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1

UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C.
20549

FORM 20-F

[ ] REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g)
OF THE SECURITIES EXCHANGE ACT OF 1934or

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended: May 31, 2007 or

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934or

[ ] SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIESEXCHANGE ACT OF 1934

Commission file number: 0-31092

MEDICURE INC.(Exact name
of registrant as specified in its charter)

Canada(Jurisdiction of incorporation or
organization)

4 - 1200 Waverley Street, Winnipeg, Manitoba, Canada R3T
0P4(Address of principal executive offices)

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 May 31, 2007 the registrant had 116,314,509 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 _________ NoX

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 _________ NoX

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2

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 XNo
  _________

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 FilerXNon-Accelerated Filer_________

Indicate by check mark which financial statement item the registrant
  has elected to follow: Item 17 XItem 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 _________   NoX

As of May 31, 2007, the rate for Canadian dollars was US $0.9349
for Cdn $1.00.

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3

TABLE OF CONTENTS

|GLOSSARY                                                             | 5                                                            
|-------------------------------------------------------------------- | -------------------------------------------------------------
|FORWARD LOOKING
      STATEMENTS                                     | 6                                                            
|PART I                                                               |                                                              
|ITEM 1 - IDENTITY OF
      DIRECTORS, SENIOR MANAGEMENT AND ADVISERS | 6                                                            
|A.                                                                   | Directors and
      Senior Management                        
|B.                                                                   | Advisers                                                     
|C.                                                                   | Auditors                                                     
|ITEM 2 - OFFER STATISTICS
      AND EXPECTED TIMETABLE               | 6                                                            
|ITEM 3 - KEY
      INFORMATION                                       | 6                                                            
|A.                                                                   | Selected Financial Data                                      
|B.                                                                   | Capitalization and Indebtedness                              
|C.                                                                   | Reasons for the Offer and Use
      of Proceeds              
|D.                                                                   | Risk Factors                                                 
|ITEM 4 - INFORMATION ON THE
      COMPANY                            | 20                                                           
|A.                                                                   | History and
      Development of the Company                 
|B.                                                                   | Business Overview                                            
|C.                                                                   | Organizational Structure                                     
|D.                                                                   | Property, Plants and
      Equipment                         
|ITEM 4A -
      UNRESOLVED STAFF COMMENTS                            | 26                                                           
|ITEM 5 - OPERATING AND
      FINANCIAL REVIEW AND PROSPECTS          | 26                                                           
|A.                                                                   | Operating
      Results                                      
|B.                                                                   | Liquidity and Capital
      Resources                        
|C.                                                                   | Research and
      Development, Patents and Licenses, etc    
|D.                                                                   | Trend Information                                            
|E.                                                                   | Off-balance
      Sheet Arrangements                         
|F.                                                                   | Contractual Obligations                                      
|ITEM 6 -
      DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES            | 40                                                           
|A.                                                                   | Directors and Senior
      Management                        
|B.                                                                   | Compensation                                                 
|C.                                                                   | Board Practises                                              
|D.                                                                   | Employees                                                    
|E.                                                                   | Share Ownership                                              
|ITEM 7 -
      MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS     | 53                                                           
|A.                                                                   | Major Shareholders                                           
|B.                                                                   | Related
      Party Transactions                             
|C.                                                                   | Interests of Experts and
      Counsel                       
|ITEM 8 -
      FINANCIAL INFORMATION                                 | 55                                                           
|A.                                                                   | Consolidated Statements and
      Other Financial Information
|B.                                                                   | Significant
      Changes                                    
|ITEM 9 - THE OFFERING AND
      LISTING                              | 56                                                           
|A.                                                                   | Offer and
      Listing Details                              
|C.                                                                   | Markets.                                                     
|ITEM 10 -
      ADDITIONAL INFORMATION                               | 58                                                           
|A.                                                                   | Share Capital                                                
|B.                                                                   | Memorandum
      and Articles of Association                 
|C.                                                                   | Material Contracts                                           
|D.                                                                   | Exchange
      Controls                                      
|E.                                                                   | Taxation                                                     
|F.                                                                   | Dividends
      and Paying Agents                            
|G.                                                                   | Statement by Experts.                                        
|H.                                                                   | Documents on
      Display                                   
|I.                                                                   | Subsidiary Information                                       

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4

|ITEM 11
      - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
      **RISK**                  | 72 
|----------------------------------------------------------------------------------------------------- | ---
|ITEM 12 - DESCRIPTION
      OF SECURITIES OTHER THAN EQUITY SECURITIES                                | 72 
|PART II                                                                                               | 72 
|ITEM 13 - DEFAULTS,
      DIVIDEND ARREARAGES AND DELINQUENCIES                                       | 72 
|ITEM 14
      - MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS
      **AND USE OF PROCEED** | 73 
|ITEM 15T - CONTROLS AND
      PROCEDURES                                                              | 73 
|ITEM 16
      - RESERVED                                                                              | 73 
|ITEM 16A. AUDIT COMMITTEE
      FINANCIAL EXPERT                                                      | 73 
|ITEM 16B. CODE
      OF ETHICS                                                                        | 74 
|ITEM 16C. PRINCIPAL ACCOUNTANT
      FEES AND SERVICES                                                | 74 
|ITEM 16D.
      EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT
      **COMMITTEES**                  | 74 
|ITEM 16E. PURCHASES OF EQUITY
      SECURITIES BY THE ISSUER AND AFFILIATED **PURCHASERS**            | 74 
|PART III                                                                                              | 75 
|ITEM 17 - FINANCIAL
      STATEMENTS                                                                  | 75 
|ITEM 18
      - FINANCIAL STATEMENTS                                                                  | 104
|ITEM 19 - EXHIBITS                                                                                    | 104

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5

GLOSSARY OF TERMS

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

"angina"means chest pain;

"angioplasty"means the surgical repair of a blood
vessel;

"anti-hypertensive"means blood pressure reducing;

"arrhythmia" means irregular heart rhythm;

"bioavailabilitymeans the degree to which a drug or
other substance becomes available to the target in the body after
administration;

"Computer Aided Drug Design" means a method for design
of new therapeutic molecules using computer generated models of the drug and its
molecular target;

"FDA"means the United States Food and Drug
Administration;

"GCP"means Good Clinical Practices;

"GLP"means Good Laboratory Practice;

"GMP" means Good Manufacturing Practice;

"IND" means Investigative New Drug application to a
regulatory authority for first human testing of a new drug;

"in-vitro" means test tube;

"in-vivo" means live animal;

"ischemia" means the lack of blood flow;

"myocardial infarction" means scarring and death to
portions of the heart wall;

"myocardial ischemia" means blockages to parts of the
heart muscle;

"NDA" means New Drug Application, which is a request
made to the FDA for commencement of product sales and marketing;

"NDS" means New Drug Submission, which is a request made
to the TPD for commencement of product sales and marketing;

"pharmacodynamics" means the fundamental processes
through which a drug(s) exerts its effects on living organisms;

"pharmacokinetics" means the uptake, biotransformation,
distribution, metabolism and elimination of a drug(s) by the body, including
both total amounts and tissue and organ concentrations;

"reperfusion" means the resumption of blood flow;

"TPD" means the Canadian Therapeutic Products
Directorate, formerly the Canadian Health Protection Branch;

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6

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. Unless otherwise indicated,
all references to dollar amounts in this annual report are to Canadian dollars.

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
Corporation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 Corporation. These statements may include, but are not limited to,
plans regarding the development and advancement of MC-1, statements about the
Corporations AGGRASTAT® operations, statements concerning the Corporations
partnering and regulatory discussions, future financial position, future
revenues, projected costs, and managements strategy. For this purpose, any
statements contained in the annual report that are not statements of historical
fact may be deemed to be forward-looking statements. Without limiting the
generality of the foregoing, words such as may, except, believe,
anticipate, intend, could, estimate, or continue, or the negative or
other variations of comparable terminology, are intended to identify
forward-looking statements.

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 Corporation as at May 31,
2007 and 2006 and for the fiscal years ended May 31, 2007, 2006 and 2005 was
extracted from the audited consolidated financial statements of the Corporation
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 17
- 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, 2005,
2004 and 2003 and for the fiscal years ended May 31, 2004 and 2003 was extracted
from the audited financial statements of the Corporation not included in this
annual report. Reference is made to Note 13 of the consolidated financial
statements of the Corporation included herein for a discussion of the material
measurement differences

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7

between Canadian GAAP and U.S. GAAP, and their effect on
the Corporations financial statements. Except where otherwise indicated, all
amounts are presented in accordance with Canadian GAAP.

To date, the Corporation has not generated sufficient cash flow
from operations to fund ongoing operational requirements and cash commitments.
The Corporation has financed its operations principally through the sale of its
equity securities. While the Corporation believes it has sufficient capital and
liquidity to finance current operations, nevertheless, its ability to continue
operations is dependent on the ability of the Corporation to obtain additional
financing. See Item 3 - Key Information - D. Risk Factors. Based on the
Corporations current plans and upon closing of the transactions disclosed in
Item 8B  Financial Information  Significant Changes below, the Corporations
available working capital will be sufficient into the first half of fiscal 2009.

Under Canadian Generally Accepted Accounting Principles (in
Canadian dollars):

|Balance Sheet Data   |  | May 31,     |   |  | May 31,     |   |  | May 31,     |   |  | May 31,     |   |  | May 31,     |  
|-------------------- |  | ----------- | - |  | ----------- | - |  | ----------- | - |  | ----------- | - |  | ----------- | -
|                     |  | 2007        |   |  | 2006        |   |  | 2005        |   |  | 2004        |   |  | 2003        |  
|(as at period end)   |  | **$**       |   |  | **$**       |   |  | **$**       |   |  | **$**       |   |  | **$**       |  
|Current Assets       |  | 35,827,187  |   |  | 35,841,573  |   |  | 8,658,888   |   |  | 21,342,820  |   |  | 4,465,048   |  
|Capital Assets       |  | 196,521     |   |  | 50,663      |   |  | 81,002      |   |  | 66,202      |   |  | 67,497      |  
|Intangible Assets    |  | 23,412,131  |   |  | 2,921,841   |   |  | 1,332,969   |   |  | 976,690     |   |  | 763,464     |  
|Other Assets         |  | 349,963     |   |  | -           |   |  | -           |   |  | -           |   |  | -           |  
|Total Assets         |  | 59,785,802  |   |  | 38,814,077  |   |  | 10,072,859  |   |  | 22,385,712  |   |  | 5,296,009   |  
|Total Liabilities    |  | 25,479,333  |   |  | 1,644,339   |   |  | 2,732,754   |   |  | 817,575     |   |  | 353,908     |  
|Net Assets           |  | 34,306,469  |   |  | 37,169,738  |   |  | 7,340,105   |   |  | 21,568,137  |   |  | 4,942,101   |  
|Capital Stock and    |  | 112,137,421 |   |  | 83,297,304  |   |  | 40,860,597  |   |  | 40,222,719  |   |  | 17,607,597  |  
|Contributed Surplus  |  |             |   |  |             |   |  |             |   |  |             |   |  |             |  
|Deficit              |  | (77,830,952 | ) |  | (46,127,566 | ) |  | (33,520,492 | ) |  | (18,654,582 | ) |  | (12,665,496 | )
|Statement of         |  |             |   |  |             |   |  |             |   |  |             |   |  |             |  
|Operations           |  |             |   |  |             |   |  |             |   |  |             |   |  |             |  
|(for the fiscal year |  |             |   |  |             |   |  |             |   |  |             |   |  |             |  
|ended on)            |  |             |   |  |             |   |  |             |   |  |             |   |  |             |  
|Product Sales        |  | 5,944,730   |   |  | -           |   |  | -           |   |  | -           |   |  | -           |  
|Interest and Other   |  | 1,590,801   |   |  | 299,737     |   |  | 394,784     |   |  | 445,461     |   |  | 241,281     |  
|Income               |  |             |   |  |             |   |  |             |   |  |             |   |  |             |  
|Loss from Continuing |  |             |   |  |             |   |  |             |   |  |             |   |  |             |  
|Operations           |  | (31,703,386 | ) |  | (12,607,074 | ) |  | (14,865,910 | ) |  | (5,989,086  | ) |  | (4,193,688  | )
|Net Loss for the     |  | (31,703,386 | ) |  | (12,607,074 | ) |  | (14,865,910 | ) |  | (5,989,086  | ) |  | (4,193,688  | )
|Period               |  |             |   |  |             |   |  |             |   |  |             |   |  |             |  
|Basic and Diluted    |  | (0.30       | ) |  | (0.17       | ) |  | (0.22       | ) |  | (0.11       | ) |  | (0.11       | )
|Loss per Share       |  |             |   |  |             |   |  |             |   |  |             |   |  |             |  
|Weighted-Average     |  |             |   |  |             |   |  |             |   |  |             |   |  |             |  
|Number of            |  |             |   |  |             |   |  |             |   |  |             |   |  |             |  
|Common Shares        |  | 104,879,404 |   |  | 75,144,764  |   |  | 66,717,715  |   |  | 55,738,716  |   |  | 37,118,889  |  
|Outstanding          |  |             |   |  |             |   |  |             |   |  |             |   |  |             |  

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8

Under U.S. Generally Accepted Accounting Principles (in
Canadian dollars):

|Balance Sheet Data   |  | May 31,     |   |  | May 31,     |   |  | May 31,     |   |  | May 31,     |   |  | May 31,     |  
|-------------------- |  | ----------- | - |  | ----------- | - |  | ----------- | - |  | ----------- | - |  | ----------- | -
|                     |  | 2007        |   |  | 2006        |   |  | 2005        |   |  | 2004        |   |  | 2003        |  
|(as at Period end)   |  |             |   |  |             |   |  |             |   |  | **$**       |   |  | **$**       |  
|Current Assets       |  | 35,827,187  |   |  | 35,841,573  |   |  | 8,658,888   |   |  | 21,342,820  |   |  | 4,465,048   |  
|Capital Assets       |  | 196,521     |   |  | 50,663      |   |  | 60,859      |   |  | 41,472      |   |  | 37,050      |  
|Intangible Assets    |  | 20,078,862  |   |  | -           |   |  | -           |   |  | -           |   |  | -           |  
|Other Assets         |  | 349,963     |   |  | -           |   |  | -           |   |  | -           |   |  | -           |  
|Total Assets         |  | 56,452,533  |   |  | 35,892,236  |   |  | 8,719,747   |   |  | 21,384,292  |   |  | 4,502,098   |  
|Total Liabilities    |  | 25,479,333  |   |  | 1,644,339   |   |  | 2,732,754   |   |  | 817,575     |   |  | 353,908     |  
|Net Assets           |  | 30,973,200  |   |  | 34,247,897  |   |  | 5,986,993   |   |  | 20,566,717  |   |  | 4,148,190   |  
|Capital Stock and    |  | 128,382,255 |   |  | 99,542,135  |   |  | 57,105,431  |   |  | 56,459,161  |   |  | 33,818,449  |  
|Contributed Surplus  |  |             |   |  |             |   |  |             |   |  |             |   |  |             |  
|Deficit              |  | (97,409,055 | ) |  | (65,294,238 | ) |  | (51,118,438 | ) |  | (35,892,444 | ) |  | (29,670,259 | )
|Statement of         |  |             |   |  |             |   |  |             |   |  |             |   |  |             |  
|Operations           |  |             |   |  |             |   |  |             |   |  |             |   |  |             |  
|Product Sales        |  | 5,944,730   |   |  | -           |   |  | -           |   |  | -           |   |  | -           |  
|Interest and Other   |  | 1,590,801   |   |  | 299,737     |   |  | 394,784     |   |  | 445,461     |   |  | 241,281     |  
|Income               |  |             |   |  |             |   |  |             |   |  |             |   |  |             |  
|Loss from Continuing |  |             |   |  |             |   |  |             |   |  |             |   |  |             |  
|Operations           |  | (32,114,817 | ) |  | (14,175,800 | ) |  | (15,225,994 | ) |  | (6,222,185  | ) |  | (5,255,613  | )
|Net Loss for the     |  | (32,114,817 | ) |  | (14,175,800 | ) |  | (15,225,994 | ) |  | (6,222,185  | ) |  | (5,255,613  | )
|Period               |  |             |   |  |             |   |  |             |   |  |             |   |  |             |  
|Basic and Diluted    |  | (0.31       | ) |  | (0.19       | ) |  | (0.23       | ) |  | (0.11       | ) |  | (0.14       | )
|Loss per Share       |  |             |   |  |             |   |  |             |   |  |             |   |  |             |  
|Weighted-Average     |  |             |   |  |             |   |  |             |   |  |             |   |  |             |  
|Number of            |  |             |   |  |             |   |  |             |   |  |             |   |  |             |  
|Common Shares        |  | 104,879,404 |   |  | 75,144,764  |   |  | 66,717,715  |   |  | 55,738,716  |   |  | 37,118,889  |  
|Outstanding          |  |             |   |  |             |   |  |             |   |  |             |   |  |             |  

Comparability of Data

The selected financial data for the fiscal years ended May 31,
2007, 2006, 2005, 2004 and 2003 includes the operations of Medicure
International Inc., a Barbados corporation (Medicure International),
commencing June 1, 2000, and Medicure Pharma Inc., a United States corporation,
and Medicure Europe Limited, a United Kingdom corporation, commencing June 1,
2006.

Dividends

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

Exchange Rates

Unless otherwise indicated, all reference to dollar amounts are
to Canadian dollars. The following table sets out the exchange rates for one
Canadian dollar expressed in terms of one U.S. dollar for the periods indicated.
Rates of exchange are obtained from the Bank of Canada and believed by the
Registrant to approximate closely the noon buying rates in New York City for
cable transfers as certified for customs purposes by the Federal Reserve Bank in
New York.

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9

|           |  |        |  |  | **May 31,
      2007** |  |  | **May 31,
      2006** |  |  | May 31, 2005 |  |  | May 31, 2004 |  |  | May 31, 2003 | 
|---------- |  | ------ |  |  | ---------------------- |  |  | ---------------------- |  |  | ------------ |  |  | ------------ |  |  | ------------ | 
|           |  |        |  |  |                        |  |  |                        |  |  |              |  |  |              |  |  |              | 
|Period End |  |        |  |  | 0.9349                 |  |  | 0.9079                 |  |  | 0.7967       |  |  | 0.7335       |  |  | 0.7307       | 
|Average    |  |        |  |  | 0.8798                 |  |  | 0.8588                 |  |  | 0.7978       |  |  | 0.7453       |  |  | 0.6569       | 
|           |  |        |  |  |                        |  |  |                        |  |  |              |  |  |              |  |  |              | 
|           |  | June   |  |  | May                    |  |  | April                  |  |  | March        |  |  | February     |  |  | January      | 
|           |  | 2007   |  |  | 2007                   |  |  | 2007                   |  |  | 2007         |  |  | 2007         |  |  | 2007         | 
|           |  |        |  |  |                        |  |  |                        |  |  |              |  |  |              |  |  |              | 
|High for   |  | 0.9491 |  |  | 0.9376                 |  |  | 0.9051                 |  |  | 0.8696       |  |  | 0.8647       |  |  | 0.8598       | 
|Month(1)   |  |        |  |  |                        |  |  |                        |  |  |              |  |  |              |  |  |              | 
|Low for    |  | 0.9294 |  |  | 0.8958                 |  |  | 0.8621                 |  |  | 0.8462       |  |  | 0.8419       |  |  | 0.8440       | 
|Month(1)   |  |        |  |  |                        |  |  |                        |  |  |              |  |  |              |  |  |              | 

Notes:

(1) Figures are extracted from daily exchange rates

As of July 31, 2007, the exchange rate to convert one Canadian
dollar into the U.S. dollar was 0.9374.

B. Capitalization and Indebtedness

Not applicable

C. Reasons for the Offer and Use of Proceeds

Not applicable

D. Risk Factors

The Corporations business entails significant risks. In
addition to the usual risks associated with a business, the following is a
general description of certain significant risk factors which are applicable to
the Corporation.

Prior to the acquisition of AGGRASTAT®, the Corporation had
no products in commercial production or use. As such, the Corporation was
considered to be a development-stage enterprise for accounting purposes prior to
the acquisition. The Corporation expects to continue to incur substantial losses
and may never achieve 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 Corporations 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 Corporation has incurred net losses every year since
inception in 1997. As of May 31, 2007, the date of its last audited financial
statements, the Corporation had an accumulated deficit of $77,830,952. The
Corporation incurred net losses of $31,703,386 for the year ended May 31, 2007,
$12,607,074 for the year ended May 31, 2006, $14,865,910 for the year ended May
31, 2005, $5,989,086 for the year ended May 31, 2004 and $4,193,688 for the year
ended May 31, 2003.

The Corporation anticipates that its losses will not only
continue for the foreseeable future but will increase significantly, principally
from expenditures relating to its research and development efforts and clinical
trials. The long-term profitability of the Corporations operations is
uncertain, and may never occur. The Corporations long-term profitability will
be directly related to its ability to develop a commercially viable drug product
or products. This in turn depends on numerous factors, including the following:

| | a) | the success of the Corporations research and development
      activities, including its drug discovery, preclinical and clinical
      development programs;
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------

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10

| | b) | obtaining Canadian and United States regulatory approvals
      to market MC-1 and MC-4232, its lead products;                                                                              
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                             
| | c) | the ability to contract for the manufacture of the
      Corporations products according to schedule and within budget, given that
      it has no experience in large scale manufacturing;
| |    |                                                                                                                                                                                             
| | d) | the ability to successfully prosecute and defend its
      patents and other intellectual property; and                                                                                     
| |    |                                                                                                                                                                                             
| | e) | the ability to successfully market the Corporations
      products including AGGRASTAT® (tirofiban hydrochloride), given that it has
      limited experience in marketing.                

If the Corporation does achieve profitability, it may not be
able to sustain or increase profitability in the future.

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

The Corporations failure to obtain necessary regulatory
approvals to fully market its current and future therapeutic products in one or
more significant markets may adversely affect its business, financial condition
and results of operations. The procedure 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.

With the exception of AGGRASTAT®, all of the Corporations
products are currently in the research and development stages. The Corporation
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. Even the Corporations most clinically
advanced product, MC-1, is only currently being studied in critical Phase III
clinical trials. Unsatisfactory results obtained from a particular study or
clinical trial relating to one or more of the Corporations products may cause
the Corporation to reduce or abandon its commitment to that program.

If the Corporation fails to successfully complete its clinical
trials, it will not obtain approval from the Canadian Therapeutic Products
Directorate, formerly the Canadian Health Protection Branch (TPD), or from the
U.S. Food and Drug Administration (FDA), to market its leading product, MC-1
or its second clinical candidate, MC-4232. Regulatory approvals also may be
subject to conditions that could limit the market for MC-1 or MC-4232 or make
either product or both products more difficult or expensive to sell than
anticipated. Also, regulatory approvals may be revoked at any time, including
for failure to comply with regulatory requirements or poor performance of MC-1
or MC-4232 in terms of safety and effectiveness.

The Corporations business, financial condition and results of
operations may be adversely affected if it fails to obtain regulatory approvals
in Canada, the United States and abroad to market and sell MC-1 or MC-4232 or
any current or future drug products, including any limitations imposed on the
marketing of such products.

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

The Corporation has a contract with CanAm Bioresearch Inc.
(CanAm) to perform for it a significant amount of its research and development
activities. Because of the specialized scientific nature of the Corporations
business, the loss of services of CanAm may require the Corporation to attract
and retain replacement qualified scientific, technical and management personnel.
Competition in the biotechnology industry for such personnel is intense and the
Corporation may not be able to hire or retain a sufficient number of qualified
personnel, which may compromise the pace and success of its research and
development activities.

Also, certain of the Corporations management personnel are
officers and/or directors of other companies, some publicly-traded, and will
only devote part of their time to the Corporation. The Corporation does

---

11

not have key person insurance in effect in the event of a loss
of any management, scientific or other key personnel. The loss of any such
personnel could pose serious challenges for the Corporation.

The Corporation faces substantial technological competition
from many biotechnology 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 Corporation competes with other
companies in Canada, the United States and abroad to develop products designed
to treat similar conditions. Many 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
Corporation. Small companies may also prove to be significant competitors,
particularly through collaborative arrangements with large pharmaceutical and
biotechnology companies. Developments by other companies may adversely affect
the competitiveness of the Corporations products or technologies or the
commitment of its research and marketing collaborators to its programs or even
render its products obsolete.

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 Corporation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 Corporation
obtains approval of its products. The Corporation may not be able to
successfully compete with its competitors or their products and, if it is unable
to do so, the Corporations business, financial condition and results of
operations may suffer.

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

The Corporations success will depend partly 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 will be crucial to the Corporations intention to license to or
contract with larger, international pharmaceutical companies the manufacturing,
marketing, sales and distribution of any products it may commercialize for
production. To date, the Corporation has not entered into any such arrangements
and may never be able to establish such arrangements on favourable terms. 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 Corporations ability to
develop and commercialize its products, and may adversely affect its business,
financial condition and results of operations.

The Corporation has licensed certain technologies relating to
products under development and may enter into future licensing agreements. The
Corporations current licensing agreements contain provisions allowing the
licensors to terminate such agreements if it becomes insolvent or breach the
terms and conditions of the licensing agreements without rectifying such event
of default in accordance with the agreement terms.

The Corporation 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, drug companies, medical supply companies,
and companies, such as the Corporation, that plan to offer various products in
the United States and other countries in the future. The Corporation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 Corporations ability to have its
products and related treatments and therapies eligible for Medicare or

---

12

private insurance reimbursement will be 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
Corporations products and related treatments, the Corporations ability to
commercialize its products would be adversely affected. There can be no
assurance that the Corporation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 payors are
increasingly challenging the price of medical products and services.

If purchasers or users of the Corporation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 Corporations products and related treatments are approved for
reimbursement by Medicare and private insurers, of which there can be no
assurance, the amount of reimbursement may be reduced at times, or even
eliminated. This would have a material adverse effect on the Corporation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.

Substantial cash payments may be required under the terms of
the Corporations borrowings upon an event of default or change of control. Such
cash payments may leave the Corporation with little or no working capital in the
business or make us insolvent.

In August 2006, the Corporation entered into a term loan
financing facility totaling approximately US$15.84 million with a syndicate of
lenders, led by Merrill Lynch Capital Canada Inc., and including Silicon Valley
Bank and Oxford Finance Corporation (the Credit Facility). Under the Credit
Facility, the Corporations lenders may require that all or a portion of the
principal amount of the Credit Facility be repaid in cash upon the occurrence of
various customary events of default (subject to certain cure periods), including
but not limited to:

- the failure to pay principal, fees and/or interest due under the Credit
  Facility;
- the suspension of the Corporations common shares from trading on the TSX
  and AMEX;
- the issuance of any judgments or orders against the Corporation for the
  payment of money (not paid or fully covered by insurance) in an aggregate
  amount in excess of US$375,000;
- any material default under any indebtedness of the Corporation in an
  aggregate principal amount exceeding US$375,000;
- any breach of any term of the credit and security agreement under which the
  Credit Facility was extended or in any other document delivered pursuant
  thereto;
- a default under any guarantee of the Credit Facility;
- an unpermitted payment by any obligor under the Credit Facility on account
  of any debt that has been subordinated to the Credit Facility;
- the occurrence of any fact, event or circumstance that could reasonably be
  expected to result in a material adverse effect; and
- actual or anticipated (such anticipation by the lenders to be based on
  their reasonable judgment based on information received from the Corporation)
  breach of certain financial covenants (including a requirement that the
  Corporation achieve certain minimum net revenue targets from the sale of
  AGGRASTAT® as at December 31 of each year during the term of the Credit
  Facility).

---

13

In August 2007, the Corporation agreed to an amendment with its
existing lenders to certain of the covenants provided for in its credit
agreement, dated August 8, 2006. The lenders and the Corporation have agreed,
subject to certain conditions:

| | i)   | From and after August 17, 2007, but no later than April 30, 2008, the
      Corporation shall receive additional cash for working capital in a total
      aggregate amount of at least US$35 million from any and/or a combination
      of any of the sources described above, provided that (1) at least US$15
      million of such aggregate amount must be received by the Corporation no
      later than September 30, 2007 and (2) a further US$15 million of such aggregate
      amount must be received by the Corporation no later than February 28, 2008
      and (3) a further US$5 million of such aggregate amount must be received
      by the Corporation no later than April 30, 2008. The Corporation intends
      that the additional cash to meet this test will come from the subscription
      agreement and term sheet described above.
| | ---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | (ii) | To amend the credit agreement such that the Corporation is required
        to achieve the following minimum net revenue requirements from sales of
        AGGRASTAT®:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |      | Calendar 2007 - nilCalendar 2008 - US$15 millionCalendar 2009 - US$23 million                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        

| | (iii) | The Corporation will deposit US$10 million in a cash
      collateral account to be held by Merrill Lynch Capital Inc. (Merrill), for
      the benefit of Merrill and the lenders, on closing of the financing
      transactions described above.
| | ----- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

As disclosed in Item 8B  Financial Information  Significant
Changes below, subsequent to May 31, 2007 the Corporation entered into two
non-binding agreements that would, if they close, provide the Corporation with
additional working capital totaling US$40 million. The Corporation anticipates
that it will meet the working capital covenant described above upon the closing
of the above financings.

Upon the occurrence and during the continuance of an event of
default, the interest rate on the Credit Facility will be increased by 1.5% .
The lenders under the Credit Facility may also require all or a portion of the
Credit Facility be redeemed in cash upon a change of control. The Corporation
has not established a sinking fund for payment of the Credit Facility, nor does
it anticipate doing so.

The Corporations substantial debt could impair its
financial condition. The Corporation is highly leveraged and has substantial
debt service obligations.

As of May 31, 2007, the Corporation had approximately US$15.84
million of principal indebtedness outstanding under the Credit Facility that
bears interest at a floating rate at one-month LIBOR plus 6.5% per annum. This
substantial indebtedness could have important consequences for the Corporation.
For example, it could:

- increase the Corporations vulnerability to general adverse economic and
  industry conditions, including increases to interest rates;
- impair the Corporations ability to obtain additional financing in the
  future for working capital needs, capital expenditures or general corporate
  purposes;
- require the Corporation to dedicate a significant portion of its existing
  cash and proceeds from any future financing transactions to the payment of
  principal and interest on its debt, which would reduce the funds available for
  its operations;

---

14

- limit the Corporations flexibility in planning for, or reacting to,
  changes in the business and the industry in which it operates; and
- place the Corporation at a competitive disadvantage compared to its
  competitors that have less debt.

Despite current indebtedness levels and the terms of the
Credit Facility, the Corporation may still be able to incur substantially more
debt. This could further exacerbate the risks associated with the Corporations
substantial leverage.

Despite current indebtedness levels and the terms of the Credit
Facility, the Corporation may still be able to incur substantial additional
indebtedness in the future. Under the Credit Facility, the Corporation is
permitted to incur, among other types of indebtedness, indebtedness that is
subordinate to the Credit Facility. If new debt is added to the Corporations
current debt levels, the related risks that it now faces could increase.

The Corporation has agreed to guarantee certain annual
minimum payments and other obligations under the proposal letter with Manchester
Securities Corp., an affiliate of Elliott Associates L.P. (Elliott).

On August 20, 2007, the Corporation executed a non-binding term
sheet with Elliott (the Term Sheet) pursuant to which the Corporation would
grant to Elliott the right to receive royalties on future sales of AGGRASTAT®
for an upfront payment of US $25 million (the Proposed Transaction). Under the
terms of the Proposed Transaction, Elliott would receive an escalating minimum
annual return based on AGGRASTAT® revenue until 2019. The minimum annual returns
start at US$2.5 million in 2007 and escalate to US$6.9 Million in 2016. The
exact percentage of AGGRASTAT® or MC-1 revenue that Elliott will receive is
tiered and declines as certain revenue levels are achieved. To secure its
obligation pursuant to the Proposed Transaction, the Corporation will grant to
Elliott a first priority security interest in the Corporations patents for
AGGRASTAT® and MC-1. There is no assurance that the Corporation will have
sufficient funds or assets to cover such payments. Failure to make minimum
payments or perform other obligations pursuant to the Proposed Transaction may
result in a default under the proposed security agreement with Elliott, which,
if not cured, could impair the Corporations ownership of its patents. This
would have a material adverse effect on the Corporation.

