |  |                   | (375,743    | ) |                   |   | -          |                   | 
|Current portion of finance lease obligation        |  |                   | (66,454     | ) |                   |   | -          |                   | 
|Current portion of royalty obligation              |  |                   | (1,503,643  | ) |                   |   | (1,190,881 | )                 | 
|Finance lease obligation                           |  |                   | (180,542    | ) |                   |   | -          |                   | 
|Long-term debt                                     |  |                   | (9,473,000  | ) |                   |   | -          |                   | 
|Royalty obligation                                 |  |                   | (2,730,269  | ) |                   |   | (2,691,670 | )                 | 
|Due to Vendor                                      |  |                   | (2,054,882  | ) |                   |   | -          |                   | 
|Derivative option on Apicore Class C shares        |  |                   | (24,499,967 | ) |                   |   | -          |                   | 
|Liability to repurchase Apicore Class E shares     |  |                   | (2,010,649  | ) |                   |   | -          |                   | 
|Fair value of Apicore Series A-1 preferrred shares |  |                   | (1,307,268  | ) |                   |   |            |                   | 
|                                                   |  | $                 | (23,273,616 | ) |                   | $ | 1,285,369  |                   | 



Based on the above net exposures
as at December 31, 2016, assuming that all other variables remain constant, a 5% appreciation or deterioration of the Canadian
dollar against the U.S. dollar would result in a corresponding increase or decrease on the Company's net income of approximately
$1,164,000 (December 31, 2015 - $64,000 and December 31, 2014 - $68,000).



The Company is also exposed to
currency risk on the Indian Rupee, however risk is reduced due to the low value of the Rupee in comparison to the Canadian dollar.
Foreign currency changes in regards to the Rupee would have limited impact on the operations of the Company.



(b) Interest rate risk
is the risk that the future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The
Company is exposed to interest rate risk arising primarily from fluctuations in interest rates on its cash, long-term debt and
other long-term liability.



An increase or decrease in interest
rates of 1% during the year ended December 31, 2016, with all other variables held constant, would result in a corresponding increase
or decrease on the Company's net income (loss) of approximately $250,000 (year ended December 31, 2015 - $20,000, seven months
ended December 31, 2014 - $4,000, year ended May 31, 2014 - $2,000). An increase in the crown company borrowing rate of 1% during
the year ended December 31, 2016, with all other variables held constant, would result in a corresponding increase or decrease
on the Company's net income (loss) of approximately $26,000 (December 31, 2015 - $49,000, seven months ended December 31, 2014
- $52,000, year ended May 31, 2014 - $52,000).



158







|                                                                                                     
|-----------------------------------------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                                                       
|(expressed in Canadian dollars)                                                                      
|Years ended December 31, 2016 and 2015, seven months ended December 31, 2014, year ended May 31, 2014







| | 20. | Financial instruments (continued):
| | --- | ----------------------------------



| | (b) | Risks arising from financial instruments
                                         and risk management (continued)
| | --- | -----------------------------------------------------------------------------------------------------------------



| | (ii) | Credit risk
| | ---- | -----------



Credit risk is the risk of financial
loss to the Company if a partner or counterparty to a financial instrument fails to meet its contractual obligation and arises
principally from the Company’s cash, and accounts receivable. The carrying amounts of the financial assets represents the
maximum credit exposure.



The Company limits its exposure
to credit risk on cash by placing these financial instruments with high-credit quality financial institutions.



The Company is subject to a concentration
of credit risk related to its accounts receivable as 46% of the balance of amounts owing are from three customers. The Company
has historically had low impairment in regards to its accounts receivable. As at December 31, 2016, none of the outstanding accounts
receivable were outside of the normal payment terms and the Company did not record any bad debt expenses (year ended December
31, 2015 - $4,142, seven months ended December 31, 2014 – bad debt expense of $4,142 and year ended May 31, 2014 - nil).



| | (iii) | Liquidity risk
| | ----- | --------------



Liquidity risk is the risk that
the Company will not be able to meet its financial obligations as they come due. The Company manages its liquidity risk by continuously
monitoring forecasted and actual cash flows, as well as anticipated investing and financing activities and to ensure, as far as
possible, that it will have sufficient liquidity to meet its liabilities when due and to fund future operations.