Under the Proposed Transaction, Elliott would have the option
to convert its royalty interest from AGGRASTAT® to MC-1 within six months of
successful commercialization of MC-1 by the Corporation, if achieved. Upon
conversion to MC-1, Elliott is entitled to a blended return of approximately 7%
on the first US$75 Million in MC-1 revenues and 3% thereafter.

The Proposed Transaction will also include an option for the
Corporation to terminate the agreement for a payment of US $70 million to
Elliott if the U.S. Food & Drug Administration approves MC-1 for sale to the
public.

The closing of the Proposed Transaction will be subject to the
receipt of all necessary regulatory approvals and other conditions of closing.
There can be no assurance that the Proposed Transaction will close.

The Corporation does not have manufacturing or marketing
experience and may never be able to successfully manufacture or market its
products.

The Corporation has no experience in large-scale manufacturing
and in marketing or selling its products and may never be able to successfully
manufacture and market its products. If the TPD or FDA approves MC-1, MC-4232 or
any other of its products, the Corporation intends to contract with and rely on
third parties to manufacture, market and sell its products. Accordingly, the
quality, timing and ultimately the commercial success of such products may be
outside of the Corporations control. Failure of or delay by a third party
manufacturer of the Corporations products to comply with good manufacturing
practices or similar quality control regulations or satisfy regulatory
inspections may have a material adverse effect on

---

15

its future prospects. Failure of or delay by a third party in
the marketing or selling of the Corporations products likewise may have a
material adverse effect on its future prospects.

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

The sale and use of products under development by the
Corporation, and the conduct of clinical studies involving human subjects, may
entail product and professional liability risks, which are inherent in the
testing, production, marketing and sale of new drugs to humans. While the
Corporation has taken, and will continue to take, what it believes are
appropriate precautions, there can be no assurance that it will avoid
significant liability exposure. Although the Corporation currently carries
product liability insurance for clinical trials, 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 Corporation. The
obligation to pay any product liability claim or recall 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 interfere with the Corporations business.

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

The Corporations success will depend partly on its ability to
obtain and protect its patents and protect its proprietary rights in unpatented
trade secrets.

The Corporation owns or jointly owns 38 United States patents.
The Corporation has additional pending United States patent applications. The
Corporation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 Corporation in the future may not be patentable.

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 Corporation 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 Corporations patents.
Litigation may be commenced by the Corporation to prevent infringement of its
patents. Litigation may also commence against the Corporation 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
Corporation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 Corporation 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.

Disclosure and use of the Corporation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
Corporation 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 Corporation,
disputes may also arise as to the rights to related or resulting know-how or
inventions.

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

The Corporations success will depend partly on its ability to
operate without infringing upon the patents and other proprietary rights of
third parties. The Corporation is not currently aware that any of its

---

16

products or processes infringe the proprietary rights of third
parties. However, despite its best efforts, the Corporation 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 Corporations financial condition and
results of operations, even if it prevails. If the Corporation 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
Corporation 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
Corporations ability to market its products and adversely affect its business,
financial condition and results of operations.

The Corporation 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.

Biotechnology, medical device, and pharmaceutical companies
operate in a high-risk regulatory environment. The TPD, FDA, and other 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 medical
product operations, such as research and development, manufacturing, and testing
and safety regulation of medical products. As a result, regulatory risk is
normally higher than in other industry sectors.

The Corporation is or may become subject to various federal,
provincial, state and local laws, regulations and recommendations. The
Corporation is subject to various laws and regulations in Canada, 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 its research
and development activities. If the Corporation fails to comply with these
regulations, it may be fined or suffer other consequences that could materially
affect its business, financial condition or results of operations.

The Corporation 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.

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

The Corporation does not currently have the required clinical
data and results to successfully market its product candidates in any
jurisdiction; future clinical or preclinical results may be negative or
insufficient to allow it to successfully market any of its product candidates;
and obtaining needed data and results may take longer than planned, and may not
be obtained at all.

Even if the Corporations products are approved for sale, they
may not be successful in the marketplace. Market acceptance of any of the
Corporation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 Corporations products, even if they prove to be safe and effective
and are approved for marketing by the TPD, the FDA and other regulatory
authorities. The Corporation estimates that it may take up to two years or
longer before its initial products may be sold commercially. If the
Corporation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 Corporation may not achieve its projected development
goals in the time frames it announces and expects.

The Corporation sets goals for and makes public statements
regarding timing of the accomplishment of objectives material to its success,
such as the commencement and completion of clinical trials, anticipated

---

17

regulatory approval dates, and time of product launch. The
actual timing of these events can vary dramatically due to factors such as
delays or failures in the Corporations clinical trials, the uncertainties
inherent in the regulatory approval process, and delays in achieving product
development, manufacturing or marketing milestones necessary to commercialize
its products. There can be no assurance that the Corporation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 Corporation fails to achieve one or more of these milestones as
planned, that could materially affect its business, financial condition or
results of operations and the price of its common shares could decline.

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

Although the Corporation does not currently manufacture
commercial quantities of its products, the Corporation produces limited
quantities of such products for its clinical trials. The Corporations research
and development processes involve the controlled storage, use, and disposal of
hazardous materials and hazardous biological materials. The Corporation is
subject to laws and regulations governing the use, manufacture, storage,
handling, and disposal of such materials and certain waste products. Although
the Corporation 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
Corporation could be held liable for any damages that result, and any such
liability could exceed its resources. There can be no assurance that the
Corporation 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 Corporations insurance may not provide adequate coverage
with respect to environmental matters.

Environmental regulation could have a material adverse
effect on the results of the Corporations operations and its financial
position.

The Corporation 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 Corporation
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 Corporation in the future.

The Corporation will 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 Corporations operations.

The Corporation has limited financial resources and has
financed its operations through the sale of securities, primarily common shares.
The Corporation has significant on-going cash expenses and no ability to
generate cash from operations. To meet its on-going cash needs the Corporation
will need to continue its reliance on the sale of such securities for future
financing, resulting in dilution to its existing shareholders. The Corporations
long-term capital requirements may be notably significant and will depend on
many factors, including continued scientific progress in its product discovery
and development program, 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
Corporation will consider contract fees, collaborative research and development
arrangements, public financing or additional private financing (including the
issuance of additional equity securities) to fund all or a part of particular
programs.

---

18

The Corporation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 Corporation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. If its capital
resources are exhausted and adequate funds are not available, the Corporation
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 or products.

As disclosed in Item 8B  Financial Information  Significant
Changes below, subsequent to May 31, 2007 the Corporation entered into two
non-binding agreements that would, if they close, provide the Corporation with
additional working capital totaling US$40 million.

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

As of May 31, 2007, the Corporation had 116,314,509, common
shares issued and outstanding. A further 4,235,528 common shares are issuable
upon exercise of outstanding stock options and another 10,691,468 common shares
are issuable upon exercise of share purchase warrants, all of which may be
exercised in the future resulting in dilution to the Corporations shareholders.
The Corporations stock option plan allows for the issuance of stock options to
purchase up to a maximum of 7,200,000 common shares at any time. The common
shares to be issued upon exercise of the outstanding options and warrants will
be freely tradable and not subject to any hold period when issued.

Sales of substantial amounts of the Corporation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 Corporations common shares may experience extreme price
and volume volatility which may result in losses to its shareholders.

On May 31, 2007, the Corporations common shares closed at a
price of CDN$1.23 on the TSX and US$1.14 on the AMEX. For the period from June
1, 2006 to May 31, 2007, the high and low trading prices of the Corporations
common shares on the TSX were CDN$1.88 and CDN$1.10, respectively, with a total
trading volume of 34,840,400 shares. For the period from June 1, 2006 to May 31,
2007, the high and low trading prices of the Corporations common shares on the
AMEX were US$1.70 and US$0.91, respectively, with a total trading volume of
26,426,800.

Daily trading volume on the TSX of the Corporations common
shares for the period from June 1, 2006 to May 31, 2007 has fluctuated, with a
high of 617,500 shares and a low of 13,800shares, averaging
approximately 138,256 shares. Daily trading volume on the AMEX in the
Corporations common shares for the period from June 1, 2006 to May 31, 2007 has
fluctuated with a high of 939,700 and a low of 3,800, averaging approximately
105,286. Accordingly, the trading price of the Corporations common shares may
be subject to wide fluctuations in response to a variety of factors including
announcement of material events by the Corporation such as 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 Corporation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 by securities
  analysts;
- new or existing products or services or technological innovations by the
  Corporation or its competitors;

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19

- 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 Corporations research and development
  efforts, including results and adequacy of, and developments in, its clinical
  trials and applications for regulatory approval;
- additions or departures of key personnel;
- sales of the Corporations common shares, including by holders of the notes
  on conversion or repayment by the Corporation in common shares;
- economic and other external factors or disasters or crises;
- limited daily trading volume; and
- developments regarding the Corporation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
biotechnology 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. In addition, because of the limited
public float, there may be limited liquidity for the Corporations common
shares. It is expected that such fluctuations in price and limited liquidity
will continue in the foreseeable future which may make it difficult for a
shareholder to sell shares at a price equal to or above the price at which the
shares were purchased.

There may not be an active, liquid market for the
Corporations common shares.

There is no guarantee that an active trading market for the
Corporations common shares will be maintained on AMEX or the TSX. 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 Corporations common
shares, the market price of its common shares could decline.

Sales of substantial numbers of the Corporation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 Corporations ability to raise capital and may adversely affect
the market price of its common shares.

The Corporation may be unable to meet its obligations under
the outstanding Credit Facility.

As of May 31, 2007, the Corporaton had approximately US$15.84
million of principal indebtedness outstanding under the Credit Facility, which
bears interest at one-month LIBOR plus 6.5 percent per annum. The term of the
Credit Facility is over 42 months, with interest due and payable at commencement
of the loan payable on the first day of the month. Commencing in June 2007,
principal is payable monthly on a straight-line amortization schedule over 33
consecutive monthly installments. There is no guarantee that the Corporation
will be able to meet its obligations under the Credit Facility.

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

Since incorporation, the Corporation has not paid any cash or
other dividends on its common shares and do not expect to pay such dividends in
the foreseeable future as all available funds will be invested to

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20

finance the growth of its business. The Corporation will need
to achieve profitability prior to any dividends being declared, which may never
happen.

The Corporation is likely to be classified as a passive
foreign investment company for United States income tax purposes, which could
have significant and adverse tax consequences to United States holders of its
common shares.

The Corporation was a passive foreign investment company
(PFIC) in the 2006 taxable year and the Corporation believes there is a
significant likelihood that it will be classified as a PFIC in the 2007 taxable
year and possibly in subsequent years. The Corporations classification as a
PFIC could have significant and adverse tax consequences for United States
holders of its common shares. It may be possible for United States holders of
the Corporations common shares to mitigate these consequences by making a
so-called qualified electing fund election. (See Certain Income Tax
Consequences below.)

The Corporation has adopted a shareholder rights plan.

The Corporation has adopted a shareholder rights plan. The
provisions of such plan could make it more difficult for a third party to
acquire a majority of the Corporations outstanding common shares, the effect of
which may be to deprive the Corporations shareholders of a control premium that
might otherwise be realized in connection with an acquisition of its common
shares.

ITEM 4. INFORMATION ON THE COMPANY

A. History and Development of the Company

On December 22, 1999, the Corporation was formed by the
amalgamation of Medicure Inc. with Lariat Capital Inc. pursuant to the
provisions of the Business Corporations Act (Alberta). The Corporation
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 Corporations current legal and commercial name is Medicure
Inc. and its current registered office is 30th Floor, 360 Main
Street, Winnipeg, Manitoba, Canada, R3C 4G1. The Corporations head office is
located at 4-1200 Waverley Street, Winnipeg, Manitoba, Canada, R3T 0P4.

In August 2006, the Corporation 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. To finance the acquisition, the Company entered into the Credit
Facility totaling US$15.84 million with a syndicate of lenders, led by Merrill
Lynch Capital, a division of Merrill Lynch Business Financial Services Inc., and
including Silicon Valley Bank and Oxford Finance Corporation. Interest is
payable monthly at one-month LIBOR plus 6.5 percent per annum. Commencing in
June 2007, principal of US$480,000 is payable monthly with the term loan
maturing February 1, 2010. The Credit Facility is secured by a security interest
in all existing and after-acquired assets of the Company including intellectual
property. Subsequent to year end, the Corporation signed a non-binding term
sheet dated August 20, 2007 to monetize a percentage of the Corporations
current and potential future commercial revenues with Manchester Securities
Corp., an affiliate of Elliott Associates, L.P. (Elliott) (see Item 8B 
Financial Information  Significant Changes below). The proposed financing is
subject to a number of closing conditions, including the amendment of the
Corporations credit agreement dated August 8, 2006 and the execution of a
definitive agreement. The transaction is expected to close in September
2007.

Since its amalgamation, the Corporation, directly and through
certain research contracts, has been engaged in the research and development of
human therapeutic drugs for cardiovascular disease. In certain instances,
therapeutics developed by the Corporation may also provide benefit for other
diseases. The Corporations lead product, MC-1, is based upon scientific
discoveries led by Dr. Naranjan S. Dhalla of The Institute of Cardiovascular
Sciences and the Department of Physiology, of the Faculty of Medicine, the
University of Manitoba in Winnipeg, Manitoba, Canada. The Corporations focus is
on the clinical development and commercialization of MC-1 for treatment of
cardiovascular disease and on the discovery and development of other
cardiovascular therapeutics.

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21

B. Business Overview

Plan of Operation

The Corporation is a biopharmaceutical company focused on the
discovery and development of therapeutics for various large-market, unmet
cardiovascular needs.

The following table summarizes the Corporations clinical
product candidates, their therapeutic focus and their stage of development.

|Product
      Candidate | Therapeutic focus               | Stage of Development
|----------------------- | ------------------------------- | --------------------
|AGGRASTAT®              | Acute Coronary Syndrome         | Currently marketed  
|MC-1                    | Coronary Artery Bypass          | Phase III           
|                        | Graft Surgery                   |                     
|MC-1                    | Acute Coronary Syndrome         | Phase II complete*  
|MC-1                    | Stroke                          | Phase I complete    
|MC-4232                 | Diabetes/Hypertension           | Phase II complete   
|MC-4262                 | Metabolic Syndrome/Hypertension | Phase I complete    

* Completed MEND-1 angioplasty study, but intend to develop for
related indication of ACS.

On August 8, 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).
  AGGRASTAT®, a glycoprotein GP IIb/IIIa receptor antagonist, is used for
  the treatment of acute coronary syndrome (ACS) including unstable angina, which
  is characterized by chest pain when one is at rest, and non-Q-wave myocardial
  infarction (MI). The Company launched product sales and marketing efforts, with
  a targeted, dedicated cardiovascular sales force and medical science liaison
  organization during the second quarter of fiscal 2007. AGGRASTAT® is complementary
  to the Companys cardiovascular strategy and provides the Company with
  a presence in the marketplace.

The Corporations research and development program is currently
focused on the clinical development of the Corporations lead clinical products,
MC-1 and MC-4232, and the discovery and development of other drug
candidates.

MC-1, the Corporations lead product, is being developed as a
treatment to reduce injury from blockages of blood to the heart (i.e. myocardial
ischemia, associated with heart attacks, angina and arrhythmia) and the brain
(i.e. ischemic stroke) and to prevent injury from ischemic reperfusion injury.
Ischemic reperfusion injury occurs when blood flow to an organ is suddenly
resumed following a stoppage, as occurs during medical procedures such as heart
surgery. The results from the Phase II MEND-1 and MEND-CABG studies demonstrated
the cardioprotective effects and safety of MC-1 in high-risk patients undergoing
angioplasty and bypass surgery, respectively.

In parallel to the development of MC-1 and MC-4232, the
Corporation has a drug discovery program the objective of which is to discover
and in-license new drug candidates for advancement into clinical development and
commercialization for unmet cardiovascular market needs. One element of the
program involves the synthesis and evaluation of compounds that are structurally
related to MC-1. The Corporation has already produced several groups of
candidate compounds using this approach and plans to build a pipeline of
additional preclinical products over the next several years. Certain of the
Corporations new compounds have shown positive effects inin vitro and
in vivo efficacy studies and are currently being studied further to
evaluate their commercial potential. Some patents have been issued for these
compounds and additional patent applications have been, and are expected to be
filed for all novel candidate compounds, to the extent commercially and
reasonably possible, protecting their composition of matter and use in a
treatment of targeted cardiovascular and related diseases.

The Corporation is also evaluating other cardiovascular drug
candidates for potential license with the objective of further broadening its
product and patent portfolio.

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22

The Corporation anticipates that no substantial material
acquisition of equipment or facilities will take place in the coming year.

It is the Corporations intention to actively search for a
partnership with a large pharmaceutical company. Such a partnership would
conceivably provide funding for Phase III clinical trials, add experience to the
product development process and bring in overall marketing expertise. While the
Corporation has had informal discussions with potential partners, no formal
agreement, or letter of intent, has been entered into by the Corporation as of
the date hereof.

Potential Products in Development Stage

As previously stated, one of the Corporations primary focuses
is the clinical development and commercialization of its lead products, MC-1 and
MC-4232.

The Corporation's lead product, MC-1, is a small molecule
therapeutic that has a broad range of potential applications from treatment of
acute cardiovascular events (such as ACS, CABG and heart attacks), to chronic
conditions (such as hypertension and metabolic syndrome). MC-1 is a
cardioprotective drug that in both preclinical and clinical studies has shown
potential for treating various forms of CV diseases and stroke. MC-1 stands to
be a major first-to-market product in a new class of drug.

The Corporation announced positive results from a MEND-1 Phase
II clinical study in January 2003. The MEND-1 trial was a proof of principle
study to establish the efficacy and safety of the Corporations lead compound,
MC-1 as a cardioprotective treatment to reduce damage to the heart associated
with acute ischemic and reperfusion injury. The trial enrolled a total of 60
high-risk patients undergoing percutaneous coronary intervention (PCI), and was
conducted at four medical centres in Canada and the USA.

The primary endpoint, peri-procedural infarct size (as
determined by area under the curve (AUC) of CK-MB within 24 hours following
initiation of elective PCI) was significantly reduced by approximately 33% in
the MC-1 treatment group. The results from the MEND-1 study provided the
Corporation with the necessary positive data to proceed with larger, Phase II
trial in Coronary Artery Bypass Graft (CABG) procedures.

The MEND-CABG study was a Phase II placebo controlled,
double-blinded study of MC-1, designed to evaluate the potential of the
Corporation's lead drug in reducing ischemic damage resulting from coronary
artery bypass graft (CABG) procedures. The trial was conducted at 42 cardiac
centres throughout Canada and the US and is managed by Montreal Heart Institute
and Duke Clinical Research Institute (DCRI) and enrolled 901 patients. The
Corporation reported positive top-line results up to post-operative day (POD) 30
in December 2005. The results showed that the 250 mg dose of MC-1 had a
statistically significant reduction in the composite of events driven by a 46.9%
reduction in non-fatal heart attacks (peak CK-MB ≥100ng/ml). Patients were also
followed up to POD 90, which was 60 days after their last drug treatment. The
treatment effect at POD 30 with MC-1 was maintained throughout the follow up
period. The safety analysis from MEND-CABG also demonstrated MC-1 was safe and
well tolerated.The Corporation plans on initiating the Phase III
MEND-CABG II study in the first half of fiscal 2007.

The Company initiated a single confirmatory Phase III study in
patients undergoing CABG procedures during the second quarter of fiscal 2007.
The Company is conducting the MEND-CABG II trial at over 120 cardiac centres
throughout North America and Europe and is managed by Duke Clinical Research
Institute (DCRI) and Montreal Heart Institute and will enroll up to 3,000
patients. The Company expects to complete enrollment by November 2007 and
announce results in the second half of fiscal 2008.

Additional preclinical studies with MC-1 also suggest its
potential value in treatment of stroke. During 2002, preclinical studies were
carried out under the direction of Dr. Ashfaq Shuaib, Director of the Division
of Neurology at the WC Mackenzie Health Sciences Centre of the University of
Alberta. MC-1 reduced infarct size (damaged region) in the brain and preserved
neurological function in an animal model. Preliminary studies also indicate that
beneficial effects may even be obtained with treatment several hours after the
onset of ischemia. A combination of MC-1 and TPA was also shown to be an
effective treatment. There was no indication that MC-1 alone increased the
incidence of hemorrhage,

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23

suggesting it would be a safe treatment for stroke patients.
Medicure plans further research on stroke, hypertension and other potential
uses.

Medicure's first combination product is MC-4232, a drug that
combines the cardio-protective benefit of MC-1 with the ACE Inhibitor,
lisinopril, for the treatment of patients with co-existing diabetes and
hypertension and related cardiovascular problems. The co-existing conditions of
diabetes and hypertension present a major increase in risk of cardiovascular
complications, including coronary artery disease, peripheral artery disease,
retinopathy, nephropathy and stroke. In addition to cardioprotection, this
product has also demonstrated potential to provide further blood pressure
lowering effects, reduction in glycated hemoglobin (HbA1c), the primary measure
of blood glucose control and reduction in triglyceride levels.

In September 2005, the Corporation announced positive results
from the Phase II MATCHED study. The MATCHED (MC-1 and ACE Therapeutic
Combination for Hypertensive Diabetics) study evaluated MC-1 alone and in
combination with an lisinopril encompassing 120 patients with co-existing
diabetes and hypertension. MATCHED was a randomized, parallel group, cross-over,
double-blind, placebo-controlled comparison of 100, 300 or 1000 mg of MC-1 alone
and in combination with 20 mg of lisinopril. The results demonstrated the
positive clinical effects of MC-4232 on important primary and secondary blood
pressure and metabolic endpoints. The Corporation plans on initiating further
clinical studies as a result of these positive results.

The Corporation has also initiated the development program for
its second combination product, MC-4262, a drug combining MC-1 and an
Angiotensin Receptor Blocker (ARB), one of the world's ten largest
pharmaceutical drug classes by revenue. The patented new product, is being
developed for use in the treatment of hypertension in patients whose condition
is complicated with metabolic syndrome resulting in increased cardiovascular
risk.

While MC-1 and MC-4232 development proceeds, the Corporation is
seeking to develop or acquire additional cardiovascular therapeutics with
commercial potential to meet a market need. The Corporations objective is to
establish a pipeline of novel cardiovascular therapeutics to ensure the
Corporations long-term growth and security. The Corporation is taking a
two-pronged approach to this effort, combining the efforts of a drug discovery
program with strategic licensing of promising new compounds from other research
groups.

The Corporations drug discovery program has produced several
families of new compounds that have shown promising effects in in vitro
and/or in vivo studies. From these compounds, the Corporation has thus
far identified certain candidates, as having potential for further development.
These compounds, the chemical identities of which are being held confidential
while patents are pending, will undergo further in vitro analysis and
in vivo animal testing on disease models and for bioavailability.

According to the American Heart Association,
cardiovascular disease is the most prevalent serious disease in the United
States, affecting approximately 79.4 million people. According to the
American Heart Association, approximately one in three Americans have
some form of cardiovascular disease. In 2002, cardiovascular disease was the
underlying or contributing cause in 58% of all deaths in the United
States.1

The Corporation is focusing its initial drug discovery and
development efforts on meeting unmet needs in the cardiovascular and stroke
market. The Corporation is advancing its lead product, MC-1, through clinical
testing with the intention of commercializing it for treatment of (1) ischemic
reperfusion injury (associated with common procedures such as angioplasty and
coronary bypass surgery and stroke); and (2) myocardial ischemia, including
heart attacks, angina and other related disorders.

The Corporation has various compounds currently in early stage
  research screening. Compounds developed by the chemistry group will be advanced
  through the following steps based on their successful advancement through early
  stage screening; (1) in vitro screening, (2) in vivo screening in an appropriate
  disease model, (3) in vivo toxicity screening, (4) dose response confirmation
  of efficacy testing in vivo,

---

|1 American Heart Association, Heart Disease and
      Stroke Statistics - 2007 Update.
|--------------------------------------------------------------------------------------

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24

(5) preclinical, GLP toxicity and pharmacokinetics testing, (6)
Phase I human testing, (7) Phase II human, (8) Phase III human, and (9) Filing
of NDA in United States and NDS in Canada to request the right to commercialize.
At the present time the most advanced product is in stage 4 of this testing
continuum, but no estimate can be made as to when a certain product may advance
to the human clinical testing stage.

As at May 31, 2007, the Corporation had 38 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

There are numerous products on the market for treatment of
cardiovascular disorders, most of which are marketed by large pharmaceutical
companies.

It is recognized that cardiovascular treatments have been of
great benefit in reducing mortality and morbidity from a range of conditions.
The existing cardiovascular drugs can be categorized into several main drug
classes, as distinguished by their mechanism of action. Some of the primary drug
classes include: ACE Inhibitors (2005 US sales estimated at US$2.2 billion),
Angiotensin II Inhibitors (2005 US sales estimated US$2.9 billion), oral
anti-platelets (2005 US sales estimated US$3.8 billion), Beta-Blockers (2005 US
sales estimated at US$2.1 billion), and Calcium Channel Blockers (2005 US sales
estimated at US$4.6 billion), each class has particular benefits as well as an
array of alternative products. Cross-use of drugs between different types of
cardiovascular disease categories makes it difficult to differentiate sales by
the more specific market segment (such as for myocardial infarction, ischemic
reperfusion injury, etc.).

Despite the development of various effective products,
pharmaceutical companies carefully monitor developments in the field and
continually attempt to bring in new major products. This is in part driven by
the rise of generic products that substantially reduce profit margins for
products as they come off patent. Competition is most intense in cardiovascular
markets like hypertension where there are many treatment options. Large
pharmaceutical companies are most interested in finding new treatment options
for inadequately treated conditions such as those targeted by the
Corporation.

Despite the number of cardiovascular products, the Corporation
has identified certain remaining unmet therapy needs for certain forms of
cardiovascular disease. For example, physicians recognize the current lack of
effective products for reducing ischemic reperfusion injury. This is a very real
clinical problem and a significant market is available for a product that would
effectively protect against this injury that results from a variety of surgical
procedures. Similarly, although current treatments are in many cases able to
restore blood flow to the heart muscle following a heart attack (myocardial
ischemia), there remains a need for products that reduce the amount of damage
and scarring that results from the blockage. Other large cardiovascular markets
targeted by the Corporation that require improved therapeutics are stroke and
certain forms of hypertension.

Ischemic stroke is damage to the brain caused by a sudden
reduction in blood supply, most often due to blood clots lodging in major
arteries of the brain. Stroke ranks as the third leading cause of death in North
America, behind diseases of the heart and cancer. It is also a leading cause, of
long term disability in the U.S.

To date, the only FDA approved stroke therapeutic is tissue
plasminogen activator (TPA), a treatment that helps dissolve arterial
obstructions. Unfortunately, TPA is typically available to less than 10% of
stroke patients due to the increased risk of hemorrhage and the narrow
therapeutic time frame during which the drug can be applied.

Competitors Products in Development

Many companies, including large pharmaceutical and
biotechnology companies, are conducting development of products that are
intended to address a same or similar medical need. Many of these companies have
much large financial and other resources than the Corporation does, including
those related to research and development, manufacturing, and sales and
marketing. The Corporation also

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25

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.

Competitive Strategy and Position

As stated, the Corporation is primarily focusing on developing
MC-1 for myocardial ischemia and reperfusion injury. The Corporation is focusing
initially on these markets because of preclinical and clinical evidence
supporting the products efficacy in these applications and, therefore, these
applications have high potential for showing MC-1s clinical benefit. The
clinical need for a product with this activity will also be considered by
regulatory authorities (principally the FDA and also the TPD). Although MC-1
shows potential for treatment of other cardiovascular diseases, these uses are
not being addressed as a first priority due to factors including the cost of
clinical trials and the more intense competitive nature of these markets.

It is the Corporations intention to secure a partnership with
a large pharmaceutical company. Such a partnership would provide funding for
clinical development, add experience to the product development process and
provide market positioning expertise. While the Corporation has had informal
discussions with potential partners in this regard, no formal agreement or
letter of intent has been entered into by the Corporation as of the date hereof.

C. Organizational Structure

Medicure International Inc., a wholly owned subsidiary of the
Corporation, 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 2nd Street, Holetown, St. James, Barbados.

Medicure Pharma Inc., a wholly owned subsidiary of the
Corporation, 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 200 Cottontail Lane,
Somerset, NJ, 08873.

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.

Medicure Europe Limited, a wholly owned subsidiary of the
Corporation, was incorporated pursuant to the laws of the United Kingdom, on May
19, 2006. Medicure Europe Limiteds registered office is located at City House,
126-130 Hills Road, Cambridge, CB2 1RY.

As at May 31, 2007, American Cardio Therapeutics Inc. was
involved in no material transactions.

The following diagram illustrates the relationship between the
Corporation its subsidiaries:



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26

D. Property, Plants and Equipment

Office Space

The Corporation has use of approximately 4,000 square feet of
office space provided by Waverley Business and Science Centre Inc. as part of
its business services contract. The office is located in Winnipeg, Manitoba.

Research Facilities

CanAm leases 10,700 square feet of office and laboratory space
at a facility in Winnipeg, Manitoba. Biological, chemistry, and analytical
research for the Corporation take place at that facility.

ITEM 4A. UNRESOLVED STAFF COMMENTS

The Corporation is an accelerated filer as defined in Rule
12b-2 under the Securities Exchange Act of 1934. There are no written
comments which have been provided by the staff of the Securities and Exchange
Commission regarding the Corporation's periodic reports under that Act during
the fiscal year ended May 31, 2007 and there are no unresolved comments as of
the date of the filing of this Annual Report with the Commission.

ITEM 5. OPERATING AND FINANCIAL REVIEW AND
PROSPECTS

This section contains forward-looking statements involving
risks and uncertainties. The Corporation'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 3 - Key
Information - D. Risk Factors. The following discussion of the financial
condition, changes in financial conditions and results of operations of the
Corporation for the years ended May 31, 2007, May 31, 2006 and May 31, 2005
should be read in conjunction with the consolidated financial statements of the
Corporation. The Corporations consolidated financial statements are presented
in Canadian dollars and have been prepared in accordance with Canadian generally
accepted accounting principles (GAAP) included under Item 17 to this annual
report. Material measurement differences between Canadian and U.S. GAAP, as
applicable to the Corporation, are set forth in note 13 to the consolidated
financial statements of the Corporation included herein.

Critical Accounting Estimates

The Corporations consolidated financial statements are
prepared in accordance with Canadian generally accepted accounting principles
(Canadian GAAP). A reconciliation of amounts to present in accordance with
United States generally accepted accounting principles (US GAAP) is described
in note 13 to the audited consolidated financial statements for the year ended
May 31, 2007. These accounting principles require management to make certain
estimates and assumptions. Management believes that the estimates and
assumptions upon which the Corporation relies are reasonable based upon
information available at the time these estimates and assumptions are made.
Actual results could differ from these estimates. Future estimates and
assumptions may lead to different judgments than those applied in the
preparation of these consolidated financial statements. Areas of significant
estimates include revenue recognition, research and development costs, clinical
trial expenses, the assessment of net recoverable value of intangible assets,
income taxes and stock-based compensation.

Revenue recognition

The Company recognizes product revenue when substantially all
of the risks and rewards of ownership have transferred to the customer and
collection is reasonably assured. Depending on specific sales terms, revenue is
recognized upon product delivery, upon customer acceptance and when no
significant contractual obligations remain. As is common practice in the
pharmaceutical industry, the Companys sales are made to pharmaceutical
wholesalers for further distribution to end consumers. As such, the Companys
product revenue recognized may be less or greater than underlying demand for the
product.

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27

Net sales reflect reduction of gross sales at the time of
initial sales recognition for estimated wholesaler chargebacks, discounts,
allowances for product returns, and other rebates. In determining the amounts of
certain of these allowances and accruals, the Company uses estimates. The
Company estimates chargebacks, discounts, and other rebates using the following
factors: contract prices and terms with customers, estimated customer and
wholesaler inventory levels, and average contractual chargeback rates.

Interest income is recognized as earned.

Research and development costs

All costs of research activities are expensed in the period in
which they are incurred. Development costs are charged as an expense in the
period incurred unless a development project meets stringent criteria for cost
deferral and amortization. The Corporation assesses whether these costs have met
the relevant criteria for deferral and amortization at each reporting date. No
development costs have been deferred to date.

Clinical trial expenses

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
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 enrollment, services provided,
contractual terms, and prior experience with similar contracts.

Intangible assets

Costs incurred in obtaining patents are capitalized and
amortized upon issuance on a straight-line basis over the remaining legal life
of the respective patents, being approximately twenty years, or their economic
life, if shorter. The cost of servicing the Companys patents is expensed as
incurred. Intangible assets are recorded at acquisition cost and are amortized
on a straight-line basis based on the following estimated useful lives:

| | Technology license | 8 years   
| | ------------------ | ----------
| | Patents            | 5-20 years
| | Trademark          | 10 years  
| | Customer list      | 10 years  

The Company determines the estimated useful lives of intangible
assets based on a number of factors, including: legal, regulatory or contractual
limitations; known technological advances; anticipated demand; and the existence
or absence of competition. A significant change in any of these factors could
require a revision of the expected useful life of the intangible asset, which
could have a material impact on the Companys results of operations through an
increase to amortization.

On a regular basis, management reviews the valuation of
intangible assets taking into consideration any events and circumstances which
may impair their recoverable value including expected cash flows, the potential
benefit the Company expects to derive from the costs incurred to date and the
Companys ongoing development plans. A change in any of these assumptions could
produce a different fair value, which could have a material impact on the
Companys results of operations.

Income Taxes

The Company follows the asset and liability method of
accounting for income taxes. Under this method, future income tax assets and
liabilities are recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of existing assets
and liabilities and their respective tax bases. Future income tax assets and
liabilities are measured using enacted or substantively enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on future tax
assets and liabilities of a change in tax rates is recognized in income in the
period that includes the date of substantive enactment. Given the Companys
history of net losses and expected future losses, the Company is of the opinion
that it is more likely than not that these tax assets will not be realized in
the foreseeable future and therefore, a full

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28

valuation allowance has been recorded against these income tax
assets. As a result, no future income tax assets or liabilities are recorded on
the Companys balance sheets.

Stock-based compensation

The Corporation has a stock option plan for its directors,
management, consultants, and employees. Compensation expense is recorded for
stock options issued to employees and non employees using the fair value method.
The Corporation must calculate the fair value of stock options issued and
amortize the fair value to stock compensation expense over the vesting period,
and adjust the amortization for stock option forfeitures and cancellations. The
Corporation uses the Black-Scholes model to calculate the fair value of stock
options issued which requires that certain assumptions including the expected
life of the option and expected volatility of the stock be estimated at the time
that the options are issued. The Corporation amortizes the fair value using the
accelerated method over the vesting period of the options, generally a period of
three years. The factors included in the Black-Scholes model are reasonably
likely to change from period to period due to changes in the Corporations stock
price and external factors, as further stock options are issued and as
adjustments are made to previous calculations for unvested stock option
forfeitures and cancellations.

The stock-based compensation recorded by the Corporation is a
critical accounting estimate because of the value of compensation recorded, the
volume of the Corporations stock option activity, and the many assumptions that
are required to be made to calculate the compensation expense. The Black-Scholes
model is not the only permitted model to calculate the fair value of stock
options. A different model, such as the binomial model, as well as any changes
to the assumptions made may result in a different stock compensation expense
calculation. The Corporation recorded stock compensation expense in fiscal 2007
of $1,025,310 (2006 - $745,570; 2005 - $504,878).

A. Operating Results

General

The Corporation has concentrated primarily on research and
development and has yet to and may never derive any revenues from its clinical
products. The Corporation 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. The Corporation
has historically incurred net losses and anticipates that such losses will
increase as it continues its development and clinical trials and eventually
seeks regulatory approval for the sale of its products.

The Corporation believes it has sufficient funds on hand to
complete the Phase III clinical trial involving MC-1. As discussed in Note 1 of
the consolidated financial statements of the Corporation, however, the
Corporations ability to continue as a going concern is dependent on its ability
to obtain sufficient funds to conduct the remainder of its clinical trials and
to successfully commercialize its products. Failure to obtain further financing
may require the Corporation to reduce substantially or eliminate expenditures
for research and development, testing including further clinical trials, and
production and marketing of its proposed products. Based on the Corporations
current plans, the Corporations available working capital will be sufficient
into the first half of fiscal 2009.

Year Ended May 31, 2007 Compared to the Year Ended May 31,
2006

Net product sales for fiscal 2007 were $5,945,000, compared to
nil in fiscal 2006. Net product sales reflect reduction of gross sales at the
time of initial sales recognition for estimated wholesaler chargebacks, returns
and discounts. The Company began recognizing revenue for AGGRASTAT® effective
August 9, 2006, the date following its acquisition. The Company currently sells
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. The Corporation only began
selling AGGRASTAT® in August 2006, and wholesaler buying patterns have sometimes
been unpredictable.

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29

Cost of goods sold for fiscal 2007 were $388,000, compared to
nil in fiscal 2006. Cost of goods sold represents direct product costs
associated with AGGRASTAT® and royalties due to Merck & Co., Inc. based on
net sales of AGGRASTAT®. Amortization of the related acquired AGGRASTAT®
intangible assets is separately discussed below. Royalties are payable to Merck
& Co., Inc., based on net sales of AGGRASTAT® and commenced in January 2007
and will continue until the expiration of the last to expire of the assigned
patents. The calculation of royalties due is based on a sliding scale dependant
on reaching certain net sales milestones. Cost of goods sold will vary from
quarter to quarter, depending on the product mix, production costs, and sales
levels.

Selling, general, and administrative expenditures for fiscal
2007 were $11,048,000, compared to $2,858,000 in fiscal 2006. Selling, general,
and administrative expenditures increased during the 2007 fiscal year primarily
as a result of the Companys acquisition and launch of AGGRASTAT® during the
first half of the year. Selling, general, and administrative expenditures
related to AGGRASTAT® were $6,716,000 in fiscal 2007, compared to nil in fiscal
2006. Selling, general, and administrative expenditures for AGGRASTAT® are
primarily related to field selling expenses, product promotion costs and
administrative expenses. Other selling, general, and administrative expenditures
in fiscal 2007 were $4,332,000, compared to $2,858,000 in fiscal 2006. Other
selling, general, and administrative expenditures are higher in the current
fiscal year due to increased business development activities, employee payroll,
and stock-based compensation expense.

Research and development expenditures for fiscal 2007 were
$23,336,000, compared to $10,219,000 in fiscal 2006, which is an increase of
128%. As expected, research and development expenditures were significantly
higher as compared to the same periods in fiscal 2006 due to the initiation and
commencement of enrollment of the Phase 3 MEND-CABG II clinical trial in
November 2006.

The MEND-CABG II Study: The Company initiated a single
confirmatory Phase 3 study in patients undergoing CABG procedures during the
second quarter of fiscal 2007. The Company is conducting the MEND-CABG II trial
at over 120 cardiac centres throughout North America and Europe and is managed
by Duke Clinical Research Institute (DCRI) and Montreal Heart Institute and will
enroll up to 3,000 patients. The Company expects to complete enrollment by
November 2007 and announce results in the second half of fiscal 2008.

Cost incurred during the current year related to coordinating
the MEND-CABG II study including costs associated with contract negotiating, IRB
fees, regulatory activity, patient costs, monitoring costs, laboratory tests,
manufacturing costs and administration costs. For the year ended May 31, 2007,
total expenditures for the MC-1 CABG program were $20,258,000 as compared to
$6,116,000 in fiscal 2006.

The MATCHED Study: The study evaluated MC-1 alone and in
combination with an ACE inhibitor encompassing 120 patients with co-existing
diabetes and hypertension. The study was designed as a Phase 2 trial to
determine the optimal dose and endpoint for Phase 3 development of MC-4232.
MATCHED was a randomized, parallel group, cross-over, double-blind,
placebo-controlled comparison of 100, 300 or 1000 mg of MC-1 alone and in
combination with 20 mg of lisinopril. The results demonstrated the positive
clinical effects of MC-4232 on important primary and secondary blood pressure
and metabolic endpoints.

Cost incurred during the current year related to data analysis
and planning for future clinical development. For the year ended May 31, 2007,
total expenditures for the MC-4232 program were $113,000 as compared to
$1,768,000 in fiscal 2006.

Refundable investment tax credits for fiscal 2007 were
$172,000, compared to $478,000 in fiscal 2006. The recording of refundable ITCs
is solely related to research and development spending in Quebec, which are
eligible for refundable tax credits. The majority of the qualifying expenditures
related to the MEND-CABG study.

Amortization for the year ended May 31, 2007 was $2,289,000,
compared to $107,000 in fiscal 2006. The increase in amortization in fiscal 2007
compared to fiscal 2006 is the result of increased amortization

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30

of intangible assets associated with the Companys acquisition
of AGGRASTAT® during the first quarter of fiscal 2007.

Interest and other income for the year ended May 31, 2007 was
$1,591,000, compared to $300,000 in fiscal 2006. Interest and other income in
fiscal 2007 is higher than fiscal 2006 due to higher average cash and cash
equivalents balance, largely due to the equity financings that the Company
completed during the fourth quarter of fiscal 2006 and the third quarter of
fiscal 2007.

Interest expense for fiscal 2007 was $1,958,000, compared to
nil in fiscal 2006. The increase in interest expense in fiscal 2007 is the
result of the Company securing a US$15,840,000 term loan facility related to the
acquisition of AGGRASTAT® during the first quarter of fiscal 2007.

Foreign exchange loss for the year ended May 31, 2007 was
$392,000, compared to $200,000 in fiscal 2006. The foreign exchange loss for
fiscal 2007 is primarily a result of the weakening of the U.S. dollar relative
to the Canadian dollar during this period, particularly in the fiscal fourth
quarter. While the functional currency of the Company is the Canadian dollar,
the Company has significant holdings of U.S. dollars in anticipation of the U.S.
dollar denominated clinical trial costs for the Phase 3 MEND-CABG II study. This
foreign exchange loss was partially offset by an unrealized foreign exchange
gain incurred as a result of the Companys U.S. denominated term loan facility
of US$15,840,000.

For the year ended May 31, 2007, the Corporation recorded a
consolidated net loss of $31,703,000 or $0.30 per share compared to a
consolidated net loss of $12,607,000 or $0.17 per share for the year ended May
31, 2006. As discussed above, the consolidated net loss resulted mainly from the
Companys clinical development program, including the Phase 3 MEND-CABG II
study. The Company expects to incur a loss next year as it continues to invest
in product research and development.

The weighted average number of common shares outstanding used
to calculate basic and diluted loss per share increased to 104,879,404 for the
year ended May 31, 2007 from 75,144,764 for the year ended May 31, 2006.

Year Ended May 31, 2006 Compared to the Year Ended May 31,
2005

Interest and other income for fiscal 2006 totaled $300,000 as
compared to $395,000 for fiscal 2005. Interest and other income in fiscal 2006
is lower than fiscal 2005 due to lower average cash and cash equivalents
balance. The Corporation anticipates that investment income will continue to
fluctuate in relation to cash and short term investment balances and interest
yields.

Research and development expenditures decreased to $10,219,000
in fiscal 2006 as compared to $13,564,000 for fiscal 2005 and represent 80% of
the Corporations total expenditures in fiscal 2006. As expected, research and
development expenditures were lower as compared to the same periods in fiscal
2005 due to the completion of the Phase II trial attributed to MC-1, called
MEND-CABG and the Phase II MATCHED study with MC-4232 during fiscal 2006.

The MEND-CABG study was a Phase II placebo controlled,
double-blinded study of MC-1, designed to evaluate the potential of the
Corporation's lead drug in reducing ischemic damage resulting from CABG
procedures. The trial was conducted at 42 cardiac centres throughout Canada and
the US and is managed by Montreal Heart Institute and Duke Clinical Research
Institute (DCRI) and enrolled 901 patients. The Corporation reported positive
top-line results up to post-operative day (POD) 30 in December 2005. Patients
were also followed up to POD 90, which was 60 days after their last drug
treatment. The treatment effect at POD 30 with MC-1 was maintained throughout
the follow up period. The safety analysis from MEND-CABG also demonstrated MC-1
was safe and well tolerated.

The Corporation expects to initiate a single confirmatory Phase
III study in patients undergoing CABG procedures in the first half of fiscal
2007. The Corporation plans to conduct the trial at over 120 cardiac centres
throughout North America and Europe and will be managed by Duke Clinical
Research Institute (DCRI) and Montreal Heart Institute and will enroll up to
3,000 patients. For the year ended May 31, 2006, total expenditures for the
MEND-CABG program were $6,116,000 as compared to $9,388,000 in fiscal 2005.

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31

The MATCHED (MC-1 and ACE Therapeutic Combination for
Hypertensive Diabetics) study evaluated MC-1 alone and in combination with an
ACE inhibitor encompassing 120 patients with co-existing diabetes and
hypertension. The study was designed as a Phase II trial to determine the
optimal dose and endpoint for Phase III development of MC-4232. MATCHED was a
randomized, parallel group, crossover, double-blind, placebo-controlled
comparison of 100, 300 or 1000 mg of MC-1 alone and in combination with 20 mg of
lisinopril. The results demonstrated the positive clinical effects of MC-4232 on
important primary and secondary blood pressure and metabolic endpoints.

For the year ended May 31, 2006, total expenditures for the
MATCHED program were $1,768,000 as compared to $1,928,000 in fiscal 2005.

Research and development expenses are expected to increase
significantly in fiscal 2007 as compared to fiscal 2006. This increase in
expenditures is expected to result from the initiation of the Phase III
MEND-CABG study in the first half of fiscal 2007.

General and administrative expenses include salaries and
related costs for those employees not directly involved in research and
development, but are required to support ongoing business development and
corporate stewardship activities. The balance also includes professional fees
such as legal, audit, investor and public relations and business development
activities. General and administration expenses totaled $2,858,000 for the year
ended May 31, 2006, as compared to $2,256,000 for the year ended May 31, 2005.
The overall increase in costs during the fiscal year ended May 31, 2006 as
compared to the same period in fiscal 2005 is primarily driven by increased
business development and investor relations activities, professional fees and
stock-based compensation expense. The Corporation expects higher levels of
general and administrative expenditures in the fiscal year ending May 31, 2007
as compared to the same period in fiscal 2006.

Refundable investment tax credits for fiscal 2006 totaled
$478,000 as compared to $553,000 for fiscal 2005. As Medicure is a public
company, the federal investment tax credits (ITCs) for qualified Scientific
Research and Experimental Development (SR&ED) expenditures are not
refundable and are calculated at a rate of 20%. These ITCs can be applied to
reduce future income taxes payable with a ten-year carry forward period. Certain
eligible SR&ED expenditures incurred in Quebec qualify for Quebec refundable
tax credits and are earned on payments made in Quebec for SR&ED labour,
SR&ED contracts and to prescribed research centres.

The recording of refundable ITCs is solely related to research
and development spending in Quebec, which are eligible for refundable tax
credits. The majority of the qualifying expenditures related to the MEND-CABG
study. The refundable ITCs recorded are based on managements estimate of
amounts expected to be recovered and are subject to audit by taxation
authorities. These amounts have been recorded as a recovery in expenses in the
statement of operations.

Foreign exchange loss for fiscal 2006 totaled $200,000 as
compared to a gain of $64,000 for fiscal 2005. The foreign exchange loss for
fiscal year 2006 is primarily a result of the weakening of the U.S. dollar
relative to the Canadian dollar during this period. While the functional
currency of the Corporation is the Canadian dollar, the Corporation is holding
U.S. dollars in anticipation of the U.S. dollar denominated clinical trial costs
incurred as a result of the MEND-CABG study.

For the year ended May 31, 2006, the Corporation recorded a
consolidated net loss of $12,607,000 or $0.17 per share compared to a
consolidated net loss of $14,866,000 or $0.22 per share for the year ended May
31, 2005. As discussed above, the consolidated net loss resulted mainly from the
Corporations ongoing clinical development programs. The Corporation expects to
incur a loss next year as it continues to invest in product research and
development.

The weighted average number of common shares outstanding used
to calculate basic and diluted loss per share increased to 75,144,764 for the
year ended May 31, 2006 from 66,717,715 for the year ended May 31, 2005.

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32

B. Liquidity and Capital Resources

Since the Companys inception, it has financed operations
primarily from public and private sales of equity, debt financing, the exercise
of warrants and stock options, and interest income on excess funds held.

Cash used in operating activities for fiscal 2007 was
$25,247,000, compared to $12,678,000 for fiscal 2006, reflecting the larger loss
in 2007. Cash used in operating activities was composed of net loss, add-backs
or adjustments not involving cash and a net change in non-cash working
items.

Cash provided by financing activities in fiscal 2007 was
$45,021,000, compared to $41,252,000 in fiscal 2006. The main sources of cash in
fiscal 2007 were net proceeds from public and private placement financings of
$27,577,000, compared to $40,957,000 in fiscal 2006, and the debt financing
associated with the Companys acquisition of AGGRASTAT® of US$15,840,000 in
fiscal 2007, compared to nil in fiscal 2006.

On August 8, 2006, the Company secured US$15,840,000 in a term
loan facility with various lenders to acquire the rights to AGGRASTAT® in the
United States and its territories from MGI PHARMA, Inc. The term of the loan
facility is over 42 months, with interest accruing at one-month LIBOR plus 6.5
percent per annum. Commencing in June 2007, principal is payable monthly on a
straight-line amortization schedule over 33 consecutive monthly installments.

On December 22 and 28, 2006, the Company raised net proceeds of
US$25,900,000 through a private placement. The placement resulted in the
issuance to investors of 19,923,044 common shares and warrants to purchase an
additional 3,984,608 common shares. The purchase price of the common shares was
$1.30 per share, and the warrants are exercisable for a period of five years at
an exercise price of $1.70 per share.

The Corporation also raised $287,000 from the exercise of stock
options in fiscal 2007, compared to $252,000 in fiscal 2006.

On August 20, 2007, the Corporation entered into a securities
purchase agreement with an unrelated investor to raise gross proceeds of US$15
million. Under the terms of the agreement, the Corporation intends to issue
approximately 13.04 million common shares together with warrants to purchase
approximately 3.9 million additional common shares (the common shares and
warrants comprise the Units), at a price of US$1.15 per Unit. The warrants have
a five-year term and will have an exercise price of US$1.50 each. The agreement
is expected to close in September 2007, and is subject to standard closing
conditions including regulatory approval. In a separate transaction, the
Corporation has signed a non-binding term sheet dated August 20, 2007 to
monetize a percentage of the Corporations current and potential future
commercial revenues with Manchester Securities Corp., an affiliate of Elliott
Associates, L.P. (Elliott) for a US$25 million up-front cash payment. Under the
proposed terms, Elliott will receive an annual return that will be calculated as
a percentage of AGGRASTAT® net sales subject to an escalating minimum annual
return, until 2019. The minimum annual returns start at US$2.5 million in 2007
and escalate to US$6.9 million in 2016. Elliott will also receive the option to
convert its rights based on AGGRASTAT® to MC-1 within six months after MC-1s
commercialization, if achieved. The exact percentage of AGGRASTAT® or MC-1
revenue that Elliott will receive is tiered and declines as certain revenue
levels are achieved. Upon conversion to MC-1, Elliott is entitled to a blended
return of approximately 7 percent on the first US$75 million in MC-1 revenues
and 3 percent thereafter. Elliots participation rights shall be secured by a
first security interest in the intellectual property rights of the Corporation
in AGGRASTAT® and MC-1 (subject to certain specified MC-1 lien release terms),
the proceeds derived from the commercialization of AGGRASTAT® and MC-1
(including without limitation any royalties receivable derived from any
licensing of AGGRASTAT® and MC-1 to any third party and accounts receivable from
the sale of AGGRASTAT® and MC-1 products), and all intellectual, proprietary and
other rights (including without limitation contractual promotion and licensing
rights and benefits) associated with, or derived from, AGGRASTAT® and MC-1. The
proposed terms also include an option for the Corporation to terminate the
agreement for a payment of US $70 million to Elliott if the U.S. Food & Drug
Administration approves MC-1 for sale to the public. The Corporation will also
issue to Elliott ten-year warrants to purchase 1 million common shares at an
exercise price of US$1.26.

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33

The Elliott agreement is subject to a number of closing
conditions, including the amendment, described below, of the Corporations
credit agreement dated August 8, 2006 and the execution of a definitive
agreement. The transaction is expected to close in September 2007.

In conjunction with the financing transactions described above,
the Corporation has agreed to an amendment with its existing lenders to certain
of the covenants provided for in its credit agreement, dated August 8, 2006. The
lenders and the Corporation have agreed, subject to certain conditions:

| | i)   | From and after August 17, 2007, but no later than
      April 30, 2008, the Corporation shall receive additional cash for working
      capital in a total aggregate amount of at least US$35 million from any and/or
      a combination of any of the sources described above, provided that (1) at
      least US$15 million of such aggregate amount must be received by the Corporation
      no later than September 30, 2007 and (2) a further US$15 million of such
      aggregate amount must be received by the Corporation no later than February
      28, 2008 and (3) a further US$5 million of such aggregate amount must be
      received by the Corporation no later than April 30, 2008. The Corporation
      intends that the additional cash to meet this test will come from the subscription
      agreement and term sheet described above.
| | ---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | (ii) | To amend the credit agreement such that the Corporation
      is required to achieve the following minimum net revenue requirements from
      sales of AGGRASTAT®:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |      | Calendar 2007 - nilCalendar 2008 - US$15 millionCalendar 2009 - US$23 million                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        

| | (iii) | The Corporation will deposit US$10 million in a cash
      collateral account to be held by Merrill Lynch Capital Inc. (Merrill), for
      the benefit of Merrill and the lenders, on closing of the financing
      transactions described above.
| | ----- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The ability of the Corporation to continue as a going concern
and to realize the carrying value of its assets and discharge its liabilities
when due is dependent on many factors, including, but not limited to, the actual
closing of the above financings, including the completion of the appropriate
amendment to its existing financing agreement, under the terms described above
and meeting any applicable financial covenants on an ongoing basis.

Cash used in investing activities in fiscal 2007 was
$22,925,000, compared to $1,244,000 in fiscal 2006. The increase was primarily
due to the Companys acquisition of the rights to AGGRASTAT® in the United
States and its territories in August 2006.

As at May 31, 2007, the Corporation had cash and cash
equivalents totaling $31,770,000 compared with $34,920,000 at the previous
year-end.

These funds are committed to short-term investments and as a
result management does not believe that the fair value of these investments
would be adversely impacted to any significant degree by a fluctuation in market
interest rates. The total number of common shares issued and outstanding at May
31, 2007 was 116,314,509 as compared to 96,046,465 at May 31, 2006.

The main purpose of Phase III trials is to obtain definitive
statistical evidence of the efficacy and safety of MC-1 and MC-4232 in order to
support an application to the TPD and FDA for commercial approval.

If either MC-1 or MC-4232 is approved for marketing by the TPD
and FDA, there will then potentially be follow-up studies (called Phase IV
trials) that may need to be completed while the drug is being marketed, in order
to adjust or extend product claims. It is not possible to estimate the scope and
size of any such studies that may be required.

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34

While MC-1 and MC-4232 progress through clinical trials, the
Corporation will continue the drug development process. This process begins with
initial product screening which should produce preliminary candidates for
preclinical research. MC-5422 and MC-45308 are such candidates that have moved
into the preclinical research stage. Once a drug candidate reaches this stage,
it can cost in excess of $1,000,000 to advance it to the clinical trial
stage.

Besides public or private financings, the other major
financings are planned to be through up front and milestone payments from a
large pharmaceutical company that has partnered with the Corporation for
clinical development and or marketing of the lead compound.

When additional funds are required, potential sources of
financing include strategic relationships and public or private sales of the
Corporations common shares. The Corporation does not have any committed sources
of financing at this time and it is uncertain whether additional funding will be
available when the need arises on terms that will be acceptable to the
Corporation. If funds are raised by selling additional common shares, or other
securities convertible into common shares, the ownership interests of the
Corporations existing shareholders will be diluted. If the Corporation is
unable to obtain financing when required, the Corporation would not be able to
carry out its business plan, including further clinical trials of MC-1 and
MC-4232. The Corporation would have to significantly limit its operations and
business, and its financial condition and results of operations would be
materially harmed.

At May 31, 2007, the Corporation had net working capital of
$21,129,422 compared to net working capital of $34,197,234 at May 31, 2006.
During the period ended August 22, 2007, a total of 80,000 stock options were
exercised for proceeds of $60,000.

At May 31, 2006, the Corporation had net working capital of
$34,197,234 compared to net working capital of $5,926,134 at May 31, 2005.
During the period ended August 10, 2006, a total of 55,000 stock options were
exercised for proceeds of $47,000.

The Corporation had long-term debt at May 31, 2007 totalling
US$15.84 million with a syndicate of lenders, led by Merrill Lynch Capital, a
division of Merrill Lynch Business Financial Services Inc., and including
Silicon Valley Bank and Oxford Finance Corporation. The term of the Credit
Facility is over 42 months, with interest accruing at one-month LIBOR plus 6.5
percent per annum. Commencing in June 2007, principal is payable monthly on a
straight-line amortization schedule over 33 consecutive monthly installments.
The Credit Facility is secured by a security interest in all existing and
after-acquired assets of the Corporation including intellectual property.

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

Research and Development

Drug development and design begins with an idea, or theoretical
concept for treating a given disorder. The idea is advanced through the drug
design process, resulting in preliminary candidates that have theoretical
potential. Candidates are improved to achieve the optimal effectiveness with
limited toxicity. Following preclinical testing, products with the greatest
potential become lead candidates and are advanced into clinical trials (human
testing) with the intent of having them receive regulatory approval for
marketing.

The Corporation has demonstrated the effectiveness of MC-1 in
preclinical in vivo models of cardiovascular disease and Phase I and
Phase II clinical trials. Additional preclinical studies may also be performed
in order to evaluate other potential uses of MC-1 and to gather other data as
may be necessary to support future clinical objectives.

In vitro and in vivo laboratory experiments to
date have been used to study MC-1 therapeutic activity in myocardial ischemia,
ischemic reperfusion injury, and hypertension. These experiments involved
internationally recognized models (including coronary artery ligation,
Langendorff, reperfusion and hypertensive rat models), and analysis techniques
(such as electrocardiogram and hemodynamic

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35

measurements, and electron microscopy). In vivo studies
involve oral and/or intravenous administration of the drug dose.

While MC-1s development proceeds, novel chemical compounds
will be synthesized or in-licensed and entered into further testing to evaluate
their commercial potential. As previously set forth, the Corporations drug
discovery program is pursuing medicinal chemistry strategies with the objective
of maximizing the probability of commercial potential. Novel chemical compounds
are screened for commercial viability prior to advancement into preclinical
testing. These studies are to determine bioavailability/distribution, safety and
efficacy (on both in vitro and in vivo models).

For the period from inception on September 15, 1997 to May 31,
2007, the Corporation has expended approximately $59,743,000 net of government
assistance and investment tax credits, which aggregate approximately $1,654,000,
on the research and development of MC-1, MC-4232 and other compounds.

Patents and Licenses

The Corporation has been issued 38 patents from the United
States Patent Office providing protection for certain uses of MC-1 and related
compounds in treatment of cardiovascular diseases and other compounds for the
use in cardiovascular disease. The Corporation has also filed 26 regular
applications in the United States plus corresponding patent applications in
other jurisdictions. The Corporation will continue to file patents to extend
protection of MC-1 and for new compounds in development. The 38 patents issued
to the Corporation are as follows:

Patent Number
      Issue Date
      Title5,292,756
    March 8, 1994
      Novel Sulfonamide Fibrinogen Receptor Antagonists5,504,090
    April 2, 1996
      Compositions and methods for the prevention and
        treatment of ischemia-reperfusion organ injury5,658,929
    August 19, 1997
      Novel Sulfonamide Fibrinogen Receptor Antagonists5,733,916
      March 31, 1998
      Prevention and treatment of ischemia-reperfusion
        and endotoxin-related injury using adenosine and purino receptor antagonists5,733,919
    March 31, 1998
    Compositions for Inhibiting Platelet Aggregation5,814,643
    September 29, 1998
      Novel Sulfonamide Fibrinogen Receptor Antagonists5,880,136
    March 9, 1999
      Novel Sulfonamide Fibrinogen Receptor Antagonists5,965,581
    October 12, 1999
    Compositions for Inhibiting Platelet Aggregation5,972,967
    October 26, 1999
    Compositions for Inhibiting Platelet Aggregation5,978,698
    November 2, 1999
      Angioplasty Procedure Using Nonionic Contrast Media6,001,842
    December 14, 1999
      Compositions and methods for use in ischemia- reperfusion
        and endotoxin-related tissue injury6,040,317
    March 21, 2000
      Novel Sulfonamide Fibrinogen Receptor Antagonists6,043,259
    March 28, 2000
      Treatment of Cardiovascular and Related Pathologies6,051,587
    April 18, 2000
    Treatment of Age Related Hypertension6,136,794
      October 24, 2000
      Platelet Aggregation Inhibition Using Low Molecular
        Weight Heparin in Combination with a GP IIb/IIIa Antagonist6,339,085
    January 15, 2002
    Prodrugs of MC16,417,204
    July 9, 2002
    5-AZA
      Analogues6,489,345
    December 2, 2003
    Treatment of Diabetes and Related Pathologies6,538,112
    March 25, 2003
    Anticoagulant Test6,548,519
    April 15, 2003
    5-AZA
      Analogues


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36

6,586,414
    July 1, 2003
    Methods of Treating Stroke6,605,612
    August 12, 2003
    Mimics
      of MC16,667,315
    December 23, 2003
    Mimics
      of MC16,677,356
    January 13, 2004
    Combination6,770,660
    August 3, 2004
    Method
      for Inhibiting Platelet Aggregation6,780,997
    August 24, 2004
    Cardioprotective Phosphonates and Malonates6,861,439
    March 1, 2005
    Treatment of Cerebrovascular Disease6,867,215
    March 15, 2005
    Cardioprotective Phosphonates and Malonates6,890,943
    May 10, 2005
    Pyridoxal Analogues and Methods of Treatment6,897,228
    May 24, 2005
      Pyridoxine and Pyridoxal Analogues: Cardiovascular
        Therapeutics7,105,673
    September 12, 2006
    Cardioprotective Phosphonates and Malonates7,115,625
    October 3, 2006
      Treatment of Cardiovascular and Related Pathologies7,115,626
    October 3, 2006
      Treatment of Cardiovascular and Related Pathologies7,125,889
    October 24, 2006
      Treatment of Cardiovascular and Related Pathologies7,132,430
    November 7, 2006
      Treatment of Cardiovascular and Related Pathologies7,144,892
    December 5, 2006
      Treatment of Cardiovascular and Related Pathologies7,148,233
    December 12, 2006
      Treatment of Cardiovascular and Related Pathologies7,230,009
    June 12, 2007
    Pyridoxal Analogues and Methods of Treatment


Patents 5,504,090, 5,733,916 and 6,001,842 are sublicensed by
the Corporation from ENDACEA, Inc. ENDACEA, Inc. has the right to sublicense the
Sublicensed Patents to the Corporation in accordance with an agreement with the
Trustees at the University of Pennsylvania. Pursuant to a Sublicense Agreement
dated April 11, 2006, ENDACEA sublicensed the exclusive worldwide use of the
patents to the Corporation. Pursuant to the Sublicense Agreement, the
Corporation has agreed to pay ENDACEA, Inc. a royalty payment on Net Sales of
Sublicensed Products sold worldwide. The Sublicense Agreement commenced on April
11, 2006.