The majority of the Company’s
accounts payable and accrued liabilities are due within the current operating period. For long-term debt repayments see note 9.



| | (c) | Capital management
| | --- | ------------------



The Company manages its capital
structure and makes adjustments to it, based on the funds available to the Company, in order to continue the business of the Company.
The Company, upon approval from its Board of Directors, will balance its overall capital structure through new share and warrant
issuances, granting of stock options, the issuance of debt or by undertaking other activities as deemed appropriate under the
specific circumstance. The Board of Directors does not establish quantitative return on capital criteria for management, but rather
relies on the expertise of the Company's management to sustain future development of the business.



The Company’s objectives when
managing capital are to safeguard the Company’s ability to continue as a going concern and to provide capital to pursue
the development and commercialization of its products. In the management of capital, the Company includes cash, long-term debt,
capital stock, stock options, warrants and contributed surplus. The Company manages the capital structure and makes adjustments
to it in light of changes in economic conditions and the risk characteristics of the underlying assets. To maintain or adjust
the capital structure, the Company may attempt to issue new shares or new debt.



At this stage of the Company's development,
in order to maximize its current business activities, the Company does not pay out dividends. Management reviews its capital management
approach on an on-going basis and believes that this approach, given the relative size of the Company, is reasonable.



The Company’s overall strategy
with respect to capital risk management remains unchanged for the year ended December 31, 2016.



159









|                                                                                                     
|-----------------------------------------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                                                       
|(expressed in Canadian dollars)                                                                      
|Years ended December 31, 2016 and 2015, seven months ended December 31, 2014, year ended May 31, 2014





| | 21. | Determination of fair values:
| | --- | -----------------------------



A number of the Company's accounting
policies and disclosures require the determination of fair value, for both financial and non-financial assets and liabilities.
Fair values have been determined for measurement and/or disclosure purposes based on the following models. When applicable, further
information about the assumptions made in determining fair values is disclosed in the notes specific to that asset or liability.



| | (a) | Long-term derivative
| | --- | --------------------



The long-term derivative is the
value associated to the options rights received by the Company and is classified as fair value through profit and loss. The change
in the long-term derivative is recorded as a revaluation of long-term derivative in the consolidated statement of net income and
comprehensive income. The long-term derivative is non-transferable and is recorded at fair value at the date at which it was acquired
and subsequently revalued at each reporting date. Estimating fair value for this derivative requires determining the most appropriate
valuation model which is dependent on the terms and conditions of the derivative. This estimate also requires determining the
most appropriate inputs to the valuation model, including the expected life of the derivative, volatility, dividend yield and
probabilities pertaining to its exercise and making assumptions about them.



| | (b) | Share-based payment transactions
| | --- | --------------------------------



The fair value of the employee share
options is measured using the Black-Scholes option pricing model. Measurement inputs include share price on measurement date,
exercise price of the instrument, expected volatility (based on weighted average historic volatility adjusted for changes expected
due to publicly available information), weighted average expected life of the instruments (based on historical experience and
general option holder behaviour), expected dividends, and the risk-free interest rate (based on government bonds). Service and
non-market performance conditions attached to the transactions are not taken into account in determining fair value.



| | (c) | Royalty obligation
| | --- | ------------------



The royalty obligation is recorded
at its fair value at the date at which the liability was incurred and subsequently measured at amortized cost using the effective
interest method at each reporting date. Estimating fair value for this liability requires determining the most appropriate valuation
model which is dependent on its underlying terms and conditions. This estimate also requires determining expected revenue from
AGGRASTAT® sales and an appropriate discount rate and making assumptions about them.