Patents 6,043,259, 6,051,587, 6,339,085, 6,890,943 and
7,230,009 are jointly owned by the Corporation and the University of Manitoba.
Pursuant to a Licence Agreement dated August 18, 1997, an Assignment Agreement
dated September 26, 1997, an updated License Agreement dated August 30, 1999 and
a newly revised version executed November 24, 2006, which supersedes all
previous versions, (the Licence Agreement) the University of Manitoba
licensed the exclusive worldwide use of the patents and the MC-1 technology to
the Corporation. Pursuant to the License Agreement, the Corporation has agreed
to pay the University of Manitoba a royalty payment of up to 3% of net sales
from any cardiovascular product derived from the MC-1 technology. The License
Agreement was originally signed on August 30, 1999 and subsequently amended on
November 24, 2006 and shall terminate if a patent or patents, domestic or
foreign, are obtained prior to commercialization of a Licensed Product, the
expiration date of the last to expire of any patents covered by the Patent
Rights.

The MC-1 technology is derived from work done by employees of
the Corporation and by two employees of the University of Manitoba, Dr. Naranjan
Dhalla and Dr. Krishnamurti Dakshinamurti, Professor Emeritus, Department of
Biochemistry.

Patents 5,292,756, 5,658,929, 5,733,919, 5,814,643, 5,880,136,
5,965,581, 5,972,967, 5,978,698, 6,040,317, 6,136,794, 6,538,112 and 6,770,660
were purchased by the Corporation 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 Corporation 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

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37

Corporation 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.

The Corporation entered into a second license with the
University of Manitoba. This technology is unrelated to MC-1. The University of
Manitoba has the right to license the technology to the Corporation in
accordance with an Inter-institutional Agreement with The University and Ottawa
Heart Institute Research Corporation. Pursuant to a license agreement dated
December 8, 2006, the University of Manitoba licensed the exclusive worldwide
use of the application to the Corporation. Pursuant to the License Agreement,
the Corporation has agreed to pay on Net Sales of Licensed Products sold
worldwide. The License Agreement commenced on December 8, 2006. No patents
related to this technology have issued yet.

There are 43 pending United States patent applications,
including 41 filed with the United States Patent Office as either regular or
provisional applications, which are owned by the Corporation by virtue of their
inventorship by employees of the Corporation and, subsequent to June 1, 2000, by
CanAm Bioresearch Inc. The 2 remaining applications, 10/588,288 and 10/909,608
are from the University of Manitoba License Agreement of December 8, 2006 and
the MGI Pharma Asset Purchase Agreement, respectively.

Much of the work, including some of the research methods, that
is important to the success of the Corporation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
Corporation 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 Corporation 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).

On June 1, 2000 the Corporation 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 Corporation 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

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38

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 and CDRI on July 2, 2004 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 development agreements is to expire on the completion
of all research and development activities by CanAm and CDRI, and the written
acknowledgment by CanAm, CDRI and Medicure International Inc. that no further
research projects will be undertaken (see Item 6 - Directors, Senior Management
and Employees - A. Directors and Senior Management)

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 or CDRI with at least 30 days prior written notice of its
intention to terminate, or by CanAm or CDRI 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
Corporation is to be kept confidential except in specific circumstances.

D. Trend Information

The Corporation is not aware of any trends, uncertainties,
demands, commitments or events which are reasonably likely to have a material
effect upon the Corporation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 part of the Corporations ongoing business, it does not
participate in transactions that generate relationships with unconsolidated
entities or financial partnerships, such as entities often referred to as
structured finance or special purpose entities or SPE, which would have been
established for the purpose of facilitating off-balance sheet arrangements or
other contractually narrow or limited purposes. As of May 31, 2007, the
Corporation was not involved in any unconsolidated SPE transactions.

F. Contractual Obligations

The following tables set forth the Corporations contractual
obligations as of May 31, 2007:

Contractual Obligations Payment Due By Period(in
      thousands of CDN$)
    Total
    2008
    2009-2010
    2011-2012
    ThereafterClinical Site Agreement
    13,107
    13,107
    -
    -
    -CommitmentsClinical Research Organization Agreement
      Commitments
    3,857
    3,857
    -
    -
    -Purchase Agreement Commitments
    3,430
    1,090
    2,340
    -
    -Service Agreement Commitments
    805
    805
    -
    -
    -Total
    21,199
    18,859
    2,340
    -
    -


In conjunction with the acquisition of AGGRASTAT®, the Company
entered into manufacturing and supply agreements to purchase a minimum quantity
of AGGRASTAT® from third parties.

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39

The Company entered into an agreement with a third party to
provide contract sales and marketing services, which expires in 2008.

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. The agreements
include the research and development of MC-1 and its related compounds.

The contracts with the clinical research organizations (CROs)
are payable over the terms of the 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. As
at May 31, 2007, the Company is committed to fund up to a further $3,857,000
related to clinical research agreements with CROs.

The Company also entered into agreements with the clinical
sites participating in the trials. The site agreements require payments over the
course of the study based on various activities being completed by the site,
such as patient visits and various testing and measurement activities required
per the study protocol. The Company is also liable for the payment of certain
pass through costs. A significant portion of the amounts due to the sites for
these activities is not payable until after the completion of these activities.
As at May 31, 2007, the Company is committed to fund up to an estimated
$13,107,000 related to site agreements. The CRO and site agreements are
cancellable upon termination notice.

In addition, the Company has committed to fund a further
$30,699,000 in research and development activities under two development
agreements with contract research organizations. The timing of expenditures and
payments is largely at the discretion of the Company and the agreements may be
terminated at any time provided thirty (30) days notice is provided.

The Corporation periodically enters into research agreements
with third parties that include indemnification provisions customary in the
industry. These guarantees generally require the Corporation 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
Corporation. In some cases, the 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
Corporation from making a reasonable estimate of the maximum potential amount it
could be required to pay. Historically, the Corporation 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.

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

Royalties are payable to Merck & Co., Inc., based on net
sales of AGGRASTAT® beginning in January 2007 and continuing until the
expiration of the last to expire of the assigned patents. The calculation of
royalties due is based on a sliding scale dependant on reaching certain net
sales milestones and ranges between 5-20% of net sales as defined in the license
agreement. Royalties due under the license agreement are included in cost of
goods sold in the period in which the related sale is recognized.

Upon closing of the Elliott financing (see Item 5B. Liquidity
and Capital Resources above), additional royalties will be owed on future sales
of AGGRASTAT® and MC-1, if approved.

No dividends have been declared or paid on any shares of the
Corporation since its incorporation. There can be no assurance that the
Corporation will ever declare any dividends on any of its shares, or if
declared, what the dividend amounts will be or whether such dividends, once
declared, will continue for any future period.

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40

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 Corporation including a brief biography of each are as follows:

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

The founder 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 Rh Pharmaceuticals
(acquired by Cangene Inc.), ABI Biotechnology (acquired by Apotex Inc.),
Viventia Biotech Inc., Genesys Pharma 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. Dr. Friesen previously served as a
senior executive of other publicly-traded companies, including a position as
President of Viventia Biotech Inc. (formerly Novopharm Biotech Inc.) In addition
to his role with the Corporation, 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 Corporation through A.D. Friesen
Enterprises Ltd., his private consulting corporation. Dr. Friesen devotes
substantially all of his time to the Corporation.

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

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 of the
University of Manitoba, and is currently Director of the Universitys Centre for
the Advancement of Medicine. He also serves as Chair of the Health Canada
Science Advisory Board, Chair of Genome Prairie; as a director of CancerCare
Manitoba and member of the Research Council of the Canadian Institute for
Advanced Research and of the Alberta Cancer Board International Committee on
Research. Dr. Naimark was the founding Chair of the Canadian Health Services
Research Foundation and of the Canadian Biotechnology Advisory Committee and has
served on many other committees and boards, in such positions as Director of the
Canadian Imperial Bank of Commerce, Chair of the International Review Panel for
the Medical Research Council of Canada and President of the Association of
Universities and Colleges of Canada. Dr. Naimark has received several honorary
degrees and awards, including the Order of Canada and the Order of Manitoba.

Gerald P. McDole, Mississuaga, Ontario, Canada, MBA 
Director

Mr. McDole is currently a director of several Canadian
healthcare companies. 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 recently established The Gerry McDole
Fellowship in Health Policy and Economic Growth.

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

Mr. Quick currently serves on the Board of Directors for Fund
For The Poor, the Board of Governors of St. Francis Hospital on Long Island, and
the National Selection Committee for the Jefferson Scholars

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41

Program of the University of Virginia. Mr. Quick is past
President and CEO of Quick & Reilly, Inc. and a former President of the
American Stock Exchange. Mr. Quick has also served on the Board of Governors of
the Chicago Stock Exchange and as Chairman of the Midwest Securities Trust
Company. Mr. Quick received a bachelor's degree in engineering from the
University of Virginia and attended Stanford University's Graduate School of
Petroleum Engineering. He was a lieutenant in the United States Navy, and served
four years active duty.

Kishore Kapoor, Winnipeg, Manitoba, Canada, CA  Director

Mr. Kapoor is the President of Wellington West Holdings Inc., a
specialized financial services company. Mr. Kapoor is also presently a director
of Manitoba Telecom Services Inc., a public company listed on the Toronto Stock
Exchange. From November 2003 to June 2005, Mr. Kapoor was Executive
Vice-President Corporate Development of Loring Ward International Ltd., which
was formed to hold the U.S. operations of Assante Corporation. As one of the
founders of Assante Corporation, Mr. Kapoor was its Executive Vice-President
Corporate Development from March 1994 to November 2003. Prior to founding
Assante Corporation, Mr. Kapoor was a tax partner with KPMG LLP. In his 14 years
with KPMG LLP, he specialized in offering clients advice on tax, corporate
finance, mergers and acquisitions, and development of corporate strategy in a
wide range of industries, including those in the biotechnology sector.

Moray W. Merchant, MBA - Vice-President, Business and Market
Development

Moray Merchant received his MBA in Pharmaceutical Marketing
from Saint Josephs University in Philadelphia and holds a Bachelors Degree in
Business Administration from the University of New Brunswick. Mr. Merchant has
over 20 years of industry experience leading the strategic planning, sales and
marketing of pharmaceutical products. For 18 years he held several positions
with DuPont Pharma in Canada managing the sales and marketing of their
cardiovascular products, directing business development activities and
establishing and leading their generics business. Beginning in 2001, he held the
positions of Vice President, Sales and Vice President of Marketing for aaiPharma
Inc., a U.S. based specialty pharmaceutical company. In these roles he was
responsible for building the sales and marketing organizations and leading the
promotion of their acquired portfolio of pharmaceutical products. Mr. Merchant
holds the responsibility for identifying partnering opportunities, leading the
strategic planning process and overseeing the commercialization of the
Corporations cardiovascular products.

Dawson Reimer, MAES - Vice-President, Operations

Dawson Reimer proceeded from a Master's Degree in Economic
Development, University of Waterloo to be employed as a full-time consultant to
the Federal Department of Western Diversification. In this capacity, he
conducted entrepreneurship training and developed a business start-up training
program. Beginning in 1996, he served as Business Development/Investor Relations
with Genesys Pharma Inc. He was also project coordinator for the establishment
of the Corporation's new research and pharmaceutical production facility. In
1997, he began conducting business activities for Genesys Venture Inc., a
biotech business incubator, where he has assisted numerous biotechnology
ventures in developing business plans, obtaining financing, and developing
intellectual property protection. In this capacity, Mr. Reimer became actively
involved in the Corporation at its inception and has been directly employed by
the Corporation since 2001. Mr. Reimer is a son-in-law of Dr. Albert D. Friesen,
Director, President, Chairman and Chief Executive Officer.

Derek G. Reimer, CA - Chief Financial Officer and Secretary

Derek Reimer came to the Corporation from Deloitte & Touche
LLP where he most recently served as a Senior Manager in the Assurance and
Advisory Services group. In this role, Mr. Reimer dealt mainly with major
corporate clients, including several TSX 100 companies, providing advice
regarding complex accounting, regulatory, and compliance issues. His previous
experience includes several years providing international accounting services to
clients exclusively in the financial services industry. Mr. Reimer is a
Chartered Accountant who also holds a Bachelor of Commerce (Hons.) degree in
accounting from the University of Manitoba. Mr. Reimer is responsible for
managing financial systems, programs and processes to ensure the successful
accomplishment of the Corporations business objectives.

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42

Mr. Jan-Ake Westin - Vice-President, Clinical
Development

Mr. Westin has worked as a managing director at two of Canadas
leading CROs: i3 Research and Innovus. In this capacity he has overseen the
management of numerous large cardiovascular clinical trials. Mr. Westin spent
over 20 years with Astra Pharma Inc., holding such positions as International
Clinical Research Manager and Senior Clinical Research Scientist. Mr. Westin
served in senior leadership positions with Pharmacia & Upjohn Inc. and
Pfizer/Pharmacia Corporation, where he served as Director of Clinical Operations
and as Director of Clinical Outsourcing, respectively. Mr. Westin received his
M.Sc. (Social Pharmacy) from the University of Uppsala in Sweden.

Dr. Charles Gluchowski  Vice-President, Research &
Development

Dr. Gluchowski received his PhD. in organic chemistry from
Texas A&M University. Dr. Gluchowski has been active in the life sciences
industry for over 20 years, including extensive experience in both executive and
senior scientific positions. His experience includes serving as President and
Chief Scientific Officer at Ceretek, a drug discovery company focused on
developing novel therapeutics targeting Lipid G-Protein Coupled Receptors
(L-GPCRs). He also served as Director of Chemistry at Synaptic Pharmaceutical
Corp. where he founded the Chemistry Department and led several drug discovery
and development project teams including a Benign Prostatic Hyperplasia project
in collaboration with Merck & Co., Inc. He began his professional career at
Allergan, Inc. where he initiated medicinal chemistry programs that led to the
discovery and development of Alphagan® and Lumigan® for the treatment of
glaucoma. The combined total sales for Alphagan® and Lumigan® in 2005 exceeded
USD$400 million. He is the sole or co-inventor on over 75 patents issued in the
U.S, and has published over 45 peer-reviewed articles and book chapters. Dr.
Gluchowski provides his services to the Corporations research and development
activities through a consulting contract with CanAm Bioresearch Inc.

Business Management

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

Moray W. Merchant, MBA - Vice-President, Business and Market
Development: Mr. Merchant holds the responsibility for identifying
partnering opportunities, leading the strategic planning process and overseeing
the commercialization of the Corporations cardiovascular products. (see
Directors and Senior Management under this item).

Dawson Reimer - Vice-President, Operations: Mr. Reimer
holds the responsibility of managing the internal operations and functional
areas which include project management and strategic planning. (See Directors
and Senior Management under this item)

Derek G. Reimer, CA - Chief Financial Officer and
Secretary: Mr. Reimer participates in the Corporations financial management
and accounting practices (see Directors and Senior Management under this
item).

Heather Hlady  Director, Sales and Marketing

Heather Hlady received her B. Sc. in Chemistry from the
University of Alberta. Ms. Hlady has over 14 years of pharmaceutical management,
sales and marketing experience. Ms. Hlady has spent her career with Jouveinal,
Pfizer and most recently, Biovail. Her experience with Jouveinal brought a
portfolio of eight different products, including the launch of two products to
the market. In 1997, she moved to Pfizer Canada where she was a District Manager
for the cardiovascular portfolio. In her role as District Manager, she managed
the sales and performance of the cardiovascular product budgets, marketing and
promotion, and was involved in the launch of two products to the market. Ms.
Hlady holds the responsibility for the launch of the sales and marketing teams
for Aggrastat® in the US, the branding and marketing of Medicure as a company,
and for creating a dynamic and strategic plan for the extension of the product
line.

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43

Scientific Management

Dr. Naranjan S. Dhalla - Chief Scientific Officer

Dr. Dhalla participates in the scientific management of the
Corporation under the title Chief Scientific Officer. The principal inventor of
MC-1, Dr. Dhalla recently retired as Distinguished Professor and Director,
Institute of Cardiovascular Sciences, St. Boniface General Hospital Research
Centre, Faculty of Medicine, University of Manitoba. Dr. Dhalla is an
internationally recognized cardiovascular researcher who has received 59 honours
and awards including the Research Achievement Award of the Canadian
Cardiovascular Society, The Upjohn Award of the Pharmacological Society of
Canada, Honorary Professorship at several universities, the Order of the Buffalo
Hunt from the Province of Manitoba, and the Order of Canada. Professionally, Dr.
Dhalla has been actively promoting the scientific basis of cardiology for over
25 years.

Dr. Dhalla has served in senior positions such as Secretary
General (17 years) and President (3 years) of the International Society for
Heart Research, Editor-in-Chief (11 years) of the international journal
Molecular and Cellular Biochemistry and is currently serving on the
editorial boards of 11 other international journals. Since 1996, Dr. Dhalla has
served as Executive Director of the International Academy of Cardiovascular
Sciences. Dr. Dhalla has published 500 papers and 350 abstracts as well as
edited or authored 31 books in the area of heart research. Dr. Dhalla has
provided his services to the Corporation's research and development activities
through a consulting contract with CanAm Bioresearch Inc.

Mr. Jan-Ake Westin - Vice-President, Clinical
Development

Mr. Westin is responsible for the design and management of
clinical studies for Medicures lead compound, MC-1, and for the clinical
aspects of other business development and research projects.

Dr. Charles Gluchowski  Vice-President, Research &
Development

Dr. Gluchowski is responsible for the preclinical development
for Medicures lead preclinical compounds, including, MC-45302 and MC-5422, and
for other research projects. Dr. Gluchowski provides his services to the
Corporations research and development activities through a consulting contract
with CanAm Bioresearch Inc. (see Directors and Senior Management under this
item).

Dr. Ahmad Khalil  Medical Director

Dr. Khalil received his MD from the Medical Academy IP in
Plovdiv, Bulgaria in 1986, and his M.Sc degree (1993) and PhD (1997) from The
University of Montreal. He has excellent basic research experience in the areas
of in vivo antithrombotic treatment and ischemia reperfusion, as well as
therapeutic approaches to coronary artery bypass graft surgery, much of which
was done during his tenure as researcher and lecturer at the renowned Montreal
Heart Institute. In addition, Dr. Khalil has experience as a practicing surgeon
in Europe and has presented at numerous cardiovascular conventions and published
extensively.

Dr. Deborah Douglas  Director of Physiology

Dr. Douglas received her Ph.D. in Animal Science from McGill
University, focusing on molecular biology related research. Her post-doctoral
experience involved cell biology research at the Institute of Cell Biology,
University of Manitoba, and the Jack Bell Research Centre, Vancouver General
Hospital, University of British Columbia. Dr. Douglas developed in vitroand in vivo models to screen for human diseases as Chief of Compound
Screening for Alviva Biopharmaceutical Inc. Dr. Douglas provides her
services to Medicure through an employment agreement with CanAm Bioresearch
Inc.

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44

Dr. Paul Armstrong - Clinical Consultant

Dr. Armstrong, Chair of the Advisory Board, is Professor in the
Department of Medicine, University of Alberta in Edmonton. Dr. Armstrong is an
internationally recognized cardiologist and clinical investigator with extensive
expertise in the design and conduct of clinical trials focused on acute ischemic
syndromes and congestive heart failure. Dr. Armstrong has published widely and
served as a senior advisor to major organizations and industry. Since June 1,
2000, Dr. Armstrong provides services to the Corporations research and
development activities through a consulting contract with CDRI Inc.

Scientific Advisory Board

The Corporation has established a Scientific Advisory Board to
ensure continued and proper review of research activities and work plans. The
members of the Scientific Advisory Board and a brief biography of each are as
follows:

Dr. Paul Armstrong - Chairperson

Dr. Armstrong, Chair of the Scientific Advisory Board, is
Professor in the Department of Medicine, University of Alberta in Edmonton. Dr.
Armstrong is an internationally recognized cardiologist and clinical
investigator with extensive expertise in the design and conduct of clinical
trials focused on acute ischemic syndromes and congestive heart failure. Dr.
Armstrong has published widely and served as a senior advisor to major
organizations and industry.

Dr. Stephen Hanessian

Dr. Hanessian is Professor, Department of Chemistry, University
of Montreal. Dr. Hanessian is one of North Americas most renowned medicinal
chemists with considerable experience in industry collaboration for the
discovery of new pharmaceuticals.

Dr. Morris Karmazyn

Dr. Karmazyn is a Professor in the Department of Pharmacology
and Toxicology at the University of Western Ontario in London, Ontario. Dr.
Karmazyn is internationally recognized and has received numerous distinctions
for his research in the field of myocardial ischemia and ischemic reperfusion
injury.

Dr. John McNeill

Dr. McNeill is Professor and Dean Emeritus, Division of
Pharmacology and Toxicology, Faculty of Pharmaceutical Sciences at the
University of British Columbia in Vancouver. The recipient of numerous awards
and distinctions, Dr. McNeills research is centered on the biochemical
mechanism action of drugs on the heart.

Dr. Eldon Smith

Dr. Smith is a Professor at the University of Calgary Medical
School in Alberta, where his past positions include Dean of the Faculty of
Medicine, Head of the Department of Medicine and Head of the Division of
Cardiology. A distinguished clinician and research scientist, Dr. Smith has
considerable industry experience having served on the boards of several
well-recognized companies.

Dr. Pierre Theroux

Dr. Theroux is Professor of Medicine at the University of
Montreal and Chief of the Coronary Care Unit at the Montreal Heart Institute.
Dr. Therouxs innovative work is widely recognized and he has contributed
extensively to the development of new treatments for acute ischemic heart
disease.

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45

Dr. Jeffrey Weitz

Dr. Weitz is Professor of Medicine and Haematology at McMaster
University in Hamilton where he has contributed extensively to understanding the
role of thrombosis and its treatment in cardiovascular disease. Dr. Weitz also
brings a wealth of expertise in academic-industrial collaboration and
development of new products.

Dr. Trevor Hassell

Dr. Hassell is Adjunct Professor of Medicine at the University
of the West Indies, Barbados, and Consultant Physician and Cardiologist at the
Queen Elizabeth Hospital, also in Barbados. He is President-Elect of the
Inter-American Heart Foundation, former President of the Caribbean Cardiac
Society and founder, President and member of the Board of Directors of the Heart
Foundation of Barbados.

Dr. A. Michael Lincoff

Dr. Lincoff is an interventional cardiologist in the Cleveland
Clinic Department of Cardiovascular Medicine and a staff cardiologist in the
Joseph J. Jacobs Center for Thrombosis and Vascular Biology, Department of
Molecular Cardiology at the Cleveland Clinic Research Institute. Dr. Lincoffs
specialty interests focus on high-risk and complex coronary angioplasty,
preventing restenosis, treating acute coronary syndromes and acute myocardial
infarction, and developing antithrombotic therapy during coronary intervention.

B. Compensation

No compensation of any kind was paid to the directors and
executive officers of the Corporation during the year ended May 31, 2007, except
for stock-based compensation described in Item 6(E) below and as follows:

On October 1, 2001, a compensation agreement was entered into
between the Corporation and A.D. Friesen Enterprises Ltd., a corporation owned
by Dr. Friesen and subsequently amended on October 1, 2003, October 1, 2005, and
October 1, 2006. For the year ended May 31, 2007, the Corporation paid A.D.
Friesen Enterprises Ltd., $289,333 in consulting compensation, including
bonuses. Dr. Friesen is eligible for an annual bonus, if certain objectives of
the Corporation are met, as determined by the Board of Directors.

Moray Merchant serves the Corporation as Vice President, Market
and Business Development and received a salary of $176,250 payable in equal
semi-monthly instalments in fiscal 2007.

Dawson Reimer serves the Corporation as Vice President,
Operations and received a salary of $98,333 payable in equal semi-monthly
instalments in fiscal 2007.

Derek G. Reimer serves the Corporation as Chief Financial
Officer and Secretary and received a salary of of $128,333 payable in equal
semi-monthly installments in fiscal 2007.

During the year ended May 31, 2007, the Corporation paid
directors a total of Nil (Year ended May 31, 2006: Nil; Year ended May 31, 2005:
Nil; Year ended May 31, 2004: Nil; Year ended May 31, 2003: Nil) for consulting
fees.

Additionally, the Corporation provides its directors $1,500 for
each quarterly board meeting they personally attend ($750 via telephone), and
$750 for each quarterly executive compensation, nominating and corporate
governance committee meeting or audit and finance committee meeting they attend.
The Corporation does not provide any cash compensation for its directors who are
also officers of the Corporation for their services as directors.

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

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46

C. Board Practices

The Board of Directors presently consists of five directors who
were elected at the Corporations annual general meeting of the shareholders
held on October 11, 2006. Each director holds office until the next annual
general meeting of the Corporation or until his successor is elected or
appointed, unless his office is earlier vacated in accordance with the Articles
of the Corporation, or with the provisions of the Canada Business
Corporations Act. Dr. Albert D. Friesen has served as a director of the
Corporation since September 1997. Dr. Arnold Naimark has served as a director of
the Corporation since March 2000, Dr. William A. Cochrane had served as a
director of the Corporation since October 2000 and resigned as of June 28, 2006.
Gerald McDole has served as a director of the Corporation since January 2004.
Peter Quick has served as a director of the Corporation since November 2005.
Kishore Kapoor was appointed as a director of the Corporation on June 28, 2006.

Audit and Finance Committee

Pursuant to Section 171 of the Canada Business Corporations
Act (the Act), the Corporation is required to have an Audit
Committee. As at the date hereof, the Audit and Finance Committee is comprised
of four independent directors: Kishore Kapoor (Chair), Dr. Arnold Naimark,
Gerald McDole and Peter Quick. The relevant experience of each member is
described above. (See Item 6. Directors, Senior Management and Employees)
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.

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 committee charter.

The charter of the Audit and Finance Committee is reproduced
below and can be found on the Corporations website at www.medicure.com.

AUDIT AND FINANCE COMMITTEE CHARTER

GENERAL FUNCTIONS, AUTHORITY, AND ROLE

The purpose of the Audit and Finance Committee is to oversee
the accounting and financial reporting processes of the Corporation and the
audits of its financial statements, and thereby assist the Board in monitoring
(1) the integrity of the financial statements of the Corporation, (2) compliance
by the Corporation with ethical policies and legal and regulatory requirements
related to financial reporting, (3) the appointment, compensation,
qualifications, independence and performance of the Corporations internal and
external auditors, (4) the performance of the Corporation's independent
auditors, and (5) performance of the Corporation's internal controls and
financial reporting process.

The Audit and Finance 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
Corporation, its auditors and its legal advisors. In connection with such
investigations or otherwise in the course of fulfilling its responsibilities
under this charter, the Audit and Finance Committee has the authority to
independently retain special legal, accounting, or other consultants to advise
it, and may request any officer or employee of the Corporation, its independent
legal counsel or independent auditor to attend a meeting of the Audit and
Finance Committee or to meet with any members of, or consultants to, the Audit
and Finance Committee. The Audit and Finance Committee has the power to create
specific sub-committees with all of the power to conduct or authorize
investigations into any matters within the

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47

scope of the mandate of the sub-committee, with full access to
all books, records, facilities and personnel of the Corporation, its auditors
and its legal advisors.

The Corporation's independent auditor is ultimately accountable
to the Board of Directors and to the Audit and Finance Committee, who, as
representatives of the Corporation's shareholders, have the authority and
responsibility to evaluate the independent auditor, appoint and replace the
independent auditor, and to determine appropriate compensation for the
independent auditor. In the course of fulfilling its specific responsibilities
hereunder, the Audit and Finance Committee must maintain free and open
communication between the Corporation's independent auditors, Board of Directors
and Corporation management. The responsibilities of a member of the Audit and
Finance Committee are in addition to such member's duties as a member of the
Board of Directors.

While the Audit and Finance Committee has the responsibilities
and powers set forth in this charter, it is not the duty of the Audit and
Finance Committee to plan or conduct audits or to determine that the
Corporation's financial statements are complete, accurate, and in accordance
with generally accepted accounting principles. This is the responsibility of
management and the independent auditor. Nor is it the duty of the Audit and
Finance 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 Corporations Code of Ethics. Any responsibilities that
the Audit and Finance Committee has the power to act upon, may be recommended to
the Board to act upon.

MEMBERSHIP

The membership of the Audit and Finance Committee will be as
follows:

The Committee shall consist of a minimum of three members of
the Board of Directors, appointed from time to time, each of whom is
affirmatively confirmed as independent by the Board of Directors, with such
affirmation disclosed in the Corporation's annual Information Circular.

The Board will elect, by a majority vote, one member as
chairperson.

The members of the Audit and Finance Committee will meet all
independence and financial literacy requirements of The American Stock Exchange,
The Toronto Stock Exchange, Rule 10A-3 of the Securities Exchange Act of 1934,
as amended, Multilateral Instrument 52-110 and the requirements of such other
securities exchange or quotations system or regulatory agency as may from time
to time apply to the Corporation.

A member of the Audit and Finance Committee may not, other than
in his or her capacity as a member of the Audit and Finance Committee, the Board
of Directors, or any other Board committee, accept any consulting, advisory, or
other compensatory fee from the Corporation, and may not be an affiliated person
of the Corporation or any subsidiary thereof.

RESPONSIBILITIES

The responsibilities of the Audit and Finance 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 Audit and Finance Committee will meet with the independent
auditor at least quarterly, either in person or telephonically.

Reporting Responsibilities

Provide to the Board of Directors proper Committee minutes.

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48

Report Committee actions to the Board of Directors with such
recommendations as the Committee may deem appropriate.

Charter Evaluation

Annually review and reassess the adequacy of this Charter and
recommend any proposed changes to the Board of Directors for approval.

Whistleblower Mechanism

Adopt and review annually a procedure through which employees
and others can anonymously inform the Audit and Finance Committee regarding any
concerns about the Corporation'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
Corporation's certificate of incorporation, memorandum, articles or similar
documents, or by the Board of Directors.

INDEPENDENT AUDITOR

Nominations

Nominate annually the independent auditor to be proposed for
shareholder approval.

Compensation and Evaluation

Approve the compensation of the independent auditor, evaluate
the performance of the independent auditor and, if so determined by the
Committee, replace the independent auditor.

Approval in Advance of Related Party Transactions

Pre-approval of all related party transactions, which are
transactions or loans between the Corporation and a related party involving
goods, services, or tangible or intangible assets that are (1) material to the
Corporation 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 Corporation, 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 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 SEC or any securities exchange
on which the Corporation's shares are traded including any of the following ten
types of non-audit services:

Bookkeeping or other services related to accounting records or
financial statements of the Corporation; Financial information systems design
and implementation consulting services; Appraisal or valuation services,
fairness opinions, or contributions-in-kind reports; Actuarial services;
Internal audit outsourcing services; Any management or human resources function;

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49

Broker, dealer, investment advisor, or investment banking
services; Legal services; Expert services related to the auditing service; and
Any other service the Board of Directors determines is not permitted.

Hiring Practices

Ensure that no individual who is, or in the past 3 years has
been, affiliated with or employed by a present or former auditor of the
Corporation or an affiliate, is hired by the Corporation as a senior officer
until at least 3 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:

Ensuring receipt from the independent auditor of a formal
written statement delineating all relationships between the independent auditor
and the Corporation, consistent with the Independence Standards Board Standard
No. 1 and related Canadian regulatory body standards;

Considering and discussing with the independent auditor any
relationships or services provided to the Corporation, including non-audit
services, that may impact the objectivity and independence of the independent
auditor; and

As necessary, taking, or recommending that the Board of
Directors 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 Audit and Finance
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 Audit and Finance 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 Corporation'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.

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50

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 Statement on Auditing Standards No. 61, as the same
may be modified or supplemented from time to time.

Review and discuss with management and the independent auditor
at the completion of annual and quarterly examinations:

The Corporation's audited and unaudited financial statements
and related notes; The Corporation's MD&A and news releases related to
financial results; The independent auditor's audit of the financial statements
and its report thereon; Any significant changes required in the independent
auditor's audit plan; The appropriateness of the presentation of any non-GAAP
related financial information;

Any serious difficulties or disputes with management
encountered during the course of the audit; and

Other matters related to the conduct of the audit, which are to
be communicated to the Audit and Finance Committee under generally accepted
auditing standards.

Review the management letter 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 Corporation's annual report.

Review, discuss with management and approve annual and interim
quarterly financial statements prior to public disclosure. The chairperson of
the Audit and Finance Committee may represent the entire Audit and Finance
Committee for purposes of this review.

Review and discuss with management and the independent auditor
the adequacy of the Corporation's internal accounting and financial controls
that management and the Board of Directors 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 Corporation.

Meet separately with the independent auditor and management, as
necessary or appropriate, to discuss any matters that the Audit and Finance
Committee or any of these groups believe should be discussed privately with the
Audit and Finance 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 generally accepted
accounting principles that have been discussed with management, and review and
discuss any significant changes in the accounting policies of the Corporation
and industry accounting and regulatory financial reporting proposals that may
have a significant impact on the Corporation's financial reports.

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 Corporation's financial statements.

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51

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
Corporation's financial statements or accounting policies.

Review with the Corporation's General Counsel legal matters
that may have a material impact on the financial statements, the Corporation'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
Corporation's financial statements.

Review, with management and the independent auditor, prior to
filing with regulatory bodies, the interim quarterly financial reports
(including related notes and MD&A) at the completion of any review
engagement or other examination. The chairperson of the Audit and Finance
Committee may represent the entire Audit and Finance Committee for purposes of
this review.

RISK ASSESSMENT

Meet periodically with management to review the Corporation'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 of Directors from time to time.

Review and discuss with management, and approve changes to, the
Corporation's Corporate Treasury Policy.

ADOPTION OF AUDIT AND FINANCE COMMITTEE CHARTER

This charter was originally adopted by the Board of Directors
on August 23, 2004 and is reviewed and amended as necessary on an annual basis.

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 Corporation. The current members of the Committee are Dr. Arnold Naimark
(Chair), Gerald McDole, Peter Quick, and Kishore Kapoor, none of whom is a
current or former executive officer of the Corporation. The Committee meets at
least once a year.

The Committee has developed a policy to govern the
Corporation'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
Corporation's responsiveness to environmental impact, health and safety and
other regulatory standards.

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 Corporation. 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

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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 Corporation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 Corporation has 36 employees,
of which 26 employees are dedicated to the Corporations research and
development activites. In addition, CanAm and CDRI have a combined staff of 23
research scientists, technicians and staff dedicated solely to the Corporations
research and development activities.

E. Share Ownership

With respect to the persons referred to above in Section B,
Compensation, the following table discloses the number of shares (each share
possessing identical voting rights), stock options held and percent of the
shares outstanding held by those persons at May 31, 2007.

|Title of Class | Identity of Person or Group    | Amount Owned | Percentage of Class
|-------------- | ------------------------------ | ------------ | -------------------
|               |                                |              |                    
|Common shares  | Dr. Albert D.
      Friesen(1) | 7,512,099(1) | 6.46%              
|Common shares  | Dr. Arnold Naimark             | Nil          | Nil                
|Common shares  | Gerald P. McDole               | 10,000       | 0.01%              
|Common shares  | Peter Quick                    | Nil          | Nil                
|Common shares  | Kishore Kapoor                 | Nil          | Nil                
|Common shares  | Derek G. Reimer                | 119,500      | 0.10%              
|Common shares  | Moray Merchant                 | Nil          | Nil                
|Common shares  | Dawson Reimer                  | 199,735      | 0.17%              
|Common shares  | Jan-Ake Westin                 | 9,000        | 0.01%              
|Common shares  | Dr. Charles Gluchowski         | Nil          | Nil                

|1) | Dr. Albert Friesen holds 427,900 shares personally or in
      an RRSP, a Canadian individual retirement plan. The rest of the shares are
      held by ADF Family Holding Corp., a private company wholly- owned by Dr.
      Friesen, his wife Mrs. Leona M. Friesen, and CentreStone Ventures Limited
      Partnership Fund (the Fund). Dr. Friesen is the CEO of the
  Fund.
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Incentive Stock Options

The following table discloses the stock options beneficially
held by the aforementioned persons, as of May 31, 2007. The stock options are
for shares of Common Stock of the Corporation.

Name of Person
    Number of
      Shares Subject to Issuance
    Exercise Price
      per Share
    Expiry DateDr. Albert D. Friesen
    100,000 150,000 150,000
    $1.63 $1.65 $1.63
    January 5, 2009 December 6, 2015
      October 14, 2016Dr. Arnold Naimark
    100,000 50,000 35,000
    $1.10 $1.10 $1.65
    December 15, 2007 August
      12, 2008 December 6, 2015Gerald P. McDole
    100,000 75,000
    $1.63 $1.65
    January 16, 2009 December
      6, 2015Peter Quick
    100,000 50,000
    $1.65 $1.54
    December 6, 2015 January
      16, 2017Kishore Kapoor
    100,000
    $1.83
    August 18, 2016Derek G. Reimer
    30,000
    $1.63
    January 5, 2009


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45,000 190,000
    $1.65 $1.63
    December 6, 2015 October 14, 2016Moray Merchant
    100,000 100,000 25,000 75,000
    $1.65 $1.12 $1.65 $1.63
    September 22, 2008 August 23, 2009
      December 6, 2015 October 14, 2016Dawson Reimer
    20,000 30,000 65,000 100,000
    $1.10 $1.63 $1.65 $1.63
    August 12, 2008 January 5, 2009
      December 6, 2015 October 14, 2016Jan-Ake Westin
    30,000
    $1.68
    October 11, 2016Dr. Charles
      Gluchowski
    150,000
    $1.72
    August 10, 2016


The Corporation 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. Each option entitles the holder
thereof to purchase one (1) Common Share of the Corporation 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
Corporations Common Shares are listed for trading.

The number of Common Shares allocated to the Plan, the exercise
period for the options (not to exceed five years), and the vesting provisions
for the options will be determined by the board of directors of the Corporation
from time to time. The aggregate number of shares reserved for issuance under
the Plan, together with any other employee stock option plans, options for
services and employee stock purchase plans, will not exceed 7,200,000 of the
issued and outstanding Common Shares. In addition, the aggregate number of
shares reserved for issuance to any one person shall not exceed five percent
(5%) of the issued and outstanding Common Shares.

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.

ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY
TRANSACTIONS

A. Major Shareholders

As of May 31, 2007, the following table sets forth the
beneficial ownership of the Corporation's common shares by each person known by
the Corporation to own beneficially more than 5% of the issued and outstanding
common shares of the Corporation. 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 Corporation, has
been furnished by the respective nominees individually. CDS & Company,
Toronto, Ontario is a clearing house that owns 74,557,872 (64.1%) of common
shares of the Corporation on behalf of beneficial owners. The Corporation does
not know the majority of the ultimate beneficial owners of these common shares.

|Title of Class | Identity of Person or Group                      | Amount Owned | Percentage of Class
|-------------- | ------------------------------------------------ | ------------ | -------------------
|               |                                                  |              |                    
|Common shares  | Dr. Albert D.
      Friesen(2)Winnipeg, Manitoba | 7,512,099(1) | 6.46%              

Notes: (1)Amount of shares as of May 31, 2007.

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|(2) | Dr. Albert Friesen holds 427,900 shares
      personally or in an RRSP. The rest of the shares are held by ADF Family
      Holding Corp., a private company wholly-owned by Dr. Friesen, his wife
      Mrs. Leona M. Friesen, and CentreStone Ventures Limited Partnership Fund
      (the Fund). Dr. Friesen is the CEO of the Fund.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

As of July 11, 2007, there were 7,325 shareholders of record
worldwide. As of this date there were 1,444 shareholders of record in the United
States holding a total of 36,853,067 common shares of the Corporation.

To the best of the Corporation'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 May 31, 2007, the total number of issued and outstanding
common shares of the Corporation beneficially owned by the directors and
executive officers of the Corporation as a group was 7,850,334 (or 6.75% of
common shares).

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

B. Related Party Transactions

Other than as set forth below, management of the Corporation is
not aware of any material interest, direct or indirect, of any director or
officer of the Corporation, any person beneficially owning, directly or
indirectly, more than 10% of the Corporations voting securities, or any
associate or affiliate of any such person in any transaction within the last
three years or in any proposed transaction which in either case has materially
affected or will materially affect the Corporation or its subsidiaries.

On October 1, 2001, a two-year consulting contract was entered
into with A.D. Friesen Enterprises Ltd., a corporation owned by Dr. Friesen.
This agreement, which was subsequently amended on February 1, 2002, paid A.D.
Friesen Enterprises Ltd. an annual salary of $150,000 payable in monthly
installments. On October 1, 2003 a new two year consulting contract was entered
into with A.D. Friesen Enterprises Ltd. for an annual salary of $175,000. On
October 1, 2005, a one-year consulting contract was entered into with A.D.
Friesen Enterprises Ltd. for an annual salary of $200,000. On October 1, 2006, a
two-year consulting contract was entered into with A.D. Friesen Enterprises Ltd.
for an annual salary of $250,000. This salary is reviewed annually by the Board.
Dr. Friesen is also eligible for grants of incentive stock options and bonuses,
if certain objectives between the Board and Dr. Friesen are met, as determined
by the Board. During the year ended May 31, 2007, the Corporation paid a total
of $289,333 to A.D. Friesen Enterprises Ltd. During the year ended May 31, 2006,
the Corporation paid a total of $191,667 to A.D. Friesen Enterprises Ltd. For
the year ended May 31, 2005, the Corporation paid a total of $175,000 to A.D.
Friesen Enterprises Ltd.

Dr. Friesen, a director, the Chairman, the President and the
Chief Executive Officer of the Corporation also owns a leasing company, Waverley
Business and Science Centre Inc. which entered into a lease with the Corporation
as of March 1, 2002. The lease agreement was subsequently amended on March 15,
2005. Pursuant to this agreement, the Corporation leases approximately 4,000
square feet of office space from Waverley Business and Science Centre Inc. for
minimum annual rental payments of $44,264, with additional overhead payable
under the lease dependant on usage. During fiscal 2007, $24,760 was paid in
excess of minimum rental payments for overhead costs.

Dr. Naranjan Dhalla, the Chief Scientific Officer of the
Corporation, is the principal scientist responsible for discovering the
cardiovascular benefits of MC-1. He is also a significant shareholder of the
Corporation. As an employee of the University of Manitoba he will receive 25% of
any royalties the university may receive in respect to the License Agreement. In
addition, Dr. Dhalla entered into a consulting agreement with the Corporation
effective January 18, 1998 wherein Dr. Dhalla agreed to perform certain
consulting services to the Corporation and which contract remains in effect as
at the date hereof. The Corporation is currently paying Dr. Dhalla $40,000 per
annum for these services through a contract with CanAm Bioresearch Inc.

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55

C. Interests of Experts and Counsel

Not applicable

ITEM 8. FINANCIAL INFORMATION

A. Consolidated Statements or Other Financial Information

Financial Statements

Included in Item 17 hereto are the consolidated financial
statements of the Corporation for the years ended May 31, 2007, 2006 and 2005.
The consolidated financial statements including related notes are accompanied by
the report of the Corporations independent registered public accounting firm,
KPMG 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 Corporations financial position or profitability. There are no
legal proceedings to which the Corporation is a party, nor to the best of the
knowledge of the Corporations management are any legal proceedings
contemplated.

Dividend Policy

The Corporation 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 Corporation will determine if and when dividends should be
declared and paid in the future based upon the Corporations financial position
at the relevant time. All of the Corporations Shares are entitled to an equal
share of any dividends declared and paid.

B. Significant Changes

On August 20, 2007, the Corporation entered into a securities
purchase agreement with an unrelated investor to raise gross proceeds of US$15
million. Under the terms of the agreement, the Corporation intends to issue
approximately 13.04 million common shares together with warrants to purchase
approximately 3.9 million additional common shares (the common shares and
warrants comprise the Units), at a price of US$1.15 per Unit. The warrants have
a five-year term and will have an exercise price of US$1.50 each. The agreement
is expected to close in September 2007, and is subject to standard closing
conditions including regulatory approval. In a separate transaction, the
Corporation has signed a non-binding term sheet dated August 20, 2007 to
monetize a percentage of the Corporations current and potential future
commercial revenues with Manchester Securities Corp., an affiliate of Elliott
Associates, L.P. (Elliott) for a US$25 million up-front cash payment. Under the
proposed terms, Elliott will receive an annual return that will be calculated as
a percentage of AGGRASTAT® net sales subject to an escalating minimum annual
return, until 2019. The minimum annual returns start at US$2.5 million in 2007
and escalate to US$6.9 million in 2016. Elliott will also receive the option to
convert its rights based on AGGRASTAT® to MC-1 within six months after MC-1s
commercialization, if achieved. The exact percentage of AGGRASTAT® or MC-1
revenue that Elliott will receive is tiered and declines as certain revenue
levels are achieved. Upon conversion to MC-1, Elliott is entitled to a blended
return of approximately 7 percent on the first US$75 million in MC-1 revenues
and 3 percent thereafter. Elliots participation rights shall be secured by a
first security interest in the intellectual property rights of the Corporation
in AGGRASTAT® and MC-1 (subject to certain specified MC-1 lien release terms),
the proceeds derived from the commercialization of AGGRASTAT® and MC-1
(including without limitation any royalties receivable derived from any
licensing of AGGRASTAT® and MC-1 to any third party and accounts receivable from
the sale of AGGRASTAT® and MC-1 products), and all intellectual, proprietary and
other rights (including without limitation contractual promotion and licensing
rights and benefits) associated with, or derived from, AGGRASTAT® and MC-1. The
proposed terms also include an option for the Corporation to terminate the
agreement for a payment of US $70 million to Elliott if the

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56

U.S. Food & Drug Administration approves MC-1 for sale to
the public. The Corporation will also issue to Elliott ten-year warrants to
purchase 1 million common shares at an exercise price of US$1.26.

The Elliott agreement is subject to a number of closing
conditions, including the amendment, described below, of the Corporations
credit agreement dated August 8, 2006 and the execution of a definitive
agreement. The transaction is expected to close in September 2007.

In conjunction with the financing transactions described above,
the Corporation has agreed to an amendment with its existing lenders to certain
of the covenants provided for in its credit agreement, dated August 8, 2006. The
lenders and the Corporation have agreed, subject to certain conditions:

| | i)   | From and after August 17, 2007, but no later than
      April 30, 2008, the Corporation shall receive additional cash for working
      capital in a total aggregate amount of at least US$35 million from any and/or
      a combination of any of the sources described above, provided that (1) at
      least US$15 million of such aggregate amount must be received by the Corporation
      no later than September 30, 2007 and (2) a further US$15 million of such
      aggregate amount must be received by the Corporation no later than February
      28, 2008 and (3) a further US$5 million of such aggregate amount must be
      received by the Corporation no later than April 30, 2008. The Corporation
      intends that the additional cash to meet this test will come from the subscription
      agreement and term sheet described above.
| | ---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | (ii) | To amend the credit agreement such that the Corporation
      is required to achieve the following minimum net revenue requirements from
      sales of AGGRASTAT®:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |      | Calendar 2007 - nilCalendar 2008 - US$15 millionCalendar 2009 - US$23 million                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        

| | (iii) | The Corporation will deposit US$10 million in a cash
      collateral account to be held by Merrill Lynch Capital Inc. (Merrill), for
      the benefit of Merrill and the lenders, on closing of the financing
      transactions described above.
| | ----- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The ability of the Corporation to continue as a going concern
and to realize the carrying value of its assets and discharge its liabilities
when due is dependent on many factors, including, but not limited to, the actual
closing of the above financings, including the completion of the appropriate
amendment to its existing financing agreement, under the terms described above
and meeting any applicable financial covenants on an ongoing basis.

ITEM 9. THE OFFERING AND LISTING

A. Listing Details

The Corporation's common shares are listed and traded on The
Toronto Stock Exchange (TSX) under the symbol MPH and The American Stock
Exchange (Amex) under the symbol MCU. The historical trading data for the
common shares of the Corporation on the above-mentioned exchanges is set out
below.

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57

|                         |  | TSX      |  |  | TSX     |  |  | Amex (1) |  |  | Amex (1) | 
|------------------------ |  | -------- |  |  | ------- |  |  | -------- |  |  | -------- | 
|Fiscal Period/Year Ended |  | High ($) |  |  | Low ($) |  |  | High     |  |  | Low      | 
|                         |  |          |  |  |         |  |  | ($US)    |  |  | ($US)    | 
|May 31, 2007             |  | 1.88     |  |  | 1.10    |  |  | 1.70     |  |  | 0.91     | 
|May 31, 2006             |  | 2.37     |  |  | 0.83    |  |  | 2.07     |  |  | 0.66     | 
|May 31, 2005             |  | 1.87     |  |  | 0.65    |  |  | 1.37     |  |  | 0.57     | 
|May 31, 2004             |  | 2.85     |  |  | 0.73    |  |  | 2.14     |  |  | 1.10     | 
|May 31, 2003             |  | 1.13     |  |  | 0.20    |  |  | N/A      |  |  | N/A      | 
|                         |  |          |  |  |         |  |  |          |  |  |          | 
|Fiscal Quarter Ended     |  |          |  |  |         |  |  |          |  |  |          | 
|                         |  |          |  |  |         |  |  |          |  |  |          | 
|May 31, 2007             |  | 1.55     |  |  | 1.13    |  |  | 1.37     |  |  | 0.97     | 
|February 28, 2007        |  | 1.64     |  |  | 1.10    |  |  | 1.43     |  |  | 0.91     | 
|November 30, 2006        |  | 1.88     |  |  | 1.37    |  |  | 1.70     |  |  | 1.21     | 
|August 31, 2006          |  | 1.88     |  |  | 1.27    |  |  | 1.70     |  |  | 1.20     | 
|May 31, 2006             |  | 2.37     |  |  | 1.52    |  |  | 2.07     |  |  | 1.41     | 
|February 28, 2006        |  | 1.85     |  |  | 1.32    |  |  | 1.70     |  |  | 1.15     | 
|November 30, 2005        |  | 1.44     |  |  | 0.85    |  |  | 1.17     |  |  | 0.72     | 
|August 31, 2005          |  | 1.20     |  |  | 0.83    |  |  | 0.95     |  |  | 0.66     | 
|                         |  |          |  |  |         |  |  |          |  |  |          | 
|Month                    |  |          |  |  |         |  |  |          |  |  |          | 
|                         |  |          |  |  |         |  |  |          |  |  |          | 
|June 2007                |  | 1.48     |  |  | 1.15    |  |  | 1.40     |  |  | 1.09     | 
|May 2007                 |  | 1.48     |  |  | 1.18    |  |  | 1.35     |  |  | 1.10     | 
|April 2007               |  | 1.55     |  |  | 1.29    |  |  | 1.37     |  |  | 1.12     | 
|March 2007               |  | 1.31     |  |  | 1.13    |  |  | 1.15     |  |  | 0.97     | 
|February 2007            |  | 1.43     |  |  | 1.10    |  |  | 1.22     |  |  | 0.91     | 
|January 2007             |  | 1.58     |  |  | 1.36    |  |  | 1.35     |  |  | 1.16     | 

Note:

(1) The Corporation commenced trading on the American Stock
Exchange on February 17, 2004.

C. Markets

The Corporation's common shares commenced trading on the
Toronto Stock Exchange on March 15, 2002 and on the American Stock Exchange on
February 17, 2004.

Amex Corporate Governance

Section 110 of the Amex company guide permits Amex to consider
the laws, customs and practices of foreign issuers in relaxing certain Amex
listing criteria, and to grant exemptions from Amex listing criteria based on
these considerations. A company seeking relief under these provisions is
required to provide written certification from independent local counsel that
the non-complying practice is not prohibited by home country law. A description
of the significant ways in which the Corporations governance practices differ
from those followed by domestic companies pursuant to Amex standards is as
follows:

Quorum Requirement: Section 123
of the Amex company guide requires that the quorum for meeting of shareholders
of a listed company be not less than 33 1/3% of the issued and outstanding
shares entitled to vote at a meeting of shareholders. The Corporations quorum
requirement is specified in its By-laws. A quorum for a meeting of members of
the Corporation is one person present or represented by proxy and holding in all
not less than 5% of the issued capital of the Corporation carrying voting
rights.

The foregoing is consistent with the laws, customs and
practices in Canada.

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58

ITEM 10. ADDITIONAL INFORMATION

A. Share Capital

Not applicable

B. Memorandum and Articles of Association

1. Objects and Purposes of the Corporation

The Memorandum of the Corporation places no restrictions upon
the Corporations objects and purposes.

2. Directors

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

Section 4.14 of By-Law No.1 of the Corporation (the By-Law)
provides that a director shall not be disqualified by reason of his office from
contracting with the Corporation 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
Corporation 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 Corporation and shall have been approved by
the directors or shareholders of the Corporation as required by section 120 of
the Act.

Section 4.01 of the By-Law states that the exact number of
directors to form the board shall be determined from time to time by the
directors of the Corporation entitled to vote at regular meetings. A quorum of
the board shall be a majority of the board. 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
Corporation;                                                                                                                                                           
|---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|ii)  | issue, reissue, sell or pledge debt obligations of the
      Corporation, 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 Corporation to secure performance of an obligation of any
      person; and                                                      
|iv)  | mortgage, hypothecate, pledge or otherwise create a
      security interest in all or any property of the Corporation, owned or
      subsequently acquired, to secure any obligation of the
  Corporation.

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

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 states that a director need not be a shareholder
to be qualified as a director.

3. Shares

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59

The Articles of the Corporation provide that the Corporation 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 Corporation 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 Corporation. Subject to the rights,
privileges, restrictions and conditions attached to any other class of shares of
the Corporation, 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
Corporation and are entitled to share equally in the remaining property of the
Corporation upon liquidation, dissolution or winding-up of the Corporation.

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 Corporation, whether
voluntary or involuntary, or any other return of capital or distribution of the
assets of the Corporation 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 Corporation 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 Corporation 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 Corporation are entitled to
examine, during its usual business hours, the Corporation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 Corporation may obtain a list of
shareholders upon payment of a reasonable fee and sending an affidavit to the
Corporation 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 Corporation, an offer to acquire
shares of the Corporation or any other matter relating to the affairs of the
Corporation.

Under the Act, shareholders of the Corporation may apply to a
court having jurisdiction directing an investigation to be made of the
Corporation. If it appears to the court that the formation, business or affairs
of the Corporation 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 Corporation.

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.

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60

The Corporation is organized under the laws of Canada. The
Corporations directors, officers, and affiliates of the Corporation, as well as
the experts named in this registration statement, are residents of Canada and,
to the best of the Corporations knowledge, all or a substantial portion of
their assets and all of the Corporations assets are located outside of the
United States. As a result, it may be difficult for shareholders of the
Corporation in the United States to effect service of process on the Corporation
or these persons above within the United States, or to realize in the United
States upon judgments rendered against the Corporation or such persons.
Additionally, a shareholder of the Corporation should not assume that the courts
of Canada (i) would enforce judgments of U.S. courts obtained in actions against
the Corporation 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 Corporation 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 one (1)
shareholder present or represented by proxy and holding in all not less than
five (5%) percent of the issued capital of the Corporation carrying voting
rights. 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.

6. Ownership of Securities

There are no limitations on the right to own securities,
imposed by foreign law or by the By-Law or other constituent document of the
Corporation.

7. Change in Control of Corporation

No provision of the Corporations articles of association,
charter or By-Law would have the effect of delaying, deferring, or preventing a
change in control of the Corporation, and operate only with respect to a merger,
acquisition or corporate restructuring of the Corporation or any of its
subsidiaries.

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61

8. Ownership Threshold

The Manitoba and Ontario Securities Acts provide that a
person that has direct or indirect beneficial ownership of, control or direction
over, or a combination of direct or indirect beneficial ownership of, and
control or direction over, securities of the issuer carrying more than 10% of
the voting rights attached to all the issuer's outstanding voting securities
must, within 10 days of becoming an "insider", file an insider report in the
required form effective the date on which the person became an insider,
disclosing any direct or indirect beneficial ownership of, or control or
direction over, securities of the reporting issuer. The Manitoba and Ontario
Securities Acts also provide for the filing of a report by an "insider"
of a reporting issuer who acquires or transfers securities of the issuer. This
insider report must be filed within 10 days after the change takes place.

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.

C. Material Contracts

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

| | a) | Amendment to Employment Agreement dated October 1, 2005
      between A.D. Friesen Enterprises Ltd. and the Corporation.                                                  
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | b) | Amendment to Development Agreement dated June 1, 2000
      between CanAm Bioresearch Inc. and Medicure International Inc. dated July
      4, 2006.                      
| | c) | Amendment to Development Agreement dated July 2, 2004
      between Medicure International Inc. and Clinical Development Research
      Institute Inc. dated July 4, 2006.
| | d) | Amended Stock Option Plan approved October 25,
    2005.                                                                                                                  
| | e) | Amendment to Employment Agreement dated October 1, 2006
      between A.D. Friesen Enterprises Ltd. and the
  Corporation.                                                

D. Exchange Controls

There is no law or government decree of regulation in Canada
that restricts the export or import of capital, or that affects the remittance
of dividends, interest or other payments to a non-resident holder of Common
Shares, other than withholding tax requirements. See "Item 7 Taxation."

There is no limitation imposed by Canadian law or by the
articles or other charter documents of the Corporation on the right of a
non-resident to hold or vote the Common Shares or the Class A common shares of
the Corporation, other than as provided in the Investment Canada Act, as amended
(the "Investment Act").

The Investment Act generally prohibits implementation of a
reviewable investment by an individual, government or agency thereof,
corporation, partnership, trust or joint venture that is a "non-Canadian" as
defined in the Investment Act (a "non-Canadian"), unless, after review the
Minister responsible for the Investment Act is satisfied that the investment is
likely to be of net benefit to Canada. If an investment by a non-Canadian is not
a reviewable investment, it nevertheless requires the filing of a short notice
which may be given at any time up to 30 days after the implementation of the
investment.

An investment in Common Shares of the Corporation by a
non-Canadian that is a "WTO investor" (an individual or other entity that is a
national of, or has the right of permanent residence in, a member of the

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62

World Trade Organization, current members of which include the
European Community, Germany, Japan, Mexico, the United Kingdom and the United
States, or a WTO investor-controlled entity, as defined in the Investment Act)
would be reviewable under the Investment Act if it were an investment to acquire
direct control, through a purchase of assets or voting interests, of the
Corporation and the value of the assets of the Corporation equalled or exceeded
$184 million, the threshold established for 1999, as indicated on the financial
statements of the Corporation for its fiscal year immediately preceding the
implementation of the investment. In subsequent years, such threshold amount may
be increased or decreased in accordance with the provisions of the Investment
Act.

An investment in Common Shares of the Corporation by a
non-Canadian, other than a WTO investor, would be reviewable under the
Investment Act if it were an investment to acquire direct control of the
Corporation and the value of the assets were $5.0 million or more, as indicated
on the financial statements of the Corporation for its fiscal year immediately
preceding the implementation of the investment.

A non-Canadian, whether a WTO investor or otherwise, would
acquire control of the Corporation for the purposes of the Investment Act if he,
she or it acquired a majority of the Common Shares of the Corporation or
acquired all or substantially all of the assets used in conjunction with the
Corporation's business. The acquisition of less than a majority, but one-third
or more of the Common Shares of the Corporation, would be presumed to be an
acquisition of control of the Corporation unless it could be established that
the Corporation was not controlled in fact by the acquirer through the ownership
of the Common Shares.

The Investment Act would not apply to certain transactions in
relation to Common Shares of the Corporation, including:

| | (a) | an acquisition of Common Shares of the Corporation by any
      person if the acquisition were made in the ordinary course of that
      person's business as a trader or dealer in securities;                                                                                                       
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                       
| | (b) | an acquisition of control of the Corporation 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 Act; and                                                           
| |     |                                                                                                                                                                                                                                                                                                       
| | (c) | an acquisition of control of the Corporation by reason of
      an amalgamation, merger, consolidation or corporate reorganization
      following which the ultimate direct or indirect control in fact of the
      Corporation, through the ownership of voting interests, remains
      unchanged.

E. Taxation

U.S. Federal Income Tax Consequences

The following is a summary of certain 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
acquired pursuant to this prospectus.

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 tax advisor regarding the U.S. federal income, U.S. state
and local, and foreign tax consequences of the acquisition, ownership, and
disposition of Common Shares.

No legal opinion from U.S. legal counsel or ruling from the
Internal Revenue Service (the IRS) has been requested, or will be obtained,
regarding the U.S. federal income tax consequences of the acquisition,
ownership, and disposition of Common Shares. This summary is not binding on the
IRS, and

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63 the IRS is not precluded from taking a position that is
different from, and contrary to, the positions taken in this summary. In
addition, because the authorities on which this summary is based are subject to
various interpretations, the IRS and the U.S. courts could disagree with one or
more of the positions taken in this summary.

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 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
prospectus. 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., any state in the
U.S., or 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 tax advisor regarding the U.S. federal
income, U.S. state and local, and foreign tax consequences (including the
potential application of and operation of any income tax treaties) of the
acquisition, ownership, and disposition of Common Shares.

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; or (i) U.S. Holders that own (directly, indirectly, or constructively) 10%
or more of the total combined voting power of all classes of shares of the
Corporation entitled to vote. U.S. Holders that are subject to special
provisions under the Code, including U.S. Holders described immediately above,
should consult their own tax advisors

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regarding the U.S. federal income tax consequences of the
acquisition, ownership, and disposition of Common Shares.

If an entity that is classified as a partnership for U.S.
federal income tax purposes holds Common Shares, the U.S. federal income tax
consequences of the acquisition, ownership, and disposition of Common Shares to
such partnership and the partners of such partnership generally will depend on
the activities of the partnership and the status of such partners. Partners of
entities that are classified as partnerships for U.S. federal income tax
purposes should consult their own tax advisors 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 any U.S. federal tax consequences
other than U.S. federal income tax consequences, or any U.S. state and local or
(except as specifically discussed below in Canadian Federal Income Tax
Considerations for United States Residences) foreign tax consequences to U.S.
Holders of the acquisition, ownership, and disposition of Common Shares. Each
U.S. Holder should consult its own tax advisor 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.

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

Distributions on Common Shares

General Taxation of Distributions

Subject to the passive foreign investment company rules
discussed below, 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 Corporation.
To the extent that a distribution exceeds the current and accumulated earnings
and profits of the Corporation, 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 Disposition of Common Shares below).

Reduced Tax Rates for Certain Dividends

For taxable years beginning before January 1, 2011, a dividend
paid by the Corporation generally will be taxed at the preferential tax rates
applicable to long-term capital gains if (a) the Corporationis 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 Corporation generally will be a qualified foreign
corporation under Section 1(h)(11) of the Code (a QFC) if (a) the Corporation
is incorporated in a possession of the U.S., (b) the Corporation is eligible for
the benefits of the Canada-U.S. Tax Convention, or (c) the Common Shares are
readily tradable on an established securities market in the U.S. However, even
if the Corporation satisfies one or more of such requirements, the Corporation
will not be treated as a QFC if the Corporation is a passive foreign investment
company (as defined below) for the taxable year during which the Corporation
pays a dividend or for the preceding taxable year. In 2003, the U.S. Department
of the Treasury (the Treasury) and the IRS announced that they intended to
issue Treasury Regulations providing procedures for a foreign corporation to
certify that it is a QFC. Although these Treasury Regulations have not yet been
issued, the Treasury and the IRS have confirmed their intention to issue these
Treasury Regulations. It is expected that these Treasury Regulations will
obligate persons required to file information returns to report a dividend paid
by a foreign corporation as a dividend from a QFC if the foreign corporation
has, among other things, certified under penalties of perjury that the foreign
corporation was not a passive

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foreign investment company for the taxable year during
which the foreign corporation paid the dividend or for the preceding taxable
year.