| | (d) | Liability to repurchase Apicore Class
                                         E shares
| | --- | ---------------------------------------------------------------------------------------



The liability is recorded at its
fair value being the fixed option price for which the employees can request the Company to redeem their Class E shares based on
the underlying contractual terms.



| | (e) | Derivative
                                         option on Apicore Class C shares
| | --- | ------------------------------------------------------------------------------------



The derivative option is recorded
at the fair value underlying the contractual terms that provided the fixed option price of Apicore’s Class C common shares
at the date of grant.



| | (f) | Fair value
                                         of the Apicore Series A-1 preferred shares
| | --- | ----------------------------------------------------------------------------------------------



The fair value of the Apicore
Series A-1 shares was determined on initial recognition in relation to valuation performed over Apicore for purposes of the Company’s
acquisition of Apicore. Estimating fair value required using the most appropriate valuation model and management’s best
estimates of future cash flows and an appropriate discount rate.



160









|                                                                                                     
|-----------------------------------------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                                                       
|(expressed in Canadian dollars)                                                                      
|Years ended December 31, 2016 and 2015, seven months ended December 31, 2014, year ended May 31, 2014







| | 22. | Segmented information:
| | --- | ----------------------



The operations of the Company
are classified in two industry segments: the marketing and distribution of AGGRASTAT® and the manufacturing and distribution
of API. No operating segments have been aggregated to form these reportable operating segments.



Revenue generated from external
customers based on their location for the years ended December 31, 2016 and 2015; seven months ended December 31, 2014 and year
ended May 31, 2014 is as follows:



|                 |  | Year ended December 31 2016 |            |  | Year ended December 31 2015 |   |            | Seven months  ended December 31 2014 |  |   | Year ended May 31 2014 | 
|---------------- |  | --------------------------- | ---------- |  | --------------------------- | - | ---------- | ------------------------------------ |  | - | ---------------------- | 
|United States    |  | $                           | 36,823,860 |  |                             | $ | 22,083,128 |                                      |  | $ | 5,264,395              | 
|Canada and other |  |                             | 954,611    |  |                             |   | -          |                                      |  |   | -                      | 
|                 |  | $                           | 37,778,471 |  |                             | $ | 22,083,128 |                                      |  | $ | 5,264,395              | 



During the year ended December
31, 2016 70% of total revenue was generated from three customers. Customer A accounted for 16%, Customer B accounted for 28% and
Customer C accounted for 26%.



Property and equipment, intangible
assets and other assets are located in the following countries:



|              |  | December 31, 2016 |             |  | December 31, 2015 |   |           | December 31, 2014 | 
|------------- |  | ----------------- | ----------- |  | ----------------- | - | --------- | ----------------- | 
|Canada        |  | $                 | 263,984     |  |                   | $ | 219,787   |                   | 
|Barbados      |  |                   | -           |  |                   |   | 1,411,992 |                   | 
|India         |  |                   | 7,896,331   |  |                   |   | -         |                   | 
|United States |  |                   | 103,167,032 |  |                   |   | 10,375    |                   | 
|              |  | $                 | 111,327,347 |  |                   | $ | 1,642,154 |                   | 



The financial measures reviewed
by the Company’s chief operating decision maker are presented below for the year ended December 31, 2016:



|For the year ended December 31, 2016
|------------------------------------
|                                    
|Revenue                             
|Operating costs                     
|Operating income                    