As discussed below, the Corporation expects that it will be a
passive foreign investment company for its current taxable year, and the
Corporation expects that it will be a passive foreign investment company for
one or more subsequent taxable years. (See Additional Rules that May Apply to
U.S. HoldersPassive Foreign Investment Corporation below). Accordingly, the
Corporation does not expect to be a QFC for its current taxable year, and the
Corporation may not be a QFC for subsequent taxable years.

If the Corporation is not a QFC, a dividend paid by the
Corporation 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 tax
advisor regarding the dividend rules.

Distributions Paid in Foreign Currency

The amount of a distribution received on the Common Shares 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 received 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 summary, and a U.S. Holder that is a corporation should
consult its own tax advisor 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 adjusted tax basis in the Common Shares sold
or otherwise disposed of. Subject to the passive foreign investment company
rules discussed below, 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.

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.

Foreign Tax Credit

A U.S. Holder that pays (whether directly or through
withholding) Canadian income tax with respect to dividends received 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 taxable 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

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66

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 (including passive income, high
withholding tax interest, financial services income, general income, and
certain other categories of income). 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 foreign tax credit rules.
Dividends received on the Common Shares generally will be treated as foreign
source and generally will be categorized as passive income or, in the case of
certain U.S. Holders, financial services income for purposes of applying the
foreign tax credit rules. However, for taxable years beginning after December
31, 2006, the foreign tax credit limitation categories are reduced to passive
category income and general category income (and the other categories of
income, including financial services income, are eliminated). The foreign tax
credit rules are complex, and each U.S. Holder should consult its own tax
advisor 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 tax advisor regarding the information reporting and backup
withholding tax rules.

Additional Rules that May Apply to U.S. Holders

If the Corporation 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 a U.S. Holder of the acquisition,
ownership, and disposition of Common Shares.

Passive Foreign Investment Company

The Corporation generally will be a passive foreign investment
company under Section 1297(a) of the Code (a PFIC) if, for a taxable year,
(a) 75% or more of the gross income of the Corporation for such taxable year is
passive income or (b) on average, 50% or more of the assets held by the
Corporation 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 Corporation 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 Corporation owns, directly or indirectly, 25% or more of the total
value of the outstanding shares of another foreign corporation, the Corporation
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
Corporation 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.

The Corporation expects that it will be a PFIC for its current
taxable year, and the Corporation expects that it will be a PFIC for one or more
subsequent taxable years. The determination of whether the

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Corporation 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 various interpretations. In addition, whether the Corporation will be a PFIC
for its current taxable and each subsequent taxable year depends on the assets
and income of the Corporation over the course of each such taxable year and, as
a result, cannot be predicted with certainty as of the date of this prospectus.
Accordingly, there can be no assurance that the IRS will not challenge the
determination made by the Corporation concerning its PFIC status or that the
Corporation will not be a PFIC for any taxable year.

Default PFIC Rules Under Section 1291 of the Code

If the Corporation 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 Corporation 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.

A Non-Electing U.S. Holder will be subject to the rules of
Section 1291 of the Code with respect to (a) any gain recognized on the sale or
other taxable disposition of Common Shares and (b) any excess distribution
received on the Common Shares. A distribution generally will be an excess
distribution to the extent that such distribution (together with all other
distributions received in the current taxable year) exceeds 125% of the average
distributions received during the three preceding taxable years (or during a
U.S. Holders holding period for the Common Shares, if shorter).

Under Section 1291 of the Code, any gain recognized on the sale
or other taxable disposition of Common Shares, and any excess distribution
received 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 (other than
years prior to the first taxable year of the Corporation beginning after
December 31, 1986 for which the Corporation was not a PFIC) will be subject to
U.S. federal income tax at the highest tax rate 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. Such a Non-Electing
U.S. Holder that is not a corporation must treat any such interest paid as
personal interest, which is not deductible. The amount of any such gain or
excess distribution allocated to the current year of such Non-Electing U.S.
Holders holding period for the Common Shares will be treated as ordinary income
in the current year, and no interest charge will be incurred with respect to the
resulting tax liability for the current year.

If the Corporation is a PFIC for any taxable year during which
a Non-Electing U.S. Holder holds Common Shares, the Corporation will continue to
be treated as a PFIC with respect to such Non-Electing U.S. Holder, regardless
of whether the Corporation ceases to be a PFIC in one or more subsequent taxable
years. A Non-Electing U.S. Holder may terminate this deemed PFIC status by
electing to recognize gain (which will be taxed under the rules of Section 1291
of the Code discussed above) as if such Common Shares were sold on the last day
of the last taxable year for which the Corporation was a PFIC.

QEF Election

The procedure for making a QEF Election, and the U.S. federal
income tax consequences of making a QEF Election, will depend on whether such
QEF Election is timely. A QEF Election generally will be timely if it is made
for the first year in a U.S. Holders holding period for the Common Shares in
which the Corporation is a PFIC. In this case, a U.S. Holder may make a timely
QEF Election by filing the appropriate QEF Election documents with such U.S.
Holders U.S. federal income tax return for such first year. However, if the
Corporation was a PFIC in a prior year in a U.S. Holders holding period for the
Common Shares, then in order to be treated as making a timely QEF Election,
such U.S. Holder must elect to recognize gain (which will be taxed under the
rules of Section 1291 of the Code discussed above) as if the Common Shares were
sold on the qualification date for an amount equal to the fair market value of
the Common Shares on the qualification date. The qualification date is the
first day of the first taxable year in which the Corporation was a QEF with
respect to such U.S. Holder. In addition, under

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very limited circumstances, a U.S. Holder may make a
retroactive QEF Election if such U.S. Holder failed to file the QEF Election
documents in a timely manner.

A QEF Election will apply to the taxable year for which such
QEF Election is made and to all subsequent taxable years, unless such QEF
Election is invalidated or terminated or the IRS consents to revocation of such
QEF Election. If a U.S. Holder makes a QEF Election and, in a subsequent taxable
year, the Corporation ceases to be a PFIC, the QEF Election will remain in
effect (although it will not be applicable) during those taxable years in which
the Corporation is not a PFIC. Accordingly, if the Corporation becomes a PFIC in
another subsequent taxable year, the QEF Election will be effective and the U.S.
Holder will be subject to the QEF rules described above during any such
subsequent taxable year in which the Corporation qualifies as a PFIC. In
addition, the QEF Election will remain in effect (although it will not be
applicable) with respect to a U.S. Holder even after such U.S. Holder disposes
of all of such U.S. Holders direct and indirect interest in the Common Shares.
Accordingly, if such U.S. Holder reacquires an interest in the Corporation, such
U.S. Holder will be subject to the QEF rules described above for each taxable
year in which the Corporation is a PFIC.

A U.S. Holder that makes a timely QEF Election generally will
not be subject to the rules of Section 1291 of the Code discussed above. For
example, a U.S. Holder that makes a timely QEF Election generally will recognize
capital gain or loss on the sale or other taxable disposition of Common Shares.

However, for each taxable year in which the Corporation is a
PFIC, a U.S. Holder that makes a QEF Election 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 Corporation, which will be taxed as long-term capital gain to such U.S.
Holder, and (b) and the ordinary earnings of the Corporation, which will be
taxed as ordinary income to such U.S. Holder. Generally, net capital gain is
the excess of (a) net long-term capital gain over (b) net short-term capital
loss, and ordinary earnings are the excess of (a) earnings and profits over
(b) net capital gain. 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
Corporation is a PFIC, regardless of whether such amounts are actually
distributed to such U.S. Holder by the Corporation. However, a U.S. Holder that
makes a QEF Election may, subject to certain limitations, elect to defer payment
of current U.S. federal income tax on such amounts, subject to an interest
charge. If such U.S. Holder is not a corporation, any such interest paid will be
treated as personal interest, which is not deductible.

A U.S. Holder that makes a QEF Election generally (a) may
receive a tax-free distribution from the Corporation to the extent that such
distribution represents earnings and profits of the Corporation that were
previously included in income by the U.S. Holder because of such QEF Election
and (b) will adjust such U.S. Holders tax basis in the Common Shares to reflect
the amount included in income or allowed as a tax-free distribution because of
such QEF Election.

The Corporation currently intends to provide, for each taxable
year that the Corporation is a PFIC, each U.S. Holder that has made a QEF
Election with (a) a PFIC Annual Information Statement as described in Treasury
Regulation Section 1.1295 -1(g) and (b) all additional information that such
U.S. Holder is required to obtain in connection with maintaining such QEF
Election. Each U.S. Holder should consult its own tax advisor regarding the
availability of, and procedure for making, a QEF Election.

Mark-to-Market Election

A U.S. Holder may make a Mark-to-Market Election only if the
Common Shares are marketable stock. The Common Shares generally will be
marketable stock if the Common Shares are regularly traded on a qualified
exchange or other market. For this purpose, a qualified exchange or other
market includes (a) a national securities exchange that is registered with the
Securities and Exchange Commission, (b) the national market system established
pursuant to section 11A of the Securities and Exchange Act of 1934 (the
Exchange Act), or (c) a foreign securities exchange that is regulated or
supervised by a governmental authority of the country in which the market is
located, provided that (i) such foreign exchange has trading volume, listing,
financial disclosure, surveillance, and other requirements designed to prevent
fraudulent and manipulative acts and practices, remove impediments to and
perfect the mechanism of a free, open, fair, and orderly market, and protect
investors (and the laws of the country in which the foreign exchange is located
and the rules of the foreign exchange ensure that such requirements

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are actually enforced) and (ii) the rules of such foreign
exchange effectively promote active trading of listed stocks. If the Common
Shares are traded on such a qualified exchange or other market, the Common
Shares generally will be regularly traded for any calendar year during which
the Common Shares are traded, other than in de minimis quantities, on at least
15 days during each calendar quarter.

A Mark-to-Market Election applies to the taxable year in which
such Mark-to-Market Election is made and to each subsequent taxable year, unless
the Common Shares cease to be marketable stock or the IRS consents to
revocation of such election. Each U.S. Holder should consult its own tax advisor
regarding the availability of, and procedure for making, a Mark-to-Market
Election.

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.
However, if a U.S. Holder makes a Mark-to-Market Election after the beginning of
such U.S. Holders holding period for the Common Shares and such U.S. Holder has
not made a timely QEF Election, the rules of Section 1291 of the Code discussed
above will apply to certain dispositions of, and distributions on, the Common
Shares.

A U.S. Holder that makes a Mark-to-Market Election will include
in ordinary income, for each taxable year in which the Corporation 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 adjusted
tax basis in such Common Shares. A U.S. Holder that makes a Mark-to-Market
Election will be allowed a deduction in an amount equal to the lesser of (a) the
excess, if any, of (i) such U.S. Holders adjusted tax basis in the Common
Shares over (ii) the fair market value of such Common Shares as of the close of
such taxable year or (b) the excess, if any, of (i) the amount included in
ordinary income because of such Mark-to-Market Election for prior taxable years
over (ii) the amount allowed as a deduction because of such Mark-to-Market
Election for prior taxable years.

A U.S. Holder that makes a Mark-to-Market Election generally
will adjust such U.S. Holders tax basis in the Common Shares to reflect the
amount included in gross income or allowed as a deduction because of such
Mark-to-Market Election. In addition, upon a sale or other taxable disposition
of Common Shares, a U.S. Holder that makes a Mark-to-Market Election will
recognize ordinary income or loss (not to exceed the excess, if any, of (a) the
amount included in ordinary income because of such Mark-to-Market Election for
prior taxable years over (b) the amount allowed as a deduction because of such
Mark-to-Market Election for prior taxable years).

Other PFIC Rules

Under Section 1291(f) of the Code, the IRS has issued proposed
Treasury Regulations that, subject to certain exceptions, would cause a U.S.
Holder that had not made a timely QEF Election to recognize gain (but not loss)
upon certain transfers of Common Shares that would otherwise be tax-deferred
(such as gifts and exchanges pursuant to tax-deferred reorganizations under
Section 368 of the Code). However, the specific U.S. federal income tax
consequences to a U.S. Holder may vary based on the manner in which Common
Shares are transferred.

Certain additional adverse rules will apply with respect to a
U.S. Holder if the Corporation is a PFIC, regardless of whether such U.S. Holder
makes a QEF Election. For example under Section 1298(b)(6) of the Code, a U.S.
Holder that uses Common Shares as security for a loan will, except as may be
provided in Treasury Regulations, be treated as having made a taxable
disposition of such Common Shares.

The PFIC rules are complex, and each U.S. Holder should consult
its own tax advisor 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 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
in Canada, deals at arms length and is not affiliated with the Corporation for
the purpose of the Tax Act, holds the

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70

Common Shares as capital property and does not 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. Common Shares will generally be considered to be
capital property to a holder unless such shares are held in the course of
carrying on a business, or in an adventure or concern in the nature of trade.
Holders who meet all the criteria in clauses (a) and (b) are referred to herein
as a U.S. Holder or U.S. Holders and this summary only addresses the tax
considerations to such U.S. Holders. The summary does not deal with special
situations, such as the particular circumstances of traders or dealers, limited
liability companies, tax exempt entities, insurers or financial institutions.
Such holders should consult their own tax advisors.

This summary is based upon the current provisions of the Tax
Act, the regulations thereunder in force at the date hereof (Regulations), all
specific proposals to amend the Tax Act and Regulations publicly announced by or
on behalf of the Minister of Finance (Canada) prior to the date hereof and the
current provisions of the Convention and the current administrative practices of
the Canada Revenue Agency published in writing prior to the date hereof. This
summary does not otherwise take into account or anticipate any changes in law or
administrative practices whether by legislative, governmental or judicial
decision or action, nor does it take into account tax laws of any province or
territory of Canada or of the U.S. or of any other jurisdiction outside Canada.

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.

This summary is of a general nature only and is not intended
to be, nor should it be construed to be, legal or tax advice to any particular
U.S. Holder and no representation with respect to the federal income tax
consequences to any particular U.S. Holder or prospective U.S. Holder is made.
The tax liability of a U.S. Holder will depend on the holders particular
circumstances. Accordingly, U.S. Holders should consult with their own tax
advisors for advice with respect to their own particular circumstances.

Dividends

Amounts paid or credited or deemed to be paid or credited to a
U.S. Holder as, on account or in lieu of payment, or in satisfaction of,
dividends on Common Shares will be subject to Canadian withholding tax on the
gross amount of the dividends. Under the Convention, the rate of Canadian
withholding tax on dividends paid or credited by the Corporation to a U.S.
Holder that beneficially owns such dividends is generally 15% unless the
beneficial owner is a company which owns at least 10% of its voting stock at
that time in which case the rate of Canadian withholding tax is reduced to 5%.

Dispositions

A U.S. Holder will generally not be subject to tax under the
Tax Act on any capital gain realized on a disposition of Common Shares, provided
that the shares do not constitute taxable Canadian property to the U.S. Holder
at the time of disposition and the U.S. Holder is not entitled to relief under
the Convention. Generally, Common Shares will not constitute taxable Canadian
property to a U.S. Holder provided that such shares are listed on a prescribed
stock exchange (which currently includes the TSX and AMEX) at the time of the
disposition and, during the 60-month period immediately preceding the
disposition, the U.S. Holder, persons with whom the U.S. Holder does not deal at
arms length, or the U.S. Holder together with all such persons has not owned
25% or more of the issued shares of any series or class of the Corporations
capital stock.

If the Common Shares constitute taxable Canadian property to a
particular U.S. Holder, any capital gain arising on their disposition may be
exempt from Canadian tax under the Convention if at the time of disposition the
Common Shares do not derive their value principally from real property situated
in Canada.

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71

Canadian Federal Income Tax Consequences

The following is a summary of the principal Canadian federal
income tax considerations, as of the date hereof, generally applicable to
Security holders who deal at arm's length with the Corporation, who, for
purposes of the Income Tax Act (Canada) (the "Canadian Tax Act") and any
applicable tax treaty or convention, have not been and will not be resident or
deemed to be resident in Canada at any time while they have held shares of the
Corporation, to whom such shares are capital property, and to whom such shares
are not "taxable Canadian property" (as defined in the Canadian Tax Act). This
summary does not apply to a non-resident insurer.

Generally, shares of the Corporation will be considered to be
capital property to a holder thereof provided that the holder does not use such
shares in the course of carrying on a business or has not acquired them in one
or more transactions considered to be an adventure in the nature of trade. All
security holders should consult their own tax advisors as to whether, as a
matter of fact, they hold shares of the Corporation as capital property for the
purposes of the Canadian Tax Act.

Under the current provisions of the Canadian Tax Act, as
modified by the Proposed Amendments (see below), one-half of capital gains
(taxable capital gains) must be included in computing the income of a holder
in the year of disposition. One-half of capital losses (allowable capital
losses) may generally be deducted against taxable capital gains for the year
of disposition subject to and in accordance with the provisions of the Canadian
Tax Act.

Allowable capital losses in excess of a holders taxable
capital gains of a taxation year may generally be carried back three years and
carried forward indefinitely for deduction against taxable capital gains
realized in those years, to the extent and under circumstances permitted under
the Canadian Tax Act.

This discussion takes into account specific proposals to amend
the Canadian Tax Act and the regulations thereunder publicly announced by or on
behalf of the Minister of Finance (Canada) prior to the date hereof (the
"Proposed Amendments") and assumes that all such Proposed Amendments will be
enacted in their present form. No assurances can be given that the Proposed
Amendments will be enacted in the form proposed, if at all; however the Canadian
federal income tax considerations generally applicable to security holders
described herein will not be different in a material adverse way if the Proposed
Amendments are not enacted.

Except for the foregoing, this discussion does not take into
account or anticipate any changes in law, whether by legislative, administrative
or judicial decision or action, nor does it take into account provincial,
territorial or foreign income tax legislation or considerations, which may
differ from the Canadian federal income tax considerations described herein.

Generally, shares of the Corporation will not be taxable
Canadian property at a particular time provided that such shares are listed on a
prescribed stock exchange (which exchanges currently include the Toronto Stock
Exchange), the holder does not use or hold, and is not deemed to use or hold,
the shares of the Corporation in connection with carrying on a business in
Canada and the holder, persons with whom such holder does not deal at arm's
length, or the holder and such persons, have not owned (or had under option) 25%
or more of the issued shares of any class or series of the capital stock of the
Corporation at any time within five years preceding the particular time.

A holder of shares of the Corporation that are not taxable
Canadian property will not be subject to tax under the Canadian Tax Act on the
sale or other disposition of shares.

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 Corporation, or is provided by its legal counsel and/or
auditors. Additionally, this summary does not consider the effects of United
States federal, state, local or foreign income tax consequences.

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72

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 Corporation.

F. Dividends and Paying Agents

Not applicable

G. Statement by Experts

Not applicable

H. Documents on Display

The documents described herein may be inspected at the head
office of Corporation at 4  1200 Waverley Street, Winnipeg, Manitoba, Canada
R3T 0P4, during normal business hours.

I. Subsidiary Information

Not applicable

ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK

INTEREST RATE RISK

The primary objective of the Corporations investment
activities is to preserve principal by maximizing the income the Corporation
receives from such activities without significantly increasing risk. Securities
that the Corporation invests in are generally highly liquid short-term
investments such as term deposits with terms to maturity of less than one year.

Due to the short-term nature of these investments, the
Corporation believes there is no material exposure to interest rate risk arising
from such investments and accordingly, no quantitative tabular disclosure is
required.

As disclosed above, the Corporation entered into a debt
agreement in connection with its acquisition of the rights of AGGRASTAT® in the
United States and its territories in August 2006. At May 31, 2007, the
outstanding principal amount of this debt is US$15.84 million. As this debt
bears interest at a fluctuating rate of LIBOR plus 6.5 percent per annum, the
Corporation is exposed to interest rate risk.

FOREIGN EXCHANGE RISK

The Corporations primary currency of operations is the
Canadian dollar. However, the Corporation has expenditures and holds investments
denominated in a foreign currency. In fiscal 2007, it is estimated that
approximately 55% of the Corporations expenditures were denominated in a
foreign currency, primarily being the US dollar. To date the Corporation 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. A 10% change in foreign exchange rates for
fiscal 2007 would have impacted loss for the year by 7%.

ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY
SECURITIES

Not applicable

PART II

ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND
DELINQUENCIES

Not applicable

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73

ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY
HOLDERS ANDUSE OF PROCEEDS

Not applicable

ITEM 15T. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

The Corporation carried out an evaluation, under the
supervision and with the participation of the Corporation's management,
including the Corporation's chief executive officer and its chief financial
officer, of the effectiveness of the design and operation of the Corporation's
disclosure controls and procedures pursuant to Exchange Act Rule 13a-14. Based
upon that evaluation, the Corporation's chief executive officer and its chief
financial officer concluded that the Corporation's disclosure controls and
procedures as of May 31, 2007 are effective in identifying, on a timely basis,
material information relating to the Corporation that is to be publicly
disclosed.

Internal Control over Financial Reporting

The Corporations management is responsible for establishing
and maintaining adequate internal control over financial reporting as required
under applicable Canadian and U.S. securities regulatory requirements.

The Corporations management carried out an evaluation, under
the supervision of the Corporations chief executive officer and chief financial
officer, of the effectiveness of the Corporations internal control over
financial reporting, as of May 31, 2007, 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 its evaluation under
this framework, management concluded that the Corporations internal control
over financial reporting was effective as of that date.

This annual report does not include an attestation report of
the Corporations registered public accounting firm regarding internal control
over financial reporting. Managements report was not subject to attestation by
the Corporations registered public accounting firm pursuant to temporary rules
of the Securities and Exchange Commission that permit the Corporation to provide
only managements report in this annual report.

Changes in Internal Control over Financial Reporting

There have been no changes in the Corporation's internal
controls over financial reporting identified in connection with the evaluation
described in the preceding paragraph that occurred during the period covered by
this annual report that has materially affected, or is reasonably likely to
materially affect, the Corporation's internal controls over financial reporting.

ITEM 16. RESERVED

Not applicable

ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT

As of May 31, 2007, Mr. Kishore Kapoor, a non-employee
director, was a member of the audit committee of the Corporation. The board of
directors of the Corporation has determined that Mr. Kapoor (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 by Rule 121A of the Amex 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.

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74

ITEM 16B. CODE OF ETHICS

On August 23, 2004, the Corporation adopted a written Code of
Business Conduct and Ethics (Code of Ethics) that applies to the Corporation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
Corporations employees live up to high ethical standards. A copy of the Code of
Ethics is maintained on the Corporations website at www.medicure.com.

The Corporation intends to disclose any amendment to or waiver
from any provision in the Code of Ethics, that has occurred during the past
fiscal year and that applies to the principal executive officer, principal
financial officer, principal accounting officer or controller, or persons
performing similar functions, either in its Exchange Act annual report or on the
Corporations Internet website.

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, KPMG 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.

|(a) Audit fees |   | 2007   |  |   | 2006   | 
|-------------- | - | ------ |  | - | ------ | 
|               | $ | 55,600 |  | $ | 34,500 | 

Audit fees consist of fees paid for the audit of the
Corporations annual financial statements.

|(b) Audit-related fees |   | 2007    |  |   | 2006   | 
|---------------------- | - | ------- |  | - | ------ | 
|                       | $ | 124,850 |  | $ | 33,600 | 

Audit-related fees consist of fees paid for the review of the
Corporations interim financial statements and for services associated with the
issuance of prospectuses.

(c) Tax fees - No compensation was paid to KPMG for tax
compliance, tax advice and tax planning in fiscal 2007 or 2006.

|(d) All other fees |   | 2007  |  |   | 2006   | 
|------------------ | - | ----- |  | - | ------ | 
|                   | $ | 3,825 |  | $ | 62,725 | 

All other fees consist of fees paid for translation services
and assistance with Sarbanes-Oxley compliance planning.

ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT
COMMITTEES

Not applicable

ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER
AND AFFILIATEDPURCHASERS

Not applicable

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75

PART III

ITEM 17. FINANCIAL STATEMENTS

The consolidated financial statements were prepared in
accordance with Canadian GAAP and are presented in Canadian dollars. There are
material measurement differences between United States and Canadian GAAP. A
reconciliation of the consolidated financial statements to United States GAAP is
set forth in Note 13 of the notes to the consolidated financial statements.

The consolidated financial statements are in the following
order:

| | 1. | Report of Independent Registered Public Accounting
      Firm;
| | -- | --------------------------------------------------------------
| | 2. | Consolidated Balance Sheets;                                  
| | 3. | Consolidated Statements of Operations and
  Deficit;          
| | 4. | Consolidated Statements of Cash Flows; and                    
| | 5. | Notes to Consolidated Financial
  Statements.                 

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76

Consolidated Financial Statements of

MEDICURE INC.

Years ended May 31, 2007, 2006 and 2005

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77

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Directors of Medicure Inc.

We have audited the consolidated balance sheets of Medicure
Inc. as at May 31, 2007 and 2006 and the consolidated statements of operations
and deficit and cash flows for each of the years in the three year period ended
May 31, 2007. These consolidated financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our audit opinion.

In our opinion, the consolidated financial statements referred
to above present fairly, in all material respects, the financial position of the
Company as at May 31, 2007 and 2006 and the results of its operations and its
cash flows for each of the years in the three year period ended May 31, 2007, in
conformity with Canadian generally accepted accounting principles.

Canadian generally accepted accounting principles vary in
certain significant respects from accounting principles generally accepted in
the United States of America. Information relating to the nature and effect of
such differences is presented in note 13 to the consolidated financial
statements.

(signed) KPMG LLP

Chartered Accountants

Winnipeg, Canada August 22, 2007

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78

|MEDICURE INC.                                          |   |             |   |   |             |  
|------------------------------------------------------ | - | ----------- | - | - | ----------- | -
|Consolidated Balance Sheets                            |   |             |   |   |             |  
|(Expressed in Canadian dollars)                        |   |             |   |   |             |  
|                                                       |   |             |   |   |             |  
|May 31, 2007 and
      2006                            |   |             |   |   |             |  
|                                                       |   |             |   |   |             |  
|                                                       |   | 2007        |   |   | 2006        |  
|                                                       |   |             |   |   |             |  
|Assets                                                 |   |             |   |   |             |  
|                                                       |   |             |   |   |             |  
|Current assets:                                        |   |             |   |   |             |  
|Cash and cash equivalents                              | $ | 31,770,320  |   | $ | 34,920,433  |  
|Accounts
      receivable (note 3)                     |   | 2,048,260   |   |   | 458,424     |  
|Inventories (note 4)                                   |   | 640,004     |   |   |            |  
|Research
      advance (note 10)                       |   | 200,000     |   |   | 200,000     |  
|Prepaid expenses                                       |   | 1,168,603   |   |   | 262,716     |  
|                                                       |   | 35,827,187  |   |   | 35,841,573  |  
|                                                       |   |             |   |   |             |  
|Property and equipment (note 5)                        |   | 196,521     |   |   | 50,663      |  
|                                                       |   |             |   |   |             |  
|Intangible assets (note 6)                             |   | 23,412,131  |   |   | 2,921,841   |  
|                                                       |   |             |   |   |             |  
|Deferred debt issue expenses (net of
      accumulated |   |             |   |   |             |  
|amortization of $211,096)                              |   | 349,963     |   |   |            |  
|                                                       |   |             |   |   |             |  
|                                                       | $ | 59,785,802  |   | $ | 38,814,077  |  
|                                                       |   |             |   |   |             |  
|Liabilities and Shareholders' Equity                   |   |             |   |   |             |  
|                                                       |   |             |   |   |             |  
|Current liabilities:                                   |   |             |   |   |             |  
|Accounts
      payable and accrued liabilities         | $ | 8,536,869   |   | $ | 1,644,339   |  
|Current portion of long-term debt (note 7)             |   | 6,160,896   |   |   |            |  
|                                                       |   | 14,697,765  |   |   | 1,644,339   |  
|                                                       |   |             |   |   |             |  
|Long-term debt (note 7)                                |   | 10,781,568  |   |   |            |  
|                                                       |   |             |   |   |             |  
|Shareholders equity:                                  |   |             |   |   |             |  
|Capital stock (note 8)                                 |   | 109,102,397 |   |   | 81,226,634  |  
|Contributed surplus [note 8(c)]                        |   | 3,035,024   |   |   | 2,070,670   |  
|Deficit                                                |   | (77,830,952 | ) |   | (46,127,566 | )
|                                                       |   | 34,306,469  |   |   | 37,169,738  |  
|                                                       |   |             |   |   |             |  
|Nature of operations (note 1)                          |   |             |   |   |             |  
|Commitments and contingencies (note 10)                |   |             |   |   |             |  
|Subsequent events (notes 1 and 7)                      |   |             |   |   |             |  
|                                                       |   |             |   |   |             |  
|                                                       | $ | 59,785,802  |   | $ | 38,814,077  |  

See accompanying notes to consolidated financial statements.

On behalf of the Board:

|Signed Dr. A.D. Friesen | Director | Signed Mr. Kishore Kapoor | Director
|------------------------- | -------- | --------------------------- | --------

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79

|MEDICURE INC.                                     |   |             |   |   |             |   |   |             |  
|------------------------------------------------- | - | ----------- | - | - | ----------- | - | - | ----------- | -
|Consolidated Statements of Operations and Deficit |   |             |   |   |             |   |   |             |  
|(Expressed in Canadian dollars)                   |   |             |   |   |             |   |   |             |  
|                                                  |   |             |   |   |             |   |   |             |  
|Years ended May
      31, 2007, 2006 and 2005     |   |             |   |   |             |   |   |             |  
|                                                  |   |             |   |   |             |   |   |             |  
|                                                  |   | 2007        |   |   | 2006        |   |   | 2005        |  
|                                                  |   |             |   |   |             |   |   |             |  
|Revenue:                                          |   |             |   |   |             |   |   |             |  
|Product sales, net                                | $ | 5,944,730   |   | $ |            |   | $ |            |  
|                                                  |   |             |   |   |             |   |   |             |  
|Expenses:                                         |   |             |   |   |             |   |   |             |  
|Cost of
      goods sold, excluding amortization  |   | 387,803     |   |   |            |   |   |            |  
|Selling, general and
      administrative         |   | 11,047,769  |   |   | 2,858,443   |   |   | 2,256,499   |  
|Research
      and development (note 10)          |   | 23,335,752  |   |   | 10,219,025  |   |   | 13,564,069  |  
|Investment tax credits                            |   | (171,927    | ) |   | (478,473    | ) |   | (553,335    | )
|Amortization                                      |   | 2,288,745   |   |   | 107,379     |   |   | 57,874      |  
|                                                  |   | 36,888,142  |   |   | 12,706,374  |   |   | 15,325,107  |  
|                                                  |   |             |   |   |             |   |   |             |  
|Loss before the undernoted                        |   | (30,943,412 | ) |   | (12,706,374 | ) |   | (15,325,107 | )
|                                                  |   |             |   |   |             |   |   |             |  
|Other expenses (income):                          |   |             |   |   |             |   |   |             |  
|Interest
      and other income                   |   | (1,590,801  | ) |   | (299,737    | ) |   | (394,784    | )
|Interest expense                                  |   | 1,958,380   |   |   |            |   |   |            |  
|Foreign exchange loss
      (gain), net           |   | 392,395     |   |   | 200,437     |   |   | (64,413     | )
|                                                  |   | 759,974     |   |   | (99,300     | ) |   | (459,197    | )
|                                                  |   |             |   |   |             |   |   |             |  
|Loss for the year                                 |   | (31,703,386 | ) |   | (12,607,074 | ) |   | (14,865,910 | )
|                                                  |   |             |   |   |             |   |   |             |  
|Deficit, beginning
      of year                  |   | (46,127,566 | ) |   | (33,520,492 | ) |   | (18,654,582 | )
|                                                  |   |             |   |   |             |   |   |             |  
|Deficit, end of
      year                        | $ | (77,830,952 | ) | $ | (46,127,566 | ) | $ | (33,520,492 | )
|                                                  |   |             |   |   |             |   |   |             |  
|Basic and diluted loss per share                  | $ | (0.30       | ) | $ | (0.17       | ) | $ | (0.22       | )
|                                                  |   |             |   |   |             |   |   |             |  
|Weighted average number of common shares used in  |   |             |   |   |             |   |   |             |  
|computing basic and diluted loss
      per share  |   | 104,879,404 |   |   | 75,144,764  |   |   | 66,717,715  |  

See accompanying notes to consolidated financial statements.