161







ITEM 19. EXHIBITS



|Number |  | Exhibit                                                                                                                                                                                                                                        
|------ |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       |  |                                                                                                                                                                                                                                                
|1.     |  | Articles of Incorporation and Bylaws: [15];                                                                                                                                                                                                    
|       |  |                                                                                                                                                                                                                                                
|1.1    |  | Medicure’s Articles of Incorporation dated September 15, 1997 [1];                                                                                                                                                                             
|       |  |                                                                                                                                                                                                                                                
|1.2    |  | Lariat’s Articles of Incorporation dated June 3, 1997 [1];                                                                                                                                                                                     
|       |  |                                                                                                                                                                                                                                                
|1.3    |  | Medicure’s Certificate of Continuance from Manitoba to Alberta dated December 3, 1999
    [1];                                                                                                                                                 
|       |  |                                                                                                                                                                                                                                                
|1.4    |  | Certificate of Amalgamation for Medicure and Lariat dated December 22, 1999 [1];                                                                                                                                                               
|       |  |                                                                                                                                                                                                                                                
|1.5    |  | Medicure’s Certificate of Continuance from Alberta to Canada dated February 23, 2000
    [1];                                                                                                                                                  
|       |  |                                                                                                                                                                                                                                                
|1.6    |  | Amended Certificate of Continuance and Articles of Continuance dated February 20, 2003 [3];                                                                                                                                                    
|       |  |                                                                                                                                                                                                                                                
|1.7    |  | Certificate of Amendment dated November 1, 2012 [15];                                                                                                                                                                                          
|       |  |                                                                                                                                                                                                                                                
|1.8    |  | Bylaw No. 1A [15];                                                                                                                                                                                                                             
|       |  |                                                                                                                                                                                                                                                
|4.     |  | Material Contracts and Agreements: [15];                                                                                                                                                                                                       
|       |  |                                                                                                                                                                                                                                                
|4.1    |  | Transfer Agency Agreement between Montreal Trust Company of Canada and the Company dated
    as of January 26, 2000, whereby Montreal Trust Company of Canada agreed to act as transfer agent and registrar with respect
    to the Shares [1];
|       |  |                                                                                                                                                                                                                                                
|4.2    |  | Medicure International Licensing Agreement between the Company and Medicure International
    Inc. dated June 1, 2000, wherein the Company granted Medicure International, Inc. a license with regard to certain intellectual
    property [1];
|       |  |                                                                                                                                                                                                                                                
|4.3    |  | Development Agreement between Medicure International, Inc. and CanAm Bioresearch Inc. dated
    June 1, 2000, wherein CanAm Bioresearch Inc. agreed to conduct research and development activities for Medicure International,
    Inc. [1];   
|       |  |                                                                                                                                                                                                                                                
|4.4    |  | Amendment to the Consulting Services Agreement dated February 1, 2002 between A.D. Friesen
    Enterprises Ltd. and the Company whereby consulting services will be provided to the Company by Dr. Albert D. Friesen [2];                      
|       |  |                                                                                                                                                                                                                                                
|4.5    |  | Stock Option Plan approved February 4, 2002 [3];                                                                                                                                                                                               
|       |  |                                                                                                                                                                                                                                                
|4.5    |  | Amendment dated March 1, 2002 to the Development Agreement between Medicure International,
    Inc. and CanAm Bioresearch Inc. [5];                                                                                                            
|       |  |                                                                                                                                                                                                                                                
|4.7    |  | Amendment dated August 7, 2003 to the Development Agreement between Medicure International,
    Inc. and CanAm Bioresearch Inc. [3];                                                                                                           
|       |  |                                                                                                                                                                                                                                                
|4.8    |  | Amendment to the Consulting Services Agreement dated October 1, 2003 between A.D. Friesen
    Enterprises Ltd. and the Company whereby consulting services will be provided to the Company by Dr. Albert D. Friesen [4];                       
|       |  |                                                                                                                                                                                                                                                
|4.9    |  | Employment Agreement with Dawson Reimer dated October 1, 2001 [4];                                                                                                                                                                             