---

80

|MEDICURE INC.                                          |   |             |   |   |             |   |   |             |  
|------------------------------------------------------ | - | ----------- | - | - | ----------- | - | - | ----------- | -
|Consolidated Statements of Cash Flows                  |   |             |   |   |             |   |   |             |  
|(Expressed in Canadian dollars)                        |   |             |   |   |             |   |   |             |  
|                                                       |   |             |   |   |             |   |   |             |  
|Years ended May
      31, 2007, 2006 and 2005          |   |             |   |   |             |   |   |             |  
|                                                       |   |             |   |   |             |   |   |             |  
|                                                       |   | 2007        |   |   | 2006        |   |   | 2005        |  
|                                                       |   |             |   |   |             |   |   |             |  
|Cash provided by (used in):                            |   |             |   |   |             |   |   |             |  
|                                                       |   |             |   |   |             |   |   |             |  
|Operating activities:                                  |   |             |   |   |             |   |   |             |  
|Loss for the year                                      | $ | (31,703,386 | ) | $ | (12,607,074 | ) | $ | (14,865,910 | )
|Adjustments for:                                       |   |             |   |   |             |   |   |             |  
|Amortization of property and equipment                 |   | 41,187      |   |   | 32,797      |   |   | 27,995      |  
|Amortization of intangible assets                      |   | 2,247,558   |   |   | 74,582      |   |   | 29,879      |  
|Amortization of deferred debt issue                    |   |             |   |   |             |   |   |             |  
|expenses                                               |   | 211,096     |   |   |            |   |   |            |  
|Write-off of property and equipment                    |   |            |   |   | 17,212      |   |   |            |  
|Stock-based compensation                               |   | 1,025,310   |   |   | 745,570     |   |   | 504,878     |  
|Unrealized foreign exchange gain                       |   |             |   |   |             |   |   |             |  
|on long-term debt                                      |   | (825,221    | ) |   |            |   |   |            |  
|Change in the following:                               |   |             |   |   |             |   |   |             |  
|Accounts receivable                                    |   | (1,589,836  | ) |   | 11,342      |   |   | (191,669    | )
|Inventories                                            |   | (640,004    | ) |   |            |   |   |            |  
|Prepaid expenses                                       |   | (905,887    | ) |   | 135,488     |   |   | 512,133     |  
|Accounts payable
      and accrued liabilities         |   | 6,892,530   |   |   | (1,088,415  | ) |   | 1,915,179   |  
|                                                       |   | (25,246,653 | ) |   | (12,678,498 | ) |   | (12,067,515 | )
|                                                       |   |             |   |   |             |   |   |             |  
|Investing activities:                                  |   |             |   |   |             |   |   |             |  
|Acquisition of property
      and equipment            |   | (187,045    | ) |   | (19,671     | ) |   | (42,796     | )
|Acquisition of
      intangible assets                 |   | (22,737,848 | ) |   | (1,224,223  | ) |   | (386,157    | )
|                                                       |   | (22,924,893 | ) |   | (1,243,894  | ) |   | (428,953    | )
|                                                       |   |             |   |   |             |   |   |             |  
|Financing activities:                                  |   |             |   |   |             |   |   |             |  
|Issuance
      of common shares, net of share          |   |             |   |   |             |   |   |             |  
|issue
      costs                                      |   | 27,814,807  |   |   | 41,251,907  |   |   | 133,000     |  
|Proceeds
      from issuance of long-term debt         |   | 17,767,685  |   |   |            |   |   |            |  
|Debt issue expenses                                    |   | (561,059    | ) |   |            |   |   |            |  
|                                                       |   | 45,021,433  |   |   | 41,251,907  |   |   | 133,000     |  
|                                                       |   |             |   |   |             |   |   |             |  
|Increase (decrease) in cash and cash
      equivalents |   | (3,150,113  | ) |   | 27,329,515  |   |   | (12,363,468 | )
|                                                       |   |             |   |   |             |   |   |             |  
|Cash and cash equivalents, beginning of year           |   | 34,920,433  |   |   | 7,590,918   |   |   | 19,954,386  |  
|                                                       |   |             |   |   |             |   |   |             |  
|Cash and cash equivalents, end of year                 | $ | 31,770,320  |   | $ | 34,920,433  |   | $ | 7,590,918   |  
|                                                       |   |             |   |   |             |   |   |             |  
|Supplementary information:                             |   |             |   |   |             |   |   |             |  
|Cash transactions:                                     |   |             |   |   |             |   |   |             |  
|Interest paid                                          | $ | 1,574,209   |   | $ |            |   | $ |            |  
|Interest received                                      |   | 1,596,616   |   |   | 207,718     |   |   | 530,876     |  
|Non-cash
      transactions:                           |   |             |   |   |             |   |   |             |  
|Value assigned to stock options granted                |   |             |   |   |             |   |   |             |  
|as consideration for
      acquisition of              |   |             |   |   |             |   |   |             |  
|intellectual property from third party                 |   |             |   |   |             |   |   |             |  
|(note 6)                                               | $ |            |   | $ | 439,230     |   | $ |            |  
|Value assigned to placement agents                    |   |             |   |   |             |   |   |             |  
|stock-based compensation
      related to              |   |             |   |   |             |   |   |             |  
|August 19, 2005 private placement                      |   |             |   |   |             |   |   |             |  
|[note 8(c)]                                            |   |            |   |   | 42,758      |   |   |            |  

See accompanying notes to consolidated financial statements.

---

81

|MEDICURE INC.                                
|---------------------------------------------
|Notes to Consolidated Financial Statements   
|(Expressed in Canadian dollars)              
|Years ended May
      31, 2007, 2006 and 2005

|1. | Nature of operations:
|-- | ---------------------

Medicure Inc. (the Company) is a
biopharmaceutical company focused on the discovery and development of
therapeutics for various large-market, unmet cardiovascular needs. In fiscal
2007, 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, U.S. Virgin Islands, and Guam). AGGRASTAT®, a
glycoprotein GP IIb/IIIa receptor antagonist, is used for the treatment of acute
coronary syndrome (ACS) including unstable angina, which is characterized by
chest pain when one is at rest, and non-Q-wave myocardial infarction.

Prior to the acquisition of AGGRASTAT®,
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.

The Companys research and development
program is currently focused on the clinical development of the Companys lead
clinical products, MC-1 and MC-4232, and the discovery and development of other
drug candidates.

Since September 15, 1997, the date of
inception of the Company through to May 31, 2007, the Company has expended
approximately $59,743,000 net of government assistance and investment tax
credits, which aggregate approximately $1,654,000, on the research and
development of MC-1, MC-4232 and other compounds.

To date, the Company has financed its
cash requirements primarily through share issuances, debt financing, investment
tax credits, government grants and interest income. As the Company is continuing
to further its pharmaceutical research of novel compounds, future losses are
anticipated and additional financing will be required. The eventual
profitability of the Company is dependent on many factors, including, but not
limited to, successful development and market acceptance of its products,
receiving the required regulatory approvals, the conclusion and implementation
of applicable strategic and other alliances and adequate financing on a timely
basis. There can be no assurance that required regulatory approvals will be
received or, if received, will be received on a timely basis. In addition,
pharmaceutical industries are subject to rapid and substantial technological
change, which could reduce the marketability of the Companys products or
technology, and which requires ongoing issuance and maintenance of patents as
well as continued investment in research and development. It is not possible to
predict the outcome of the Companys future research and development activities
or the financing thereof.

In response to these factors and to
support continued operations through the 2008 fiscal year, The Company has
entered into the following arrangements subsequent to May 31, 2007 which it
anticipates closing in September 2007:

---

82

|MEDICURE INC.                                         
|------------------------------------------------------
|Notes to Consolidated Financial Statements (continued)
|(Expressed in Canadian dollars)                       
|Years ended May
      31, 2007, 2006 and 2005         

|1. | Nature of operations (continued):
|-- | ---------------------------------

On August 20, 2007, the Company entered
into a securities purchase agreement with an unrelated investor to raise gross
proceeds of US$15 million. Under the terms of the agreement, the Company intends
to issue approximately 13.04 million common shares together with warrants to
purchase approximately 3.9 million additional common shares (the common shares
and warrants comprise the Units), at a price of US$1.15 per Unit. The warrants
have a five year term and will have an exercise price of US$1.50 each. The
agreement is expected to close in September 2007, and is subject to standard
closing conditions including regulatory approval. In a separate transaction, the
Company has signed a non-binding term sheet dated August 20, 2007 to monetize a
percentage of the Companys current and potential future commercial revenues
with Manchester Securities Corp., an affiliate of Elliott Associates, L.P.
(Elliott) for a US$25 million up-front cash payment. Under the proposed terms,
Elliott will receive an annual return that will be calculated as a percentage of
AGGRASTAT® net sales subject to an escalating minimum annual return, until 2019.
The minimum annual returns start at US$2.5 million in 2007 and escalate to
US$6.9 million in 2016. Elliott will also receive the option to convert its
rights based on AGGRASTAT® to MC-1 within six months after MC-1s
commercialization, if achieved. The exact percentage of AGGRASTAT® or MC-1
revenue that Elliott will receive is tiered and declines as certain revenue
levels are achieved. Upon conversion to MC-1, Elliott is entitled to a blended
return of approximately 7 percent on the first US$75 million in MC-1 revenues
and 3 percent thereafter. Elliots participation rights shall be secured by a
first security interest in the intellectual property rights of the Company in
AGGRASTAT® and MC-1 (subject to certain specified MC-1 lien release terms), the
proceeds derived from the commercialization of AGGRASTAT® and MC-1 (including
without limitation any royalties receivable derived from any licensing of
AGGRASTAT® and MC-1 to any third party and accounts receivable from the sale of
AGGRASTAT® and MC products), and all intellectual, proprietary and other rights
(including without limitation contractual promotion and licensing rights and
benefits) associated with, or derived from, AGGRASTAT® and MC-1. The Company
will also issue Elliott ten-year warrants to purchase 1 million common shares at
an exercise price of US$1.26.

The Elliott agreement is subject to a
number of closing conditions, including the amendment, described below, of the
Companys credit agreement dated August 8, 2006 and the execution of a
definitive agreement. The transaction is expected to close in September 2007.

In conjunction with the financing
transactions described above, the Company has agreed to an amendment with its
existing lenders (note 7) to certain of the covenants provided for in its credit
agreement, dated August 8, 2006. The lenders and the Company have agreed,
subject to certain conditions:

---

83

|MEDICURE INC.                                         
|------------------------------------------------------
|Notes to Consolidated Financial Statements (continued)
|(Expressed in Canadian dollars)                       
|Years ended May
      31, 2007, 2006 and 2005         

|1. | Nature of operations (continued):
|-- | ---------------------------------

| | (i)  | From and after August 17, 2007, but no later than April
        30, 2008, the Company shall receive additional cash for working capital
        in a total aggregate amount of at least US$35 million from any and/or
        a combination of any of the sources described above, provided that (1)
        at least US$15 million of such aggregate amount must be received by the
        Company no later than September 30, 2007 and (2) a further US$15 million
        of such aggregate amount must be received by the Company no later than
        February 28, 2008 and (3) a further US$5 million of such aggregate amount
        must be received by the Company no later than April 30, 2008. The Company
        intends that the additional cash to meet this test will come from the
        subscription agreement and term sheet described above.
| | ---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | (ii) | To amend the credit agreement such that the Company
        is required to achieve the following minimum net revenue requirements
        from sales of AGGRASTAT®:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |      | Calendar 2007 - nilCalendar 2008 - US$15 millionCalendar 2009 - US$23 million                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        

| | (iii) | The Company will deposit US$10 million in a cash
      collateral account to be held by Merrill Lynch Capital Inc. (Merrill), for
      the benefit of Merrill and the lenders, on closing of the financing
      transactions described above.
| | ----- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The ability of the Company to continue
as a going concern and to realize the carrying value of its assets and discharge
its liabilities when due is dependent on many factors, including, but not
limited to, the actual closing of the above financings, including the completion
of the appropriate amendment to its existing financing agreement, under the
terms described above and meeting any applicable financial covenants on an
ongoing basis. These consolidated financial statements do not reflect any
adjustments that may be required if these transactions are not completed as
indicated.

---

84

|MEDICURE INC.                                         
|------------------------------------------------------
|Notes to Consolidated Financial Statements (continued)
|(Expressed in Canadian dollars)                       
|Years ended May
      31, 2007, 2006 and 2005         

|2. | Significant accounting policies:
|-- | --------------------------------

| | (a) | Basis of presentation:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |     | These consolidated financial statements have been
      prepared in accordance with accounting principles generally accepted in
      Canada (Canadian GAAP). The measurement principles applied are also in
      conformity, in all material respects, with accounting principles generally
      accepted in the United States of America (U.S. GAAP) except as described
      in note 13 to the consolidated financial statements.                                                                                                                                                                                  
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |     | These financial statements have been prepared on a
      consolidated basis to include the accounts of the Company and its
      wholly-owned subsidiaries, Medicure International Inc., Medicure Pharma
      Inc., and Medicure Europe Limited. All significant inter-Company
      transactions and balances have been eliminated.                                                                                                                                                                                                                                                                                    
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | (b) | Revenue recognition:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |     | The Company recognizes product revenue when substantially
      all of the risks and rewards of ownership have transferred to the customer
      and collection is reasonably assured. Depending on specific sales terms,
      revenue is recognized upon product delivery, upon customer acceptance, and
      when no significant contractual obligations remain. Net sales reflect
      reduction of gross sales at the time of initial sales recognition for
      estimated wholesaler chargebacks, discounts, allowances for product
      returns, and other rebates. Interest income is recognized as
  earned.
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | (c) | Inventories:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |     | Inventories of raw materials and packaging materials are
      valued at the lower of cost and replacement cost. Inventories of finished
      goods are valued at the lower of cost and net realizable value. Cost is
      determined under the first-in, first-out method.                                                                                                                                                                                                                                                                                                                                            
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | (d) | Cash and cash equivalents:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |     | Cash and cash equivalents include cash on hand and
      balances with banks as well as highly liquid short-term investments. The
      Company considers all highly liquid short-term investments with terms to
      maturity when acquired of three months or less to be cash
    equivalents.                                                                                                                                                                                                                                                                                                                        

---

85

|MEDICURE INC.                                         
|------------------------------------------------------
|Notes to Consolidated Financial Statements (continued)
|(Expressed in Canadian dollars)                       
|Years ended May
      31, 2007, 2006 and 2005         

|2. | Significant accounting policies
      (continued):
|-- | --------------------------------------------------

| | (e) | Property and equipment:                                                                                                                             
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                     
| |     | Property and equipment are stated at cost. Amortization
      is recorded over the estimated useful life of the assets at the following
      rates:

| | Asset                             | Basis               | Annual Rate
| | --------------------------------- | ------------------- | -----------
| |                                   |                     |            
| | Computer equipment                | Straight-line       | 25%        
| | Furniture, fixtures and equipment | Diminishing balance | 20%        
| | Leasehold improvements            | Straight-line       | 20%        

| | (f) | Intangible assets:                                                                                                                                                                                                                                                                                                                   
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                      
| |     | Costs incurred in obtaining patents are capitalized and
      amortized upon issuance on a straight- line basis over the remaining legal
      life of the respective patents, being approximately twenty years, or their
      economic life, if shorter. The cost of servicing the Companys patents is
      expensed as incurred.
| |     |                                                                                                                                                                                                                                                                                                                                      
| |     | Intangible assets are recorded at acquisition cost and
      are amortized on a straight-line basis based on the following estimated
      useful lives:                                                                                                                                                                             

| | Patents            | 5 - 20 years  
| | ------------------ | --------------
| | Trademark          | 10 years      
| | Technology license | 8 years       
| | Customer list      | 10
      years

| | (g) | Deferred debt issue expenses:                                                                                                                                                                                                                                                              
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                            
| |     | Deferred debt issue expenses are reported at cost less
      accumulated amortization. Amortization is calculated using the
      straight-line method over the term of the debt. Amortization expense
      related to deferred debt issue expenses is included in interest
      expense.

---

86

|MEDICURE INC.                                         
|------------------------------------------------------
|Notes to Consolidated Financial Statements (continued)
|(Expressed in Canadian dollars)                       
|Years ended May
      31, 2007, 2006 and 2005         

|2. | Significant accounting policies
      (continued):
|-- | --------------------------------------------------

| | (h) | Impairment of long-lived assets:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |     | On a regular basis, management reviews the valuation of
      long-lived assets, which includes property and equipment and intangible
      assets, taking into consideration any events and circumstances which may
      impact recoverable value. Section 3063 of the CICA Handbook, Impairment
      of Long-Lived Assets, prescribes rigorous principles for the
      recognition, measurement and disclosure of any impairment of long-lived
      assets. Management has reviewed the carrying value of the long-lived
      assets using this guidance and determined no impairment currently
      exists.               
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | (i) | Stock-based compensation:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |     | The Company has a stock option plan [note 8(d)] for its
      directors, management, employees and consultants. The Company uses the
      fair value method of accounting for stock options granted. The fair value
      of the options is expensed over their vesting period.                                                                                                                                                                                                                                                                                                                                                   
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | (j) | Government assistance and investment tax
  credits:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |     | 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 development
      expenditures (SR&ED) 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.
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |     | Investment tax credits are only available on research and
      development expenditures incurred directly by the Company.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | (k) | Research and development:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |     | All costs of research activities are expensed in the
      period in which they are incurred. Development costs are charged as an
      expense in the period incurred unless a development project meets
      stringent criteria for cost deferral and amortization. No development
      costs have been deferred to date. Tangible and intangible assets acquired
      for use in research and development projects are accounted for as
      described in note 2(e) and (f).                                                                                                                                                

---

87

|MEDICURE INC.                                         
|------------------------------------------------------
|Notes to Consolidated Financial Statements (continued)
|(Expressed in Canadian dollars)                       
|Years ended May
      31, 2007, 2006 and 2005         

|2. | Significant accounting policies
      (continued):
|-- | --------------------------------------------------

| | (l) | Clinical trial expenses:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |     | 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 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
      enrollment, services provided, contractual terms, and prior experience
      with similar contracts.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | (m) | Income taxes:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |     | The Company follows the asset and liability method of
      accounting for income taxes. Under this method, future income tax assets
      and liabilities are recognized for the future tax consequences
      attributable to differences between the financial statement carrying
      amounts of existing assets and liabilities and their respective tax bases.
      Future income tax assets and liabilities are measured using enacted or
      substantively enacted tax rates expected to apply to taxable income in the
      years in which those temporary differences are expected to be recovered or
      settled. The effect on future tax assets and liabilities of a change in
      tax rates is recognized in income in the period that includes the date of
      substantive enactment. When realization of future income tax assets does
      not meet the more likely than not criterion, a valuation allowance is
      provided for the difference.                                                                                                                                                                                            
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | (n) | Net earnings (loss) per share:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |     | Basic earnings (loss) per share is computed using the
      weighted average number of shares outstanding during the year including
      contingently issuable shares where the contingency has been resolved. The
      diluted per share amounts are calculated based on the weighted average
      number of common shares outstanding during the period, plus the effect of
      dilutive common share equivalents such as options and warrants. This
      method requires that diluted per share amounts be calculated using the
      treasury stock method, as if all the common share equivalents, where the
      average market price for the period exceeds the exercise price had been
      exercised at the beginning of the reporting period, or at the date of
      issue, if later, as the case may be, and that the funds obtained thereby
      were used to purchase common shares of the Company at the average trading
      price of the common shares during the period. For all periods presented,
      all potential common shares have been excluded from the calculation of
      dilutive loss per share as their effect is
anti-dilutive.

---

88

|MEDICURE INC.                                         
|------------------------------------------------------
|Notes to Consolidated Financial Statements (continued)
|(Expressed in Canadian dollars)                       
|Years ended May
      31, 2007, 2006 and 2005         

|2. | Significant accounting policies
      (continued):
|-- | --------------------------------------------------

| | (o) | Foreign currency translation:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |     | Current assets and current liabilities in foreign
      currencies have been translated into Canadian dollars at the rates of
      exchange in effect at the balance sheet date. Income and expense
      transactions are translated at actual rates of exchange during the year.
      Exchange gains and losses are included in loss for the period.                                                                                                                                                                                                                                                                                                                                                                      
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |     | The operations of the Companys foreign subsidiaries are
      considered to be integrated foreign operations and, accordingly, are
      converted to Canadian dollars using the temporal method. Under this
      method, monetary assets and liabilities are translated at the rate of
      exchange prevailing at the balance sheet date, non-monetary assets and
      liabilities are translated at the rate in effect when the assets were
      acquired or liabilities were assumed and items included in the statements
      of operations at the average exchange rates in effect at the date of such
      transactions with resulting exchange gains or losses included in the
      determination of earnings.
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | (p) | Use of estimates:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |     | The preparation of financial statements requires
      management to make estimates and assumptions that affect the reported
      amounts of assets and liabilities, the disclosure of contingent assets and
      liabilities at the date of the financial statements and the reported
      amounts of revenues and expenses during the year. Actual results could
      differ from those estimates.                                                                                                                                                                                                                                                                                                                      

|3. | Accounts receivable:
|-- | --------------------

| |                           |   | 2007      |  |   | 2006    | 
| | ------------------------- | - | --------- |  | - | ------- | 
| |                           |   |           |  |   |         | 
| | Trade accounts receivable | $ | 1,164,386 |  | $ |        | 
| | SR&ED taxes receivable    |   | 408,927   |  |   | 237,000 | 
| | Interest receivable       |   | 184,121   |  |   | 189,936 | 
| | Other                     |   | 290,826   |  |   | 31,488  | 
| |                           |   |           |  |   |         | 
| |                           | $ | 2,048,260 |  | $ | 458,424 | 

The Company believes that there is no
unusual exposure associated with the collection of these accounts receivable. As
at May 31, 2007, the trade accounts receivable primarily consists of amounts
owing from four customers which represent approximately 98 percent (May 31, 2006
- nil) of trade accounts receivable.

---

89

|MEDICURE INC.                                         
|------------------------------------------------------
|Notes to Consolidated Financial Statements (continued)
|(Expressed in Canadian dollars)                       
|Years ended May
      31, 2007, 2006 and 2005         

|4. | Inventories:
|-- | ------------

| |                                       |   | 2007    |  |   | 2006 | 
| | ------------------------------------- | - | ------- |  | - | ---- | 
| | Raw materials and packaging materials | $ | 366,796 |  | $ |     | 
| | Finished goods                        |   | 273,208 |  |   |     | 
| |                                       | $ | 640,004 |  | $ |     | 

|5. | Property and equipment:
|-- | -----------------------

| |                                   |   |         |  |   | Accumulated  |  |   | Net book | 
| | --------------------------------- | - | ------- |  | - | ------------ |  | - | -------- | 
| | May 31, 2007                      |   | Cost    |  |   | amortization |  |   | value    | 
| |                                   |   |         |  |   |              |  |   |          | 
| | Computer equipment                | $ | 138,586 |  | $ | 102,396      |  | $ | 36,190   | 
| | Furniture, fixtures and equipment |   | 183,287 |  |   | 25,116       |  |   | 158,171  | 
| | Leasehold improvements            |   | 20,671  |  |   | 18,511       |  |   | 2,160    | 
| |                                   |   |         |  |   |              |  |   |          | 
| |                                   | $ | 342,544 |  | $ | 146,023      |  | $ | 196,521  | 

| |                                   |   |         |  |   | Accumulated  |  |   | Net book | 
| | --------------------------------- | - | ------- |  | - | ------------ |  | - | -------- | 
| | May 31, 2006                      |   | Cost    |  |   | amortization |  |   | value    | 
| |                                   |   |         |  |   |              |  |   |          | 
| | Computer equipment                | $ | 91,629  |  | $ | 76,156       |  | $ | 15,473   | 
| | Furniture, fixtures and equipment |   | 43,199  |  |   | 14,303       |  |   | 28,896   | 
| | Leasehold improvements            |   | 20,671  |  |   | 14,377       |  |   | 6,294    | 
| |                                   |   |         |  |   |              |  |   |          | 
| |                                   | $ | 155,499 |  | $ | 104,836      |  | $ | 50,663   | 

|6. | Intangible assets:
|-- | ------------------

| |                    |   |            |  |   | Accumulated  |  |   | Net book   | 
| | ------------------ | - | ---------- |  | - | ------------ |  | - | ---------- | 
| | May 31, 2007       |   | Cost       |  |   | amortization |  |   | value      | 
| |                    |   |            |  |   |              |  |   |            | 
| | Patents            | $ | 20,244,953 |  | $ | 1,915,341    |  | $ | 18,329,612 | 
| | Trademark          |   | 3,760,874  |  |   | 284,565      |  |   | 3,476,309  | 
| | Technology license |   | 1,166,619  |  |   | 173,876      |  |   | 992,743    | 
| | Customer list      |   | 663,684    |  |   | 50,217       |  |   | 613,467    | 
| |                    |   |            |  |   |              |  |   |            | 
| |                    | $ | 25,836,130 |  | $ | 2,423,999    |  | $ | 23,412,131 | 

---

90

|MEDICURE INC.                                         
|------------------------------------------------------
|Notes to Consolidated Financial Statements (continued)
|(Expressed in Canadian dollars)                       
|Years ended May
      31, 2007, 2006 and 2005         

|6. | Intangible assets (continued):
|-- | ------------------------------

| |                    |   |           |  |   | Accumulated  |  |   | Net book  | 
| | ------------------ | - | --------- |  | - | ------------ |  | - | --------- | 
| | May 31, 2006       |   | Cost      |  |   | amortization |  |   | value     | 
| |                    |   |           |  |   |              |  |   |           | 
| | Patents            | $ | 1,935,502 |  | $ | 146,971      |  | $ | 1,788,531 | 
| | Technology license |   | 1,162,780 |  |   | 29,470       |  |   | 1,133,310 | 
| |                    |   |           |  |   |              |  |   |           | 
| |                    | $ | 3,098,282 |  | $ | 176,441      |  | $ | 2,921,841 | 

In August 2006, the Company acquired
the rights to AGGRASTAT® Injection (tirofiban hydrochloride) in the U.S. and its
territories (Puerto Rico, Virgin Islands, and Guam) from MGI PHARMA Inc. for
total cash consideration of US$19,000,000, and is required to make certain
royalty payments to Merck & Co., Inc., based on net sales of AGGRASTAT® in
the U.S. The purchase price has been allocated to patents, trademark, and
customer list intangible assets acquired, which are amortized over their
estimated useful lives.

During the year ended May 31, 2006, the
Company acquired several U.S. and European patents from a third party for
purinoceptor antagonists and adenosine receptor antagonists for the treatment of
ischemic reperfusion injury pursuant to a sub-licensing agreement. Terms of the
agreement included a cash fee of US$500,000, stock options having an estimated
fair value at the date of grant of $439,230 and a royalty on future sales of
products claimed in the licensed patents.

|7. | Long-term debt:
|-- | ---------------

In connection with the Companys
acquisition of the licensing rights to AGGRASTAT® in the United States and its
territories, the Company obtained a term loan facility totaling US$15,840,000
from Merrill Lynch Capital Canada Inc, a division of Merrill Lynch Business
Financial Services Inc., Silicon Valley Bank and Oxford Finance Corporation.
Interest is payable monthly at one-month LIBOR plus 6.5 percent per annum.
Commencing in June 2007, principal of US$480,000 is payable monthly with the
term loan maturing February 1, 2010.

Principal repayments to maturity are as
follows:

| | 2008 | $ | 6,160,896  | 
| | ---- | - | ---------- | 
| | 2009 |   | 6,160,896  | 
| | 2010 |   | 4,620,672  | 
| |      |   |            | 
| |      | $ | 16,942,464 | 

---

91

|MEDICURE INC.                                         
|------------------------------------------------------
|Notes to Consolidated Financial Statements (continued)
|(Expressed in Canadian dollars)                       
|Years ended May
      31, 2007, 2006 and 2005         

|7. | Long-term debt (continued):                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | The term loan facility is secured by collateral,
      consisting of all financial, physical, and intangible assets of the
      Company and its subsidiaries. The term loan facility agreement includes
      certain financial and non-financial covenants. As described in note 1, the
      Company has entered into an agreement with the lenders that, subject to
      the completion of certain financing arrangements and other closing
      conditions, will modify financial covenants of this debt.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|8. | Capital stock:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | (a)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | (b)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             

| |                                                     |  | Number of shares |  |   | Amount      | 
| | --------------------------------------------------- |  | ---------------- |  | - | ----------- | 
| |                                                     |  |                  |  |   |             | 
| | Common shares:                                      |  |                  |  |   |             | 
| |                                                     |  |                  |  |   |             | 
| | Balance, May 31, 2004                               |  | 66,646,660       |  | $ | 39,731,296  | 
| | Exercise of
      options for cash                  |  | 180,000          |  |   | 133,000     | 
| | Balance, May 31, 2005                               |  | 66,826,660       |  |   | 39,864,296  | 
| |                                                     |  |                  |  |   |             | 
| | Private placement for cash on August 19,
      2005 |  |                  |  |   |             | 
| | net of share issue costs of $545,544                |  | 5,205,500        |  |   | 4,139,406   | 
| | Public offering for cash on January 4, 2006         |  |                  |  |   |             | 
| | net of share issue costs of $1,154,850              |  | 7,750,000        |  |   | 10,857,650  | 
| | Private placement for cash on May 9, 2006           |  |                  |  |   |             | 
| | net of share issue costs of $2,373,792              |  | 16,000,000       |  |   | 25,959,800  | 
| | Exercise of options for cash                        |  | 264,305          |  |   | 405,482     | 
| | Balance, May 31, 2006                               |  | 96,046,465       |  |   | 81,226,634  | 
| |                                                     |  |                  |  |   |             | 
| | Private placement for cash on December 22, 2006,    |  |                  |  |   |             | 
| | net of share issue costs of
      $1,866,177        |  | 15,615,392       |  |   | 21,541,766  | 
| | Private placement for cash on December 28, 2006,    |  |                  |  |   |             | 
| | net of share issue costs of
      $499,879          |  | 4,307,652        |  |   | 5,986,541   | 
| | Exercise of
      options for cash                  |  | 345,000          |  |   | 347,456     | 
| |                                                     |  |                  |  |   |             | 
| | Balance, May 31,
      2007                         |  | 116,314,509      |  | $ | 109,102,397 | 

Share issue costs include a non-cash
charge of $42,758 related to placement agents warrants granted as compensation
for the August 19, 2005 private placement.

---

92

|MEDICURE INC.                                         
|------------------------------------------------------
|Notes to Consolidated Financial Statements (continued)
|(Expressed in Canadian dollars)                       
|Years ended May
      31, 2007, 2006 and 2005         

|8. | Capital stock (continued):
|-- | --------------------------
|   |                           
|   | (c) Contributed surplus:  

| | Balance, May 31, 2004                            | $ | 491,423   |  
| | ------------------------------------------------ | - | --------- | -
| | Options granted                                  |   | 504,878   |  
| | Balance, May 31, 2005                            |   | 996,301   |  
| |                                                  |   |           |  
| | Stock-based compensation                         |   | 1,184,800 |  
| | Placement agents warrants granted               |   | 42,758    |  
| | Options exercised - transferred to capital stock |   | (153,189  | )
| | Balance, May 31, 2006                            |   | 2,070,670 |  
| |                                                  |   |           |  
| | Stock-based compensation                         |   | 1,025,310 |  
| | Options exercised - transferred to capital stock |   | (60,956   | )
| |                                                  |   |           |  
| | Balance, May 31, 2007                            | $ | 3,035,024 |  

|(d) | Options:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    | 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 7,200,000 common shares of the Company
      at any time. The stock options generally are subject to vesting over a
      period up to three years and have a maximum term of ten years.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    | A summary of the Companys stock options is as
      follows:                                                                                                                                                                                                                                                                                                                                                                                                                                                              

| |                      |  | 2007      |   |   | 2006           |  |  | 2005      |  
| | -------------------- |  | --------- | - | - | -------------- |  |  | --------- | -
| |                      |  |           |   |   | Weighted       |  |  |           |  
| |                      |  |           |   |   | average        |  |  |           |  
| |                      |  | Shares    |   |   | exercise price |  |  | Shares    |  
| |                      |  |           |   |   |                |  |  |           |  
| | Balance, beginning   |  |           |   |   |                |  |  |           |  
| | of year              |  | 3,300,028 |   | $ | 1.41           |  |  | 2,372,333 |  
| | Granted              |  | 1,355,500 |   |   | 1.65           |  |  | 1,308,000 |  
| | Exercised            |  | (345,000  | ) |   | 0.83           |  |  | (264,305  | )
| | Cancelled or expired |  | (75,000   | ) |   | 1.37           |  |  | (116,000  | )
| |                      |  |           |   |   |                |  |  |           |  
| | Balance, end of year |  | 4,235,528 |   | $ | 1.52           |  |  | 3,300,028 |  
| |                      |  |           |   |   |                |  |  |           |  
| | Options exercisable, |  |           |   |   |                |  |  |           |  
| | end
      of year    |  | 2,318,028 |   |   |                |  |  | 1,709,685 |  

---

93

|MEDICURE INC.                                         
|------------------------------------------------------
|Notes to Consolidated Financial Statements (continued)
|(Expressed in Canadian dollars)                       
|Years ended May
      31, 2007, 2006 and 2005         

|8. | Capital stock (continued):
|-- | --------------------------

| |                                             |   | 2007 |  |   | 2006 |  |   | 2005 | 
| | ------------------------------------------- | - | ---- |  | - | ---- |  | - | ---- | 
| |                                             |   |      |  |   |      |  |   |      | 
| | Weighted average fair value per unit        |   |      |  |   |      |  |   |      | 
| | of options granted during the year at       |   |      |  |   |      |  |   |      | 
| | market value on grant date                  | $ | 1.07 |  | $ | 1.27 |  | $ | 0.49 | 
| | Weighted average fair value per unit        |   |      |  |   |      |  |   |      | 
| | of options granted during the
      year at |   |      |  |   |      |  |   |      | 
| | above
      market value on grant date      |   |     |  |   | 0.34 |  |   | 0.41 | 

Options outstanding at May 31, 2007
consist of the following:

| | Range of      |             | Weighted
      average | Options
      outstanding |            
| | ------------- | ----------- | ---------------------- | ------------------------- | -----------
| | exercise      | Number      | remaining              | weighted average          | Number     
| | prices        | outstanding | contractual life       | exercise price            | exercisable
| |               |             |                        |                           |            
| | $ 0.75 - 1.95 | 3,985,528   | 6.1 years              | $ 1.46                    | 2,068,028  
| | 2.14 - 2.67   | 250,000     | 3.1
      years        | 2.46                      | 250,000    
| |               |             |                        |                           |            
| |               | 4,235,528   |                        | $
      1.52              | 2,318,028  

The compensation expense related to
stock options granted under the stock option plan during fiscal 2007 aggregated
$1,025,310 (2006 - $745,570; 2005 - $504,878). The compensation expense was
determined based on the fair value of the options at the date of grant using the
Black-Scholes option pricing model with the following weighted average
assumptions:

| |                           |  | 2007      |  |  | 2006      |  |  | 2005      | 
| | ------------------------- |  | --------- |  |  | --------- |  |  | --------- | 
| |                           |  |           |  |  |           |  |  |           | 
| | Expected option life      |  | 6.5 years |  |  | 7.0 years |  |  | 4.0 years | 
| | Risk-free interest rate   |  | 4.10%     |  |  | 4.05%     |  |  | 3.61%     | 
| | Dividend yield            |  |          |  |  |          |  |  |          | 
| | Expected
      volatility |  | 66.96%    |  |  | 72.70%    |  |  | 70.57%    | 

The cost of stock-based payments that
are fully vested and non-forfeitable at the grant date is measured and
recognized at that date. For awards that vest at the end of the vesting period,
compensation cost is recognized on a straight-line basis over the vesting
period. For awards that vest on a graded basis, compensation cost is recognized
on a pro rata basis over the vesting period from the date of issuance.

---

94

|MEDICURE INC.                                         
|------------------------------------------------------
|Notes to Consolidated Financial Statements (continued)
|(Expressed in Canadian dollars)                       
|Years ended May
      31, 2007, 2006 and 2005         

|8. | Capital stock (continued):
|-- | --------------------------

| | (e) | Warrants:
| | --- | ---------

| |                     |  |           |  |   |           |  |  |         |  |  | Granted      |    |  |           |  |  | Granted      |  |  |           | 
| | ------------------- |  | --------- |  | - | --------- |  |  | ------- |  |  | ------------ | -- |  | --------- |  |  | ------------ |  |  | --------- | 
| | Issuance            |  | Original  |  |   | Value     |  |  | May 31, |  |  | (Exercised)  |    |  | May 31,   |  |  | (Exercised)  |  |  | May 31,   | 
| | (Expiry date)       |  | granted   |  |   | per share |  |  | 2005    |  |  | (Cancelled)* |    |  | 2006      |  |  | (Cancelled)* |  |  | 2007      | 
| |                     |  |           |  |   |           |  |  |         |  |  |              |    |  |           |  |  |              |  |  |           | 
| | 629,834 units       |  |           |  |   |           |  |  |         |  |  |              |    |  |           |  |  |              |  |  |           | 
| | (June 26, 2005)     |  | 629,834   |  | $ | 1.00      |  |  | 502,403 |  |  | (502,403     | )* |  |          |  |  |             |  |  |          | 
| |                     |  |           |  |   |           |  |  |         |  |  |              |    |  |           |  |  |              |  |  |           | 
| | 104,110 units       |  |           |  |   |           |  |  |         |  |  |              |    |  |           |  |  |              |  |  |           | 
| | (August 19, 2008)   |  | 104,110   |  |   | 1.18      |  |  |        |  |  | 104,110      |    |  | 104,110   |  |  |             |  |  | 104,110   | 
| |                     |  |           |  |   |           |  |  |         |  |  |              |    |  |           |  |  |              |  |  |           | 
| | 2,602,750 units     |  |           |  |   |           |  |  |         |  |  |              |    |  |           |  |  |              |  |  |           | 
| | (August 19, 2010)   |  | 2,602,750 |  |   | 1.18      |  |  |        |  |  | 2,602,750    |    |  | 2,602,750 |  |  |             |  |  | 2,602,750 | 
| |                     |  |           |  |   |           |  |  |         |  |  |              |    |  |           |  |  |              |  |  |           | 
| | 4,000,000 units     |  |           |  |   |           |  |  |         |  |  |              |    |  |           |  |  |              |  |  |           | 
| | (May 9, 2011)       |  | 4,000,000 |  |   | US 2.10   |  |  |        |  |  | 4,000,000    |    |  | 4,000,000 |  |  |             |  |  | 4,000,000 | 
| |                     |  |           |  |   |           |  |  |         |  |  |              |    |  |           |  |  |              |  |  |           | 
| | 3,984,608 units     |  |           |  |   |           |  |  |         |  |  |              |    |  |           |  |  |              |  |  |           | 
| | (December 22, 2011) |  | 3,984,608 |  |   | US 1.70   |  |  |        |  |  |             |    |  |          |  |  | 3,984,608    |  |  | 3,984,608 | 

| |     | The warrants were all issued together with common shares
      either under prospectus offerings or private placements with the fair
      value of the consideration received under the offerings allocated to the
      common shares issued.                                                                                                                                                                                                      
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |     | The warrants expiring on May 9, 2011 and December 22,
      2011 may be exercised, upon certain conditions being met, on a cashless
      basis based on a formula described in the warrant agreements.                                                                                                                                                                                                                                              
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | (f) | Shareholder rights plan:                                                                                                                                                                                                                                                                                                                                                                                                                             
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |     | The Company has a shareholder rights plan, the primary
      objective of which is to ensure, to the extent possible, that all
      shareholders of the Company are treated fairly in connection with any
      takeover offer for the Company and to ensure that the Board of Directors
      is provided with sufficient time to evaluate unsolicited takeover bids and
      to explore and develop alternatives to maximize shareholder
  value.

---

95

|MEDICURE INC.                                         
|------------------------------------------------------
|Notes to Consolidated Financial Statements (continued)
|(Expressed in Canadian dollars)                       
|Years ended May
      31, 2007, 2006 and 2005         

|9. | Income taxes:
|-- | -------------

Significant components of the Companys
future tax assets and liabilities are as follows:

| |                                                    |   | 2007       |   |   | 2006       |  
| | -------------------------------------------------- | - | ---------- | - | - | ---------- | -
| |                                                    |   |            |   |   |            |  
| | Future tax assets:                                 |   |            |   |   |            |  
| | Research and development
      expenses deductible |   |            |   |   |            |  
| | in future periods for income tax purposes          | $ | 3,373,000  |   | $ | 1,486,000  |  
| | Share issue costs                                  |   | 1,440,000  |   |   | 1,215,000  |  
| | Operating
      losses carried forward             |   | 2,419,000  |   |   | 2,818,000  |  
| | Other                                              |   | 222,000    |   |   | 91,000     |  
| |                                                    |   | 7,454,000  |   |   | 5,610,000  |  
| |                                                    |   |            |   |   |            |  
| | Less valuation allowance                           |   | (7,454,000 | ) |   | (5,610,000 | )
| |                                                    |   |            |   |   |            |  
| |                                                    | $ |           |   | $ |           |  

The reconciliation of the Canadian
statutory rate to the income tax provision is as follows:

| |                                                    |   | 2007       |   |   | 2006       |   |   | 2005       |  
| | -------------------------------------------------- | - | ---------- | - | - | ---------- | - | - | ---------- | -
| |                                                    |   |            |   |   |            |   |   |            |  
| | Loss for the year:                                 |   |            |   |   |            |   |   |            |  
| | Canadian                                           | $ | 4,575,446  |   | $ | 2,951,941  |   | $ | 1,796,998  |  
| | Foreign                                            |   | 27,127,940 |   |   | 9,655,133  |   |   | 13,068,912 |  
| |                                                    |   |            |   |   |            |   |   |            |  
| |                                                    | $ | 31,703,386 |   | $ | 12,607,074 |   | $ | 14,865,910 |  
| |                                                    |   |            |   |   |            |   |   |            |  
| | Canadian federal and provincial
      income taxes |   |            |   |   |            |   |  
| | recovery at 32.5% (2006 - 35%;                     |   |            |   |   |            |   |   |            |  
| | 2005 -
      37.1%)                                | $ | 10,304,000 |   | $ | 4,412,000  |   | $ | 5,518,000  |  
| | Foreign tax rate differential                      |   | (7,947,000 | ) |   | (3,138,000 | ) |   | (4,524,000 | )
| | Permanent differences                              |   | (333,000   | ) |   | (265,000   | ) |   | (196,000   | )
| | Change in statutory rates                          |   | (374,000   | ) |   | (46,000    | ) |   | (68,000    | )
| | Valuation allowance                                |   | (1,650,000 | ) |   | (1,157,000 | ) |   | (730,000   | )
| | Other                                              |   |           |   |   | 194,000    |   |   |           |  
| |                                                    |   |            |   |   |            |   |   |            |  
| |                                                    | $ |           |   | $ |           |   | $ |           |  

The foreign tax rate differential is
the difference between the Canadian federal and provincial statutory income tax
rate and the tax rates in Barbados (2.5 percent) and the United States (34
percent) that are applicable to losses incurred by its wholly-owned
subsidiaries, Medicure International Inc. and Medicure Pharma Inc.

At May 31, 2007, the Company has
Canadian and Foreign unutilized operating losses carried forward for income tax
purposes of $2,499,802 and $62,973,128, respectively. These losses are available
to be applied against taxable income of future years up to fiscal 2027. The
Company also has scientific and development investment tax credits of $2,618,000
(2006 - $991,000) which can be applied against income taxes otherwise payable of
future years up to fiscal 2027.

---

96

|MEDICURE INC.                                         
|------------------------------------------------------
|Notes to Consolidated Financial Statements (continued)
|(Expressed in Canadian dollars)                       
|Years ended May
      31, 2007, 2006 and 2005         

|10. | Commitments and contingencies:
|--- | ------------------------------
|    |                               
|    | (a) Commitments:              

As at May 31, 2007 and in the normal
course of business we have obligations to make future payments, representing
contracts and other commitments that are known and committed.

| |                                                            |   | Purchase    |  |   | Services    | 
| | ---------------------------------------------------------- | - | ----------- |  | - | ----------- | 
| |                                                            |   | agreement   |  |   | agreement   | 
| |                                                            |   | commitments |  |   | commitments | 
| |                                                            |   |             |  |   |             | 
| | Contractual obligations payment due by
      fiscal period |   |             |  |   |             | 
| | ending May 31:                                             |   |             |  |   |             | 
| |                                                            |   |             |  |   |             | 
| | 2008                                                       | $ | 1,089,922   |  | $ | 804,692     | 
| | 2009                                                       |   | 1,089,922   |  |   |            | 
| | 2010                                                       |   | 1,250,363   |  |   |            | 
| |                                                            |   |             |  |   |             | 
| |                                                            | $ | 3,430,207   |  | $ | 804,692     | 

In conjunction with the acquisition of
AGGRASTAT®, the Company entered into manufacturing and supply agreements to
purchase a minimum quantity of AGGRASTAT® from a third party totaling a minimum
of $3,430,207 over the term of the agreement, which expires in fiscal 2010.

The Company entered into an agreement
with a third party to provide contract sales and marketing services, totaling a
minimum of $804,692 over the term of the agreement, which expires in fiscal
2008.

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. The agreements include the research and development of MC-1
and its related compounds.

The contracts with the clinical
research organizations (CROs) are payable over the terms of the 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. As at May 31, 2007, the Company is committed to fund
up to a further $3,857,000 related to clinical research agreements with CROs.

---

97

|MEDICURE INC.                                         
|------------------------------------------------------
|Notes to Consolidated Financial Statements (continued)
|(Expressed in Canadian dollars)                       
|Years ended May
      31, 2007, 2006 and 2005         

|10. | Commitments and contingencies
      (continued):
|--- | ------------------------------------------------

| |     | The Company also entered into agreements with the
      clinical sites participating in the trials. The site agreements require
      payments over the course of the study based on various activities being
      completed by the site, such as patient visits and various testing and
      measurement activities required per the study protocol. The Company is
      also liable for the payment of certain pass through costs. A significant
      portion of the amounts due to the sites for these activities is not
      payable until after the completion of these activities. As at May 31,
      2007, the Company is committed to fund up to an estimated $13,107,000
      related to site agreements. The CRO and site agreements are cancellable
      upon termination notice of 30, 60 or 90 days, depending upon the terms of
      the agreement.                                                                                                                                                                                                                          
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |     | In addition, as at May 31, 2007, the Company has
      committed to fund a further $30,699,000 in research and development
      activities under two development agreements with contract research
      organizations. The timing of expenditures and payments is largely at the
      discretion of the Company and the agreements may be terminated at any time
      provided 30 days notice is provided.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |     | As at May 31, 2007, the Company has provided a research
      advance of $200,000 (2006 - $200,000) to one of the third parties referred
      to above, which is non-interest bearing, unsecured and repayable on
      demand.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | (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:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |     | The Company has granted royalties to third parties based
      on future commercial sales of MC-1, aggregating up to 3.9 percent on net
      sales. To date, no royalties are due and/or
payable.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  

---

98

|MEDICURE INC.                                         
|------------------------------------------------------
|Notes to Consolidated Financial Statements (continued)
|(Expressed in Canadian dollars)                       
|Years ended May
      31, 2007, 2006 and 2005         

|10. | Commitments and contingencies
  (continued):                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|    | Royalties are payable to Merck & Co., Inc., based on
      net sales of AGGRASTAT® in the United States and its territories beginning
      in January 2007 and continuing until the expiration of the last to expire
      of the assigned patents, which is May 6, 2023. The calculation of
      royalties due is based on a sliding scale dependant on reaching certain
      net sales milestones and ranges between 5 and 20 percent of net sales as
      defined in the license agreement. Royalties due under the license
      agreement are included in cost of goods sold in the period in which the
      related sale is recognized.           
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|11. | Related party transactions:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|    | During the year ended May 31, 2007, the Company paid
      companies controlled by a director a total of $358,345 (2006 - $267,569;
      2005 - $243,548) for office rent, supplies, property and equipment and
      consulting fees.                                                                                                                                                                                                                                                                                                                                                                                                                      
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|    | These transactions are measured at the exchange amount
      which is the amount of consideration established and agreed to by the
      related parties.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|12. | Financial instruments:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|    | The Company is exposed to market risks related to changes
      in interest rates and foreign exchange rates. The fair values of cash and
      cash equivalents, accounts receivable, research advance and accounts
      payable and accrued liabilities approximate their carrying values due to
      their short term to maturity. The fair value of the long-term debt
      approximates its carrying value as it has a variable interest rate and the
      borrowing arrangement is comparable to current market terms and conditions
      for similar debt. The Company has entered into no futures or forward
      contracts as at May 31, 2007.

---

99

|MEDICURE INC.                                         
|------------------------------------------------------
|Notes to Consolidated Financial Statements (continued)
|(Expressed in Canadian dollars)                       
|Years ended May
      31, 2007, 2006 and 2005         

|13. | Reconciliation of generally accepted accounting
      principles:                                                                                                                                                                                                           
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                             
|    | The Company prepares its consolidated financial
      statements in accordance with Canadian GAAP, the measurement principles of
      which, as applied in these consolidated financial statements, conform in
      all material respects to U.S. GAAP, except as follows:
|    |                                                                                                                                                                                                                                                                             
|    | (a)                                                                                                                                                                                                                                                                         
|    |                                                                                                                                                                                                                                                                             
|    |                                                                                                                                                                                                                                                                             
|    |                                                                                                                                                                                                                                                                             
|    | (b)                                                                                                                                                                                                                                                                         
|    |                                                                                                                                                                                                                                                                             
|    |                                                                                                                                                                                                                                                                             

---

100

|MEDICURE INC.                                         
|------------------------------------------------------
|Notes to Consolidated Financial Statements (continued)
|(Expressed in Canadian dollars)                       
|Years ended May
      31, 2007, 2006 and 2005         

|13. | Reconciliation of generally accepted accounting
      principles (continued):
|--- | -----------------------------------------------------------------------------
|    |                                                                              
|    | (c)                                                                          
|    |                                                                              
|    |                                                                              
|    |                                                                              
|    |                                                                              
|    |                                                                              
|    | (d)                                                                          
|    |                                                                              
|    |                                                                              
|    |                                                                              
|    |                                                                              
|    |                                                                              
|    |                                                                              

---

101

|MEDICURE INC.                                         
|------------------------------------------------------
|Notes to Consolidated Financial Statements (continued)
|(Expressed in Canadian dollars)                       
|Years ended May
      31, 2007, 2006 and 2005         

|13. | Reconciliation of generally accepted
      accounting principles (continued):
|--- | -----------------------------------------------------------------------------

In September 2006, the FASB approved
SFAS No. 157, Fair Value Measurements, which defines fair value,
establishes a framework for measuring fair value in GAAP and enhances
disclosures about fair value measurements. This statement applies when other
accounting pronouncements require fair value measurements. It does not require
new fair value measurements. This statement is effective for financial
statements issued for fiscal years beginning after November 15, 2007 and interim
periods within those years. The Company is evaluating the impact of this
standard on its consolidated financial position and results of operations.

The FASB has proposed to adopt new
standards which would, for the Company, result in the reclassification of
warrants denominated in other than Canadian dollars as a liability and requiring
them to be marked-to-market on an ongoing basis with changes in value during a
period included in the measurement of loss. The timing of application of this
proposed guidance is currently uncertain.

In February 2007, the FASB issued SFAS
No. 159, The Fair Value Option for Financial Assets and Financial
Liabilities (SFAS 159). Under the provisions of SFAS 159, companies may
choose to account for eligible financial instruments, warranties and insurance
contracts at fair value on a contract-by-contract basis. Changes in fair value
will be recognized in earnings each reporting period. SFAS 159 is effective for
financial statements issued for fiscal years beginning after November 15, 2007
and interim periods within those fiscal years. The Company is required to adopt
the provision of SFAS 159 effective June 1, 2008. The Company is currently
assessing the impact of the adoption of SFAS 159.

---

102

|MEDICURE INC.                                         
|------------------------------------------------------
|Notes to Consolidated Financial Statements (continued)
|(Expressed in Canadian dollars)                       
|Years ended May
      31, 2007, 2006 and 2005         

|13. | Reconciliation of generally accepted accounting
      principles (continued):
|--- | -----------------------------------------------------------------------------
|    |                                                                              
|    | (e) Summary:                                                                 

The impact of the measurement
differences to U.S. GAAP on the consolidated statements of operations and
deficit are as follows:

| |                                             |   | Year
      ended |   |   | Year
      ended |   |   | Year
      ended |  
| | ------------------------------------------- | - | ---------------- | - | - | ---------------- | - | - | ---------------- | -
| |                                             |   | May 31,          |   |   | May 31,          |   |   | May 31,          |  
| |                                             |   | 2007             |   |   | 2006             |   |   | 2005             |  
| |                                             |   |                  |   |   |                  |   |   |                  |  
| | Loss for the period, Canadian GAAP          | $ | (31,703,386      | ) | $ | (12,607,074      | ) | $ | (14,865,910      | )
| | Adjustments for the following:              |   |                  |   |   |                  |   |   |                  |  
| | Stock-based
      compensation (c)          |   |                 |   |   |                 |   |   | (8,392           | )
| | Intangible assets (a)                       |   | (618,330         | ) |   | (1,663,453       | ) |   | (386,157         | )
| | Amortization of
      intangible assets (a) |   | 206,899          |   |   | 74,582           |   |   | 29,878           |  
| | Scientific equipment (b)                    |   |                 |   |   | 17,212           |   |   |                 |  
| | Amortization of
      scientific            |   |                  |   |   |                  |   |   |                  |  
| | equipment (b)                               |   |                 |   |   | 2,933            |   |   | 4,587            |  
| |                                             |   |                  |   |   |                  |   |   |                  |  
| | Loss for the
      period, U.S. GAAP        | $ | (32,114,817      | ) | $ | (14,175,800      | ) | $ | (15,225,994      | )
| |                                             |   |                  |   |   |                  |   |   |                  |  
| | Basic and diluted loss per share,           |   |                  |   |   |                  |   |   |                  |  
| | U.S. GAAP                                   | $ | (0.31            | ) | $ | (0.19            | ) | $ | (0.23            | )
| | Weighted average number of common           |   |                  |   |   |                  |   |   |                  |  
| | shares                                      |   | 104,879,404      |   |   | 75,144,764       |   |   | 66,717,715       |  

The impact of the measurement
differences to U.S. GAAP on the consolidated statements of cash flows are as
follows:

| |                      |   | Year
      ended |   |   | Year
      ended |   |   | Year
      ended |  
| | -------------------- | - | ---------------- | - | - | ---------------- | - | - | ---------------- | -
| |                      |   | May 31,          |   |   | May 31,          |   |   | May 31,          |  
| |                      |   | 2007             |   |   | 2006             |   |   | 2005             |  
| |                      |   |                  |   |   |                  |   |   |                  |  
| | Operating activities | $ | (25,864,983      | ) | $ | (13,902,721      | ) | $ | (12,453,672      | )
| | Investing activities |   | (22,306,563      | ) |   | (19,671          | ) |   | (42,796          | )
| | Financing activities |   | 45,021,433       |   |   | 41,251,907       |   |   | 133,000          |  

The impact of the measurement
differences to U.S. GAAP described above would result in the consolidated
balance sheet items as follows:

| |                                       |   | 2007        |   |   | 2006        |  
| | ------------------------------------- | - | ----------- | - | - | ----------- | -
| |                                       |   |             |   |   |             |  
| | Intangible assets                     | $ | 20,078,862  |   | $ |            |  
| | Capital stock and contributed surplus |   | 128,382,255 |   |   | 99,542,138  |  
| | Deficit                               |   | (97,409,055 | ) |   | (65,294,238 | )

---

103

|MEDICURE INC.                                         
|------------------------------------------------------
|Notes to Consolidated Financial Statements (continued)
|(Expressed in Canadian dollars)                       
|Years ended May
      31, 2007, 2006 and 2005         

|14. | Segmented information:
|--- | ----------------------

The Company considers that it operates
in one business segment, the biopharmaceutical industry. Substantially all of
the Companys assets and operations are located in Canada, the United States and
Barbados. During the year ended May 31, 2007, 100 percent of product revenues
were generated from sales of AGGRASTAT® in the United States, which was to seven
customers. Customer A accounted for 34 percent, Customer B accounted for 32
percent, Customer C accounted for 26 percent, and the remaining four customers
accounted for 8 percent.

Property and equipment and intangible
assets are located in the following countries:

| |               |   | 2007       |  |   | 2006      | 
| | ------------- | - | ---------- |  | - | --------- | 
| |               |   |            |  |   |           | 
| | Canada        | $ | 251,543    |  | $ | 179,164   | 
| | Barbados      |   | 23,233,236 |  |   | 2,793,340 | 
| | United States |   | 123,873    |  |   |          | 

|15. | Comparative figures:
|--- | --------------------

The comparative financial statements
have been reclassified from statements previously presented to conform to the
basis of presentation adopted in the current years financial statements.

---

104

Other Schedules

Information required pursuant to Schedule 21.12 -04 of
Regulation S-X has been disclosed on page 6. See Item 3A  Selected Financial
Information.

Information required pursuant to Schedule 21.12 -09 of
Regulation S-X is not applicable.

ITEM 18. FINANCIAL STATEMENTS

Not applicable.

ITEM 19. EXHIBITS

|Number | Exhibit                                                                                                                                                                                                                                                                    
|------ | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|1.     | Articles of Incorporation and Bylaws:                                                                                                                                                                                                                                      
|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    | Bylaws [5].                                                                                                                                                                                                                                                                
|4.     | Material Contracts and Agreements:                                                                                                                                                                                                                                         
|4.1    | License Agreement between Medicure and the University of
      Manitoba 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) [1];
|4.2    | Transfer Agency Agreement between Montreal Trust Company
      of Canada and the Corporation 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];              
|4.3    | Medicure International Licensing Agreement between the
      Corporation and Medicure International Inc. dated June 1, 2000, wherein
      the Corporation granted Medicure International Inc a license with regard
      to certain intellectual property [1];            
|4.4    | 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 [1];                            
|4.5    | Amendment to the Consulting Services Agreement dated
      February 1, 2002 between A.D. Friesen Enterprises Ltd. and the Corporation
      whereby consulting services will be provided to the Corporation by Dr.
      Albert D. Friesen [2];                            
|4.6    | Stock Option Plan approved February 4, 2002 [3];                                                                                                                                                                                                                           
|4.7    | Employment Agreement with Derek G. Reimer dated February
      4, 2002 [3];                                                                                                                                                                                                
|4.8    | Employment Agreement with Moray Merchant dated September
      22, 2003 [3];                                                                                                                                                                                               

---

105

|4.9  | Amendment dated March 1, 2002 to the
        Development Agreement between Medicure International Inc. and CanAm Bioresearch
        Inc [5];                                                                                                                                                                                       
|---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|4.10 | Amendment dated August 7, 2003 to the Development Agreement
        between Medicure International Inc. and CanAm Bioresearch Inc [3];                                                                                                                                                                                              
|4.11 | Amendment to the Consulting Services
        Agreement dated October 1, 2003 between A.D. Friesen Enterprises Ltd.
        and the Corporation whereby consulting services will be provided to the
        Corporation by Dr. Albert D. Friesen [4];                                                                                
|4.12 | Employment Agreement with Dawson Reimer dated October
        1, 2001 [4];                                                                                                                                                                                                                                                          
|4.13 | Development Agreement between Medicure
        International Inc. and Clinical Development Research Institute Inc. (CDRI)
        dated July 2, 2004, wherein CDRI agreed to conduct research and development
        activities for Medicure International [4];                                                                    
|4.14 | Amendment to Employment Agreement dated April 5, 2005
        between A.D. Friesen Enterprises Ltd. and the Corporation [5];                                                                                                                                                                                                        
|4.15 | Amendment to Employment Agreement dated
        April 5, 2005 between Moray Merchant and the Corporation [5];                                                                                                                                                                                                                       
|4.16 | Amendment to Employment Agreement dated April 5, 2005
        between Dawson Reimer and the Corporation [5];                                                                                                                                                                                                                        
|4.17 | Amendment to Employment Agreement dated
        April 5, 2005 between Derek Reimer and the Corporation [5];                                                                                                                                                                                                                         
|4.18 | Amendment dated July 8, 2005 to the Development Agreement
        between Medicure International Inc. and CanAm Bioresearch Inc [5];                                                                                                                                                                                                
|4.19 | Amendment to Employment Agreement dated
        October 1, 2005 between A.D. Friesen Enterprises Ltd. and the Corporation
        [6];                                                                                                                                                                                              
|4.20 | Amendment to Development Agreement dated July 2, 2004
        between Medicure International Inc. and Clinical Development Research
        Institute Inc. dated July 4, 2006 [6];                                                                                                                                                  
|4.21 | Amendment to Development Agreement dated
        June 1, 2000 between CanAm Bioresearch Inc. and Medicure International
        Inc. dated July 4, 2006 [6];                                                                                                                                                                        
|4.22 | Amended Stock Option Plan approved October 25, 2005
        [6];                                                                                                                                                                                                                                                                    
|4.23 | Amendment
        to Employment Agreement dated October 1, 2006 between A.D. Friesen Enterprises
        Ltd. and the Corporation **;                                                                                                                                                                                               
|4.24 | 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) **.
|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 **.                                                                                                                                                                               

---

106

| | [1] | Herein incorporated by reference as previously included
        in the Corporations Form 20-F registration statement filed on January
        30, 2001.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------
| | [2] | Herein incorporated by reference as
        previously included in the Corporations Form 20-F annual report
        filed on December 31, 2002.        
| | [3] | Herein incorporated by reference as previously included
        in the Corporations Form 20-F annual report filed on October 20,
        2003.         
| | [4] | Herein incorporated by reference as
        previously included in the Corporations Form 20-F annual report
        filed on September 15, 2004.       
| | [5] | Herein incorporated by reference as previously included
        in the Corporations Form 20-F annual report filed on August 19,
        2005.          
| | [6] | Herein incorporated by reference as
        previously included in the Corporations Form 20-F annual report
        filed on August 10, 2006.          

** Filed Herewith

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107

SIGNATURE PAGE

Pursuant to the requirements of Section 12 of the Securities
Exchange Act of 1934, the Corporation 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: August 22, 2007

ON BEHALF OF THE CORPORATION, MEDICURE INC.

per:

|Albert D. Friesen,
      Ph.D. | 
|------------------------------ | 
|Chairman, President & CEO      | 

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