162







|4.10 |  | Amendment to Employment Agreement dated April 5, 2005 between A.D. Friesen
    Enterprises Ltd. and the Company [5];                                                                                                                                                                                         
|---- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|     |  |                                                                                                                                                                                                                                                                                                              
|4.11 |  | Amendment to Employment Agreement dated April 5, 2005 between Dawson Reimer and the Company
    [5];                                                                                                                                                                                                         
|     |  |                                                                                                                                                                                                                                                                                                              
|4.12 |  | Amendment to Employment Agreement dated April 5, 2005 between Derek Reimer and the Company
    [5];                                                                                                                                                                                                          
|     |  |                                                                                                                                                                                                                                                                                                              
|4.13 |  | Amendment dated July 8, 2005 to the Development Agreement between Medicure International,
    Inc. and CanAm Bioresearch Inc. [5];                                                                                                                                                                           
|     |  |                                                                                                                                                                                                                                                                                                              
|4.14 |  | Amendment to Employment Agreement dated October 1, 2005 between A.D. Friesen Enterprises
    Ltd. and the Company [6];                                                                                                                                                                                       
|     |  |                                                                                                                                                                                                                                                                                                              
|4.15 |  | Amendment to Development Agreement dated June 1, 2000 between CanAm Bioresearch Inc. and
    Medicure International, Inc. dated July 4, 2006 [6];                                                                                                                                                            
|     |  |                                                                                                                                                                                                                                                                                                              
|4.16 |  | Amended Stock Option Plan approved October 25, 2005 [6];                                                                                                                                                                                                                                                     
|     |  |                                                                                                                                                                                                                                                                                                              
|4.17 |  | Amendment to Employment Agreement dated October 1, 2006 between A.D. Friesen Enterprises
    Ltd. and the Company [7];                                                                                                                                                                                       
|     |  |                                                                                                                                                                                                                                                                                                              
|4.18 |  | Amended License Agreement between Medicure and the University of Manitoba dated November
    24, 2006, originally dated August 30, 1999, wherein the University of Manitoba granted to Medicure an exclusive license with
    regard to certain intellectual property (the “U of M Licensing Agreement”) [7];
|     |  |                                                                                                                                                                                                                                                                                                              
|4.19 |  | Amendment to Employment Agreement dated October 1, 2007 between A.D. Friesen Enterprises
    Ltd. and the Company [8];                                                                                                                                                                                       
|     |  |                                                                                                                                                                                                                                                                                                              
|4.20 |  | Amended Stock Option Plan approved October 2, 2007 as filed on October 9, 2007 Form S-8
    #333-146574 [15];                                                                                                                                                                                                
|     |  |                                                                                                                                                                                                                                                                                                              
|4.21 |  | Employment Agreement with Dwayne Henley June 10, 2008 [8]                                                                                                                                                                                                                                                    
|     |  |                                                                                                                                                                                                                                                                                                              
|4.22 |  | Debt financing agreement between Birmingham Associates Ltd. and the Company dated September
    17, 2007 [8].                                                                                                                                                                                                
|     |  |                                                                                                                                                                                                                                                                                                              
|4.23 |  | Business and administration services agreement between Genesys Venture Inc. and the Company
    dated October 1, 2010. [15];                                                                                                                                                                                 
|     |  |                                                                                                                                                                                                                                                                                                              
|4.24 |  | Master services agreement between GVI Clinical Development Solutions Inc. and the Company
    dated June 9, 2009. [15];                                                                                                                                                                                      
|     |  |                                                                                                                                                                                                                                                                                                              
|4.25 |  | Debt settlement agreement between Birmingham Associates Ltd. And the Company dated July
    18, 2011. [15];                                                                                                                                                                                                  
|     |  |                                                                                                                                                                                                                                                                                                              
|4.26 |  | Royalty and guarantee agreement between Birmingham Associates Ltd. And the Company dated
    July 18, 2011. [15];                                                                                                                                                                                            



163







|4.27 |  | Business and administration services agreement between Genesys Venture
    Inc. and the Company dated January 1, 2012. [15];                 
|---- |  | ---------------------------------------------------------------------------------------------------------------------------------------------
|     |  |                                                                                                                                              
|4.28 |  | Stock Option Plan approved November 30, 2012 [15];                                                                                           
|     |  |                                                                                                                                              
|4.29 |  | Stock Option Plan approved June 22, 2016 **                                                                                                  
|     |  |                                                                                                                                              
|11.  |  | Code of Ethics [4].                                                                                                                          
|     |  |                                                                                                                                              
|12.1 |  | Certification of CEO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 **.                                                           
|     |  |                                                                                                                                              
|12.2 |  | Certification of CFO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 **.                                                           
|     |  |                                                                                                                                              
|13.1 |  | Certification of CEO and CFO pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002 **.
|     |  |                                                                                                                                              
|     |  | [1] Herein incorporated by reference as previously included in the Company’s Form
    20-F registration statement filed on January 30, 2001. 
|     |  |                                                                                                                                              
|     |  | [2] Herein incorporated by reference as previously included in the Company’s Form
    20-F annual report filed on December 31, 2002.         
|     |  |                                                                                                                                              
|     |  | [3] Herein incorporated by reference as previously included in the Company’s Form
    20-F annual report filed on October 20, 2003.          
|     |  |                                                                                                                                              
|     |  | [4] Herein incorporated by reference as previously included in the Company’s Form
    20-F annual report filed on September 15, 2004.        
|     |  |                                                                                                                                              
|     |  | [5] Herein incorporated by reference as previously included in the Company’s Form
    20-F annual report filed on August 19, 2005.           
|     |  |                                                                                                                                              
|     |  | [6] Herein incorporated by reference as previously included in the Company’s Form
    20-F annual report filed on August 10, 2006.           
|     |  |                                                                                                                                              
|     |  | [7] Herein incorporated by reference as previously included in the Company’s Form
    20-F annual report filed on August 22, 2007.           
|     |  |                                                                                                                                              
|     |  | [8] Herein incorporated by reference as previously included in the Company’s Form
    20-F annual report filed on August 27, 2008.           
|     |  |                                                                                                                                              
|     |  | [9] Herein incorporated by reference as previously included in the Company’s Form
    20-F annual report filed on September 2, 2009.         
|     |  |                                                                                                                                              
|     |  | [10] Herein incorporated by reference as previously included in the Company’s Form
    20-F annual report filed on September 28, 2010.       
|     |  |                                                                                                                                              
|     |  | [11] Herein incorporated by reference as previously included in the Company’s Form
    20-F annual report filed on September 28, 2011.       



164







|     |  | [12]
Herein incorporated by reference as previously included in the Company’s Form 20-F annual report filed on September 19,
2012.    
|---- |  | --------------------------------------------------------------------------------------------------------------------------------------
|     |  |                                                                                                                                       
|     |  | [13] Herein incorporated by reference as previously included in the Company’s Form
    20-F annual report filed on September 27, 2013.
|     |  |                                                                                                                                       
|     |  | [14] Herein incorporated by reference as previously included in the Company’s Form
    20-F annual report filed on September 12, 2014.
|     |  |                                                                                                                                       
|     |  | [15] Herein incorporated by reference as previously included in the Company’s Form
    20-F annual report filed on April 14, 2015.    
|     |  |                                                                                                                                       
|     |  | [16] Herein incorporated by reference as previously included in the Company’s Form
    20-F annual report filed on March 30, 2016.    
|     |  |                                                                                                                                       
|23.1 |  | Consent of Independent Registered Pubic Accounting Firm **                                                                            



** Filed Herewith



165







SIGNATURE PAGE



Pursuant to the requirements of Section 12
of the Securities Exchange Act of 1934, the Company certifies that it meets all of the requirements for filing on Form
20-F and has duly caused this Annual Report to be signed on its behalf by the undersigned, thereunto duly authorized.



Dated: April 26, 2017



ON BEHALF OF THE CORPORATION,

MEDICURE INC.



per:



|/s/ Albert Friesen       | 
|------------------------ | 
|Albert D. Friesen, Ph.D. | 
|Chairman, & CEO          | 



